Yo-yo effect continues in wool market | Elders

Yo-yo effect continues in wool market

Wool
The yo-yo effect is still present as Australian exporters and overseas buyers operate cautiously with neither side willing to take a large position.

The yo-yo effect is still present as Australian exporters and overseas buyers operate cautiously with neither side willing to take a large position.

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The yo-yo effect is still present as Australian exporters and overseas buyers operate cautiously.

Aa

A FAIRLY lack-lustre week in the wool market saw prices decline, then steady, before finishing on a firmer note across Australia last week.

The superfine Merino basis continues to close up, from its extreme levels, but all types were down a bit and the overall market indicator closed off 20c for the week.

AWEX Northern Market Indicator closed down 22c on 1394c. The 17 micron indicator closed on 2338c, 18 micron 1950c, 19 micron 1613c, 20 micron 1334c, 21 micron 1287c, and 28 micron 418c.

The yo-yo effect is still present as Australian exporters and overseas buyers operate cautiously with neither side willing to take a large position.

Over the past nine weeks the market has managed to oscillate every week from positive to negative and next week should continue that trend with a small gain.

Aside from the headline number moving up and down the individual segments are moving back towards a more normal relativity as traders and processors search for value and chase types they can sell more easily.

The superfine Merino segment has slowed a little, and because of the extremes it had reached prices have seemingly fallen a long way, when in fact it is still selling at a very healthy level.

The 17 micron MPG in US dollar terms has fallen a couple of dollars, but is still $7 higher than it was 12 months ago and now is potentially back to a level where we will see demand will start to increase again.

Medium Merino, also in US dollar terms, is range trading between 900c and 1050c. Again US$3 higher than it was during the depths of the pandemic, but could easily add another couple of dollars and everyone would still feel comfortable with the price level.

Crossbred wools are finally finding a bit of love, even if only as a blend component, although the New Zealand market did also rise this week.

Sustained higher prices for this segment will be a difficult task until some of the global stocks are cleared, but in the aftermath of COP26 which public company would dare to fit out their new office or hotel with nylon carpet when wool provides such a more sustainable and cheaper option.

...In the aftermath of COP26 which public company would dare to fit out their new office or hotel with nylon carpet when wool provides such a more sustainable and cheaper option. - Bruce McLeish, Elders

Some sensible analysis was provided during the week by Matt Dalgleish of Thomas Elder Markets showing the low environmental footprint of sheep.

Considering the conversion of plant material to high quality, nutrient rich meat protein, and importantly storing carbon every time you hang up a woollen garment - given that up to 50 per cent of the garment's weight is carbon, livestock are not the carbon bogey creatures the animal rights activists would have us believe.

As TEM says sheep are natural carbon capture and storage machines, and a fine quality woollen garment, when cared for appropriately, can last decades in the wardrobe.

More of this sort of analysis will hopefully be forthcoming, in a language and format which the millennials can understand and the online retailers can promote.

The largest online shopping event on the planet took place this week with Singles Day (November 11) being promoted in China.

By virtue of the target population and their propensity for shopping online, it has become the largest single selling event in China, if not the world since its creation by Alibaba in 2009.

Although like all good retail events it now stretches over 11 days rather than the original one.

It does, however, provide a gauge of consumer sentiment in the world's second largest economy.

The largest players, Alibaba and JD.com sought to keep a lid on expectations this year given the government policy of "common prosperity" which is acting like a tax on the giant profitable tech companies as they quickly become very philanthropic to appease Beijing.

Initial sales figures indicate that new records have again been set with this year's sales, even if the rate of increase was slightly below last year.

How the Chinese consumer is coping with a slowing economy, wobbly real estate values and the government zero Covid policy is vitally important to the wool industry.

European processors continue to make up for lost time, and plenty of woollen garments are being pulled off the shelves as temperatures decrease and gas prices increase.

India, despite being out of the world cup early continues to buy an increasing volume of wool compared to last year.

But, the Chinese domestic market is the one area that has been worrying processors, traders and exporters over the past couple of months.

Exports from China to America and Europe are progressing as fast as the constipated supply lines will allow at present, and the domestic pipeline has been filled, but processors are keenly awaiting more signals to pump some more product in when sales occur at the other end.

Even if prices in US dollar terms are just maintained while the industry awaits a more positive signal from retail activity, the prices in Australia should rise courtesy of a falling currency.

The stars are aligning to push the US Dollar higher, and also weaken the Aussie at present with the drivers for strength in the Australian currency all beginning to wane.

Chinese growth and therefore their consumption of raw materials has weakened, so while on one hand the Australian grower wants active Chinese consumers, a weaker Australian dollar because of lacklustre Chinese consumer activity may offset some of the pain.

Not that the slowdown in China is dramatic, and the predictions of a real estate collapse may have been premature as Evergrande and others seem to find a way to meet their payments at the last minute.

So, nervous times ahead for the wool industry, and many other commodities, as the world grapples with inflationary pressures, and economic realignment, but most would consider for the wool industry there is more potential for upside than downside over the coming months.

- Bruce McLeish is Elders state wool manager - Queensland.

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The story Yo-yo effect continues in wool market | Elders first appeared on Queensland Country Life.

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