Wool prices firmer across the board | Elders

Wool prices firmer across the board

Prices for Australian wool were firmer across the board after a couple of pretty ordinary sessions.

Prices for Australian wool were firmer across the board after a couple of pretty ordinary sessions.


Prices for Australian wool were firmer across the board after a couple of pretty ordinary sessions.


THE Australian wool market got a little mojo back last week, with prices firmer across the board after a couple of pretty ordinary sessions.

AWEX's Northern Market Indicator closed up 5c on 1433c. The 17 micron indicator closed on 2413c, 18 micron 2017c, 19 micron 1663c, 20 micron 1357c, 21 micron 1263c, and 28 micron 475c.

No doubt the lower volumes played a part, with no Fremantle auction, and no sale in South Africa either, buyers had no option but to focus on Sydney and Melbourne for their weekly requirements.

Added to the mix were the owners of 15 per cent of the wools offered who thought the price rise was going to be more significant, or had hoped for a miraculous jump in price above valuations and so ended up passing-in their wool, as well as a further 10pc who took the smarter option and withdrew their clips from sale.

After the close of play on Wednesday the Eastern Australian market had risen by 15c in local currency terms, and a slightly lower figure of plus 8c in US dollar terms, and a grand total of 24,100 bales had changed hands.

Demand from China is still relatively lacklustre, and European buyers are taking advantage to open their shoulders for a free hit, also being very aware of the dwindling selection of superior wools, especially in the superfine Merino categories.

Consequently, the topmakers and other early stage processors are dominating the buying lists, knowing that they will have machines to fill each and every week between now and Christmas, but also picking up neglected lots, sometimes very cheaply.

As always when the market is subdued, discounts for fault in excess of the usual Chinese types increase in severity.

Also, with a small selection on offer, the premium for less than 1.5pc VM, or better than 68pc yield increase markedly.

Such is the market environment that many fleece indicators in Melbourne gained significantly more than Sydney during the week, purely based on selection.

Adding to the mix were the RWS certified wools which are currently bringing a large premium above 'normal wools' and the larger number of these lots in Melbourne also exacerbated the divide between the two markets - which is unusual. Normally the New England factor is enough to keep the northern market at a slight premium to the southern market.

On a technical perspective the wool market appears to have found support at the expected level on many charts.

As with any chart analysis, next weeks movement can rearrange the thinking, and lead to a redraw of the lines of support and resistance, but everyone in the trade is hoping that the current support does hold and we do not visit the depths we saw last season.

Range trading, or just floating about plus or minus 20c will probably be the order of the day for the short term.

Consequently, there is a lot of neighbour watching going on at present, as firms try to work out what the topmakers are doing, and whether the indent buyers really have orders in hand or not.

A clear example of the willingness to move forward was the activity on the futures market during the week.

Although not much volume was transacted, the sentiment improved markedly on Tuesday following a positive auction results, and bid levels improved right along the curve into 2023.

Wednesday's sluggish result however, has seen the bid levels come off a little, but still showing spot prices, or slightly better all the way out to the end of 2022.

As one Chinese scribe wrote this week, the fall/winter season sales will start in September in the Northern Hemisphere. Hopefully they will provide a boost in confidence for those operating at all stages of the pipeline, and allow everyone to develop a marketing strategy for their greasy wool, tops, yarn and fabric.

Acting as a hand-brake on this anticipated momentum is the recent outbreak of the Delta variant across China.

What turned out to be a false positive case in the Jiangyin area near the Zhangjiagang Free Trade Zone had sent shudders through the wool processing trade.

The Chinese government's draconian, yet effective lockdown policy could have closed down a fair chunk of the early stage processing industry in China.

Although the various outbreaks have now been contained, using the harsh measures, many in China are still concerned about the coming, colder months and worry that further outbreaks will eventuate and how this may affect processing capability as well as sales of garments.

The worldwide consumer activity has been on an upward trajectory just at the right time for the autumn/winter collections to be launched, but there are a few nerves beginning to jangle, with the UK Prime Minister also possibly lamenting opening quite as far and fast as they did.

Governments around the world are currently still splashing the cash around, but it cannot go on forever.

Just last week at the important annual Federal Reserve Meeting at Jackson Hole in Wyoming (held virtually of course) the chairman Jerome Powell kicked off the symposium on a positive note, telling policy makers substantial progress has been made and the time is right for the Fed to start tapering off some of its economic support.

Some wonks will see this as positive news, and some will lament the ending of free money, but a return to more normal monetary conditions is positive in the fact that it signals economic recovery is on the way.

The wool industry, like many others, just has to weather the storm for another couple of weeks or a month, allow vaccination numbers to climb, the world to settle down a bit in a geopolitical sense, and hopefully consumers will open their wallets.

Then, and only then, will demand for wool increase substantially, to accommodate in excess of 30,000 bales per week.

This week's auction volume of 40,000 in Australia, plus a few crossbreds from across the ditch, and with the Cape also chipping in with another 10,000 will push the boundaries, so it may well be better to sit and wait for a month, rather than swamp the fragile demand with excess supply.

MORE READING: 'Watch Ben Jackson's sheep art for his late Aunt Deb'.

- Bruce McLeish is Elders state wool manager - Queensland.

Want daily news highlights delivered to your inbox? Sign up to the Queensland Country Life newsletter below.


From the front page

Sponsored by