ONCE again the Australian wool market gained some benefit from a weaker local currency and growers received higher prices as a result.
The movement in US dollar terms was downwards but not by a lot, with AWEX’s EMI registering a drop of US13c for the week. In Aussie terms it moved 10c higher with the superfine sector again leading the way with gains of 30 to 40c. Medium Merino performed quite strongly to recover most of last week’s negative movements, and generally added 10 to 20c.
Skirting and carding types were keenly sought after by the knitwear buyers but unfortunately the crossbred buyers still seem to be hiding with further losses of 30c for those wools this week.
Prices are still around 20 per cent higher than at the same point last year.
- Bruce McLeish, Elders
Overall not much seems to have changed in the wool pipeline over the past few weeks, which is not unusual given the time of year. Processors are bubbling along, carefully watching their stock levels, the market, and holding earnest discussions with their customers.
Greasy wool in Australia is coming quickly into store and being sold pretty much straight away. That’s not surprising given that the prices are still around 20 per cent higher than at the same point last year. Shearing is well underway in other southern hemisphere wool producing countries, but much of the wool has already been sold as buyers stay on the front foot to secure the alternatives to Australian wool.
Processing of northern hemisphere clips is almost finished with the last remnants of the Russian and European wools being consumed by topmakers around the world. There is strong competition for the few remaining containers of this relatively cheap fibre doing the rounds of trading desks. And now early stage processors and exporters in the Australian market will be looking at their calendars and calculating how much wool they need to buy over the remaining seven sale weeks to cover the Christmas recess. Yes, unfortunately that time of year is fast approaching – again, and the trade needs to plan ahead to ensure mills have adequate raw material in front of them whilst the Australian wool trade heads for the beach.
There is very little noise yet from China about quota shortages or that cash flow problems are going to get any worse that they currently are which is positive, but it is probably also a little too early for this factor yet. More likely in November we will see the effect of these issues, if they are going to be a problem this year. With China having concluded its five yearly National Congress this week and President Xi Jinping being reaffirmed as China’s leader for the next five years, with even more power to implement his vision for the country. Thus far economic reform has not been as high on the agenda as some watchers would like, but from such a powerful platform going forward some of the painful but necessary changes to state owned enterprises will be made. This will be generally positive for the wool industry as living standards continue to increase and the already largely privatised textile sector is released from some of the red tape that constrains it. Well performing government enterprises will be given more free reign to do thinks like order their own uniforms again, and innovation and quality control will be rewarded.
Elsewhere around the globe, the textile industry is slowly cranking up after their downtime over summer. Temperatures are still relatively mild across Europe and China, so consumers are not exactly rushing out to purchase another layer of clothing just yet. But the governments and bankers are thankfully steering a steady course at present.
The European Central Bank disappointed a few overnight by not releasing the foot on the money printing machines, but they do not yet have enough confidence that inflation has built up enough momentum for them to begin tapering or reducing their stimulus. In America, confidence is not a problem, or perhaps over confidence may become a problem, but pending tax cuts and probably a new head of the Federal Reserve Bank are lighting a small fire underneath their currency. How all this plays out will be interesting, but hopefully consumers there and elsewhere see the benefits sufficiently to ramp up purchasing of clothing over the next couple of months.
Superfine: A perceived lack of supply is keeping buyers active and prices continue to push higher. However, the market must shortly decide whether to continue this line or take a step back. Climatic conditions, and therefore the quality of the late season offering will play a part in this decision.
Medium Merino: The currency is allowing buyers to ease the pressure in US dollar terms, whilst growers in Australia receive better prices in local currency until such time as the demand kicks into gear again, probably towards the end of the calendar year.
Crossbreds: Although still registering a negative move this week, finer crossbreds are receiving a lot more attention from buyers so should shortly see support coming in.
