Yo-yo effect returns to wool market | Elders

Yo-yo effect returns to wool market

Livestock
Yo-yo effect: The Australian wool market is beginning to bounce up and then down, week in, week about.

Yo-yo effect: The Australian wool market is beginning to bounce up and then down, week in, week about.

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The Australian wool market is beginning to bounce up and then down, week in, week about.

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THE yo-yo has returned - not dramatically, but the market is beginning to bounce up and then down, week in, week about.

After a 20c drop the previous week, a bit of business was done, then quantities were pruned back in line with the drop in price, but also grower expectations that now is not the best time to sell, and thus we saw a 30c jump last week.

A little too much, too quickly in the opinion of most in the trade, so predictions for this week currently range from just firm, to a few cents off - so the yo-yo goes on.

Last week saw a fairly consistent 30c rise across all the Merino fleece categories, although a couple of the indicators in Melbourne in particular did get pushed out of whack by a few RWS accredited clips.

The 21 MPG in Melbourne looked to be around 30c too high for most people, but a more normal selection of wools in the coming weeks should re-align things again.

The scarcity of RWS accredited wools is pushing up the premiums for these wools significantly. Once the orders have been filled, or more growers are accredited the premiums will normalise.

About 10 per cent is generally accepted as the price premium. However, on occasions such as last week, an extra scarcity factor of additional 5pc seemed to be added.

AWEX Northern Market Indicator closed up 26c on 1443c. The 17 micron indicator closed on 2428c, 18 micron 2032c, 19 micron 1675c, 20 micron 1364c, 21 micron 1279c, and 28 micron 467c.

Not having a Cape sale no doubt contributes to the scarcity factor, as generally 50pc of the Merino clip in South Africa has been accredited to one scheme or another, and Argentina is approaching 100pc of their Merino clips being sold under RWS accreditation, or will be by the end of the year.

Different retailers are chasing and promoting different methodologies, and it is always going to be difficult for the grower sector to pick which scheme is going to be most in demand.

Everyone has a story to tell about their accreditation, and the values behind it and what the consumer is willing to contribute.

Given the current state of the market, with China quiet, and Europe relatively active we are seeing what some consider to be a top-heavy accreditation scheme or specialty market.

The Europeans simply know how much of this particular wool they will need in the next six months, and are working to procure it now.

We are also seeing some organic orders in the market under the GOTS system - the only remaining valid global organic accreditation for wool.

Similarly, there seems to be a lot of RWS orders in the market, as the Europeans, and Italy in particular try to fill their orders to avoid getting squeezed later in the season.

The business done since the auction last week is certainly a little less in volume than at the same point the previous week, hence the expected yo-yo movement.

There is, however, enough business being written for people to remain generally optimistic about the longer term.

The majority of the Chinese spot business is carbonising types, and other short wools for knitwear, with only a smattering of fleece inquiry.

China overall is relatively quiet, as expected at this time of year, but Italy and Europe in general, is making up for lost time and buying quite heavily, looking for quick delivery, sometimes not even waiting for a sample, such is the haste to get wooltops in front of their spinning machines.

Chinese mills are hopeful that some of the recently announced government stimulus is directed towards the textile sector, but nothing has been said officially yet.

Chinese mills are hopeful that some of the recently announced government stimulus is directed towards the textile sector, but nothing has been said officially yet. - Bruce McLeish, Elders

China's slowing economy is certainly causing a little angst among the textile fraternity in China, as is the cloud of another Covid wave as the weather cools down, or more likely just the government's harsh control measures which would see any local infection squashed with immediate and total lock-downs.

How long the policy of zero cases and basically closed borders can be tolerated or pursued in a country as large as China will be interesting.

It will certainly mean that no international visitors or suppliers will be attending the Spin-Expo and Intertextile exhibitions in October in Shanghai.

Web based exhibitions can only go so far to generate the excitement and enthusiasm about the new collections.

We had to use them across the globe last year, but many were hoping for a return to something more normal this season.

In Europe they have more or less got there, but with no Asian input at this season's fairs, so we have a very disjointed fashion industry at present as a by-product of Covid.

How that impacts the demand for wool in the coming season is something still to play out, but hopefully the ingenuity of the trade can overcome these issues.

Most of the world's chief financial institutions seem to be pushing to wean their economies off the money printing that has been coming from these entities with gay abandon for the past 18 months, or longer in some cases.

Everyone knows that it cannot continue forever, and even in the US they calculate that they are now reaching full employment meaning the money printing and stimulus still in the pipeline could lead to an inflation outbreak at some point.

Something which every Reserve banker is keen to avoid, but closing down the stimulus pump too early could also cause a negative confidence jolt.

How much slower the Chinese economy gets is something which would have certainly been on the agenda for the 90 minute telephone chat between President Biden and President Xi last week.

Hopefully, a little more cooperation, and a little less agro will have also been decided on, so that the consumers around the world can get back to what they do best - consuming.

The outlook for the textile trade looks good, not fantastic, given the economic frailties in various systems, but some restorative calming salts from those at the top would certainly not go astray at a time like this.

MORE READING: 'Dreaded yo-yo effect worries wool market'.

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MORE READING: 'EMI lifts but wool market remains volatile'.

- Bruce McLeish is Elders state wool manager - Queensland.

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