Superfine, medium wools gain 30-50c | Elders

Superfine, medium wools gain 30-50c


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ON THE RISE: Good quality superfine and medium Merino types all experiencing strong rises of between A30c and A50c.

ON THE RISE: Good quality superfine and medium Merino types all experiencing strong rises of between A30c and A50c.

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Good quality superfine and medium Merino types all experiencing strong rises of between A30c and A50c.

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AGAIN a softer Australian dollar assisted the bank balances of Australian growers this week as the market eased slightly in US dollar/China RMB terms but rose in local currency and also Euro terms.

Overall the market was quoted 1 per cent easier for buyers in China or elsewhere using the US dollar, but Europeans and local buyers saw a lift of 0.3 to 0.4pc. As has been the case for a number of weeks the sheer volume of crossbred wools, together with a fair whack of poorer quality Merino lines was enough to drag the average down in US dollar terms at least.

Good quality superfine and medium Merino types all experiencing strong rises of between A30c and A50c. To a degree the season for superfine Merino is coming to an end buyers are just cleaning up the few remaining lots on offer, but demand for medium Merino is still strong and the highest rises for the week were in fact in the 20-22 micron range.

AWEX’s northern market indicator closed up 9c on 1902c. The 17 micron indicator closed on 2793c, 18 micron 2389c, 19 micron 2153c, 20 micron 2017c, 21 micron 1927c, 22 micron 1886c, 26 micron 798c, and 30 micron 593c.

How long this demand lasts will be a matter of much discussion in the next few days, and the quantities being offered next week have risen for the Merino sector, which may have tempered buyer activity late in the week in Fremantle. While it is a relatively small increase in actual terms – a couple of thousand more bales of Merino fleece – it may be enough to make buyers sit back and re-assess their bidding strategies.

There is a large percentage of the trade aware that at these extreme price levels the potential of a major correction is real. - Bruce McLeish

More of a concern will probably be cash flow, which is an increasingly important factor in wool exporter’s daily lives. With China virtually shut down over the past 10 days the flow of funds to pay for previously purchased greasy wool will have slowed to a trickle and so exporters credit lines will have be stretched further.

Mills in China will restart production in coming days and machinery will quickly consume the meagre stocks which have built up over the shut down, so purely from a need to feed machinery point of view demand will resume. However, the huge machine of the textile pipeline will take a while to crank up again, so combing mills will find it difficult to sell wooltops until the spinners are able to begin selling yarn again, and yarn sales will not begin until the fabric makers have been able to secure more orders and so on.

During the many meetings and greetings post New Year in China the market outlook will be a point of discussion. While the number of people saying that current prices are too high is relatively small, there is a large percentage of the trade aware that at these extreme price levels the potential of a major correction is real. So buyers right along the pipeline are exhibiting a bit more caution, especially those who have restarted after the Chinese New Year break.

Last year was in general, an extremely successful, rewarding year for many in the merino trade as continually rising prices made it easy to “stock and roll” – that is, buy raw material, transform it into the next product and sell it on to the next customer with a decent margin attached. They do not want to start the New Year by ‘getting it wrong’, so caution is definitely the flavour of the week for now.

In Europe the Filo yarn exhibition was held in Milan, Italy. While some reported subdued conditions, others said everybody is smiling and happy, highlighting the range of opinion in the worldwide trade at present. Perhaps those who are more despondent are best characterised as those who have been saying for months that the market was too high, and prices must come down. So they waited before buying, and it did not happen (yet). Others who have continued to buy and sell along the way are in a much better position and it shows in their outlook. 

Nevertheless, at some point we will get a correction, as happens in all markets eventually. The cardings sector showed just how dramatic and violent this could be where we saw a $2 fall in a single week. But that particular segment has not collapsed and died, but merely reset and continues to perform reasonably well at its new basis. So the same could happen at some point to the fleece market, and the more astute growers are using the futures market to protect against this scenario.

Superfine: As mentioned the superfine season is drawing to a close and next week sees the final designated superfine sale for the season held in Sydney. By any measure it has been a stellar season and it will hopefully continue until the end of next week.

Medium Merino: While the world waits for the Chinese sector to decide if the Year of the Dog will be lucky for textiles or not, many have one eye on the declining seasonal conditions in western NSW and Queensland. Worsening conditions in this large wool growing area will have an impact on medium Merino production. While conditions in much of southern and eastern Australia remain favourable, which will be good for superfine and crossbred wool production, a question mark does hang over the supply going forward for the medium Merino sector.

Crossbreds: Despite increasing demand, the volume of supply is still overwhelming the market at present allowing buyers to be selective and only reward those who prepare their wools to the best standards.

- Bruce McLeish is Elders’ northern zone wool manager. 

The story Superfine, medium wools gain 30-50c | Elders first appeared on Queensland Country Life.

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