IT was a positive close to the wool selling activities for the year as we now await the arrival of the big guy in the red suit.
The Australian wool market closed 6c higher according to AWEX’s EMI figure although the weight of crossbred wool on the market dragged on the overall performance. Merino fleece was generally well supported and most micron indicators rose by 15c to 20c over the course of the week.
AWEX’s northern market indicator closed up 9c on 1412c. The 17 micron indicator closed on 1788c, 18 micron 1732c, 19 micron 1624c, 20 micron 1496c, 21 micron 1415c, 22 micron 1381c, 28 micron 658c, and 30 micron 598c.
Skirting wools were slightly mixed but generally followed the fleece types to finish stronger and the carding market was a bit choppy as buyers purchased only the types needed to fill shipping orders and avoided having left over bits and pieces sitting around during the three week recess.
The crossbred offering according to AWEX was the largest in two years, and a massive 34 per cent increase on the previous week. This volume simply swamped the market, and although prices had been recovering in recent weeks, the volume was too great and buyers were able to be selective about which lots they purchased. As a result crossbred fleece types eased by 10c to 20c, and some of the poor yielding lots, stains and the like have become very cheap.
With the Federal Reserve finally pushing the button and raising interest rates in the US, the Australian dollar eased against a firmer US currency and this also helped the wool market maintain a strong heart beat until the final bell on Thursday. Prices overall were US6c lower, but the Merino fleece types were all slightly higher in US dollar terms, with crossbreds again being the negative factor.
Similarly in New Zealand the crossbred and carpet types continued to decline in price with weak demand from Chinese mills. A lack of fashion demand and substitution by synthetic fibres has contributed to the demise of the price profile this year for carpet wools in particular.
However prices are now at a level that substitution is no longer viable, other European and Asian market are starting to become active and also volumes of new crossbred wools will start to decline as we enter the back half of the season. Merino wool has been abnormally steady in price over the past six months and will probably continue, but crossbreds look like they could provide a reminder of the volatile nature of wool.
2017 will definitely be an interesting year for the wool industry. Straight after the auction recess concludes and sales resume in mid-January, one Donald Trump will take a seat in the Oval Office together with his team of billionaire businessmen staff, and advisors.
Some of the left leaning critics are talking like Chicken Little but for most it will be a welcome change to the burdensome bureaucracy that has stifled world growth for so long. It is sure to create some waves across the globe and may yet have knock on effects in upcoming elections in Europe. Currency markets are unlikely to be stable any time soon and unfortunately this will continue to affect the wool market.
A volatile, but lower Euro is having a detrimental influence on the wool market with some European spinners and knitters struggling to pass on the higher cost of raw materials to their clients. Some will persist, while others throw in the towel. This is reverberating back to the Chinese early stage-processing sector with topmakers in China finding exports more difficult than in previous years.
Luckily the Chinese domestic industry for wool consumption has increased significantly over the past decade or we would be looking at a vastly different set of numbers on the weekly market report. China is still taking more than 70pc of Australia’s wool production, but a larger proportion of this now stays in China rather than the something like 80% that was previously re-exported as finished garment to other markets around the world.
Yet, despite the uncertainty of world economics there is much to be upbeat about as we sit back by the beach over the coming three week break and look forward to 2017. AWI and their commercial partners have brought to market some fantastic new products made from Merino in the past couple of years. Whether this is last years double-faced fabric, or the new fake-fur overcoat, which consumes a large amount of merino wool per meter, or the water and wind resistant Optim WR jacket that is made from 100pc Australian 19 micron Merino.
There are so many other products under development or in commercial trials across the spectrum that it would be fair to say that the way in which wool, particularly fine Merino, is worn will be very different in years to come than what we have been used to seeing on the runways at fashion shows in Milan and Paris.
Just this week IWTO has issued a media release correcting some clowns in the US who believed that the discomfort experienced in the new American Airlines uniform was caused by the wool content – when it was probably more likely to be caused by the chemical laden synthetics in the blend, or the poor construction of the garment. Gone are the days of the ‘itchy, scratchy’ school jumper – replaced by soft, comfortable, long lasting but expensive Merino garments. And expensive in this context remains a relative term, but a necessary one to justify the production costs of this elite fibre.
As standards of living increase in many consumer markets across the globe, and consumers themselves demand better quality products with an understanding of where they were grown and how they were produced the future of Merino is looking very good indeed.
- Bruce McLeish is Elders northern wool manager.
