Wool market finally looks stable again | Elders

Wool market finally looks stable again

Livestock
The wool market finally looks stable again, if the futures market is a reliable guide.

The wool market finally looks stable again, if the futures market is a reliable guide.

Aa

The wool market finally looks stable again, if the futures market is a reliable guide.

Aa

THE Australian wool market cruised into the recess with very little fanfare, but there was a general feeling of contentment, at least from those not facing a couple more weeks of home schooling.

After what has obviously been a very tumultuous 12 months the wool market finally looks stable again and if the futures market is as reliable a guide as usual, the longer-term outlook is one of contentment and steady price levels as far as autumn 2023.

AWEX's Northern Market Indicator closed up 12c on 1522c. The 17 micron indicator closed on 2538c, 18 micron 2129c, 19 micron 1768c, 20 micron 1438c, 21 micron 1342, and 28 micron 530c.

The Riemann Futures prices indicates at present that superfine prices may ease slightly over the longer term, but medium merino prices will stay around current levels.

Crossbred prices have just lifted a little, so the potential for further upside is certainly still present.

The wool industry has been known to be a tad volatile at times. However, so there will certainly be the odd surprise in store no doubt, but at present everything looks remarkably calm and stable.

Greasy wool prices moving into the recess were mostly stable, with just the odd area adjusting slightly as buyers filled gaps in their inventory, or looked for a bit of cheaper mill fodder to get them through the break.

Superfine Merino types eased slightly, medium Merino gained a bit, and crossbred wools picked themselves up off the floor.

Everyone was very relieved to see the volume consumed without any major headaches, and a good spread of buying houses stepped up in their area of expertise to ensure everyone got the finish line unscathed.

With such a smooth finish, stock values are maintained, and it is feasible that if demand does crop up, business can be transacted over the break with the fear of either side being too wrong.

At the same point last year, the wool market was sitting in a fairly good place too, but then the proverbial hit the fan when auctions resumed after the recess and the market dropped by about three bucks in the first six weeks of the new season.

Hopefully, the currency is not going to go against us this year, and we do not swamp the market with supply, both of which contributed to the disaster which was the second half of 2020.

Hopefully, the currency is not going to go against us this year, and we do not swamp the market with supply, both of which contributed to the disaster which was the second half of 2020. - Bruce McLeish, Elders

The uncertainty surrounding the effects of Covid should be less of an issue this year as we now know how bad it is, and generally speaking how to deal with it - until we get enough vaccines into the arms of the population.

There is quite a bit of greasy wool backed up in China awaiting processing - not because of stockpiling, or a lack of orders, but more from a lack of processing space with most early stage processing mills still struggling to hit top gear due to a lack of qualified staff.

And of course, the Chinese domestic woolclip is beginning to hit the wool stores now having been shorn in the past month or so.

Therefore, although the brokers, buyers and exporters will use the recess period to have a breather, and finish off batching and shipping tasks to round out the season, the early stage processors and beyond will be operating as fast as they can.

They hope to be in a position to catch any last-minute orders coming back from the retail end of the chain for the coming selling season. The majority of the garments have been made, but there are always going to be last minute change-of-mind things to consider, or when someone gets a glimpse of what a market leader is doing, and then a rush to copy or emulate that style.

The autumn/winter retail selling season last year was pretty much a total disaster, and the greasy wool market reacted accordingly.

This year, retailers do actually have some foot traffic - in most countries anyway, and e-commerce is now accepted as a legitimate form of business transaction, rather than just a niche market for books and music.

Even so, it is a nervous time for processors and retailers as the UK drops restrictions, Europe tries to move back towards normality, and the US appears to have vaccinated their way out of the quagmire they were in for the most part of 2020.

China has now reportedly needled 1.4 billion arms, but according to The John Hopkins University only slightly less than 16 per cent of the population is fully vaccinated there yet, but it is increasing every day.

Given the frantic global vaccination rate taking place at present, including here in Oz, by the time wool auctions resume on 10th August the world should be in a much better place regarding Covid than it was at the same point last year.

Hopefully this will allow for a retail selling season to actually take place in the northern hemisphere and for most of the garments which have been lovingly produced over the past couple of months to find a new home.

The woven or worsted sector is finally experiencing a slight resurgence in recent weeks, much to the relief of those mills who have been sitting on a mountain of fabric.

As office staff wander back to the office for at least a couple of days per week, new suits and jackets are required.

Weddings are finally allowed again in places like Italy, which had understandably banned such gatherings, and it is not just the bride and groom needing a new outfit - everyone wants to show off their new feathers to the emerging flock.

Europeans have long been the doyens of the fashion world, who set the trend whereby others follow.

So, while Asia, in particular China has been able to consume enough product to drag the wool industry up off the canvas over the last eight months, they have really been waiting and hoping that the western world would resume again, both for a market for them to sell into, but also for a style-leadership point of view as well.

The only people currently complaining about the price of wool are those early stage processors with long delayed contracts from last year, which are now finally being taken up by European mills.

But in most cases new business is being written to ship alongside these old orders, adding to the export demand for wooltops and yarn from China, thus keeping the wheels turning.

From August we should see a market gradually easing by perhaps a dollar in the Australian spring, before bouncing back upright to climb by two dollars by Christmas.

This would be a reasonable, predictable outlook - but it is the wool market.

MORE READING: 'Wool market defies predictions of carnage'.

- Bruce McLeish is Elders state wool manager - Queensland.

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