Stronger sales, rain improve wool’s outlook | Elders

Stronger sales, rain improve wool’s outlook


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IN DEMAND: The traded strongly, adding 77c to AWEX’s Eastern Market Indicator, which closed on 1858c.

IN DEMAND: The traded strongly, adding 77c to AWEX’s Eastern Market Indicator, which closed on 1858c.

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The traded strongly, adding 77c to AWEX’s Eastern Market Indicator, which closed on 1858c.

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A STRONG, healthy market last week, a lot of wind, but a bit of rain in some parts as well made for a much better outlook for the wool industry in Australia and therefore around the globe.

People overseas were equally welcoming of the stronger market as it was becoming a bit of a worry for many with stock in various stages of production and customers all the way along the pipeline were reticent to make a purchasing decision when the market kept easing.

Now that we have seen a very positive outcome for the week, on both selling days, in all three centres there is no doubt the market will keep its strength through until at least Christmas. If we can just get the follow up rains to dampen down the remaining dust that would be great – unless you happen to be in a cereal growing zone.

The market finished the week as it started, on a very strong footing and added 77c to AWEX’s Eastern Market Indicator to close on 1858c. It was a little less in US dollars terms, but still a substantial 52c for the week, and even those using the very erratic Euro saw a jump of 40c for the week.

AWEX’s northern market indicator closed up 79c on 1898c. The 17 micron indicator closed on 2472c, 18 micron 2343c, 19 micron 2204c, 20 micron 2172c, 21 micron 2158c, and 28 micron 845c.

Medium Merino fleece performed best during the week with increases of 100c common, with the superfine categories a little less enthusiastic and ‘only’ adding half that amount. - Bruce McLeish, Elders

Medium Merino fleece performed best during the week with increases of 100c common, with the superfine categories a little less enthusiastic and ‘only’ adding half that amount.

Skirtings, particularly the better lower VM lots were strong, and crossbred wools gained 50c to 80c as some large orders came out of China. Processing mills are definitely looking to cover the auction recess period in the next three weeks and for some buying crossbred types represents a lower risk, lower cash alternative.

The carding sector recovered admirably again this week. After falling more than 500c in the past three months, these wools have now added 150c in the past two weeks. There is no doubt that the carding sector had got well and truly overcooked, reaching an extreme basis to 21 micron of 0.85 – that is to say that the locks underneath the wool table were worth 85 per cent of the fleece value lying on top of the table. It is now back at 0.55 or 55pc of the fleece price which is a more realistic level.

There will be some further gains as the seasonal pattern unfolds but the crazy levels seen over the past few years for these wools, driven by fashion are now behind us.

Overall the wool market has survived the traditional ‘off-season’ where demand was absent, or at best constrained, and although the drought put paid to the usual ‘spring flush’ of wool, we did have to contend with some fairly adamant price resistance. That is not to say that the price resistance has now disappeared, but a number of brands have now made decisions on how to bridge the gap and begun to place orders for the 2019-20 season.

The small trickle of orders may build into a steadier stream through until the new year, and this would be welcomed by the many Chinese processors who are struggling at present. Domestic orders within China are said to be quite slow, in part due to the high price point, but more so as a result of the uncertainty created by a slowing economy and the on-going stoush between America and China. The end of November will see the G20 meeting held in Argentina and presents an opportunity for the Presidents of both countries to sit down and work out some sort of solution – hopefully.

The trade war situation soured at the conclusion of the recent APEC meeting in PNG where open bitchiness between the two superpowers meant that the summit was unable to reach agreement on a final statement. However, both sides have strong incentives to make a deal – so the situation could look a lot better after the G20 meeting. As noted by Tobin Gorey from CBA Global Market Research last week Australia is also part of these tensions as well.

China recently launched an investigation into Australia allegedly dumping barley into their country. Given the low production expected this harvest it seems improbable that anyone would be dumping barley, but the investigation’s real intent is designed to remind Australia just who puts the most butter on its bread according to Gorey. A sobering thought when one considers the huge influence that China yields across the wool industry.

Of more immediate concern to the world wool trade is the volatile nature of currency markets at present. Previously the US dollar had seemed to be on a steady upward path as the US economy outperformed and the Fed Reserve plotted a series of interest rate increases this year and next. Some wobbles have now appeared, along with a bit of jaw-boning from their President, so a December rate increase is still on the cards, but more than 1 further increase in 2019 is looking less likely with each media statement from Fed officials. This has the US dollar see-sawing about, making pricing of Australian wool in US dollar a changeable commodity.

Adding to the mix is the plight of the Euro which seems ‘is all over the shop’. The boffins in Brussels would appear to have reached agreement with the UK on Brexit – although the Poms are no certainty to ratify it in their own parliament, but they still have a few issues with the Italian accounting methods to sort out. Spare a thought for those traders and mills in Europe buying Australian wool in Euro and then exporting in US dollar to a customer and trying to predict where the currency rate will go by the time the customer has approved the sample.

In Australian dollar terms at least, the market looks like it will remain very strong through until the Christmas recess and we should know more about the various global pressure points by early January anyway.

- Bruce McLeish is Elders’ northern zone wool manager. 

RELATED STORY: ‘Australian wool market bounces back’.

The story Stronger sales, rain improve wool’s outlook | Elders first appeared on Queensland Country Life.

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