Positive vibe for 2014 wool market

29 Dec, 2013 01:00 AM
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There is wealth in the wool industry ... the better exchange rate theoretically should be helping

WOOL prices started on a good note early on in 2013.

There were continued talks of increasing demand off the back of Chinese growth and lower supply out of Australia, signalling a strong market for the coming year.

The first sale in 2013 saw a significant price rise, most notably in the west where the market jumped 51 cents a kilogram to close the week at 1146c/kg.

The first few months of the year were relatively strong but prices started coming off in the lead-up to the Easter break.

The falls during March and April were largely attributed to the rising US exchange rate and sluggish demand which put pressure on the market.

Wool prices were generally softer for the rest of the season.

The 2013-2014 selling season also started on a softer note despite drops in the US dollar.

It was disappointing to see the Western Market Indicator slip 41c in the first week in July to finish at 1010c/kg but agents remained upbeat that the second half of the year would be better than the first.

Australian Wool Innovation (AWI) had recently announced that there were 36 new customers using wool since 2012, but as Primaries wool manager Tim Chapman told Farm Weekly in July, the overall economy was hitting the industry hard.

"There is wealth in the wool industry," he said.

"But the bottom line is that the volume of clothing in the streets is not moving fast enough and is causing a bottleneck.

"The better exchange rate theoretically should be helping but I think the bottom line is that we don't have people in the streets spending money."

After the July recess the market was sluggish despite lower volumes.

At the end of August, however, the market received its first big push for the season.

Healthy gains of up to 69c/kg were seen in all selling centres and the WMI finished up at 1088c/kg and the national passed-in rates of 1.9 per cent were the lowest in a long time.

It was a sign of things to come.

In the first week in September the market jumped again by up to 67c/kg, which saw a 115c/kg rise in just two weeks.

This came at a time when prices were predicted to fall as higher volumes came on the market.

But wet weather held up receivals and the market was sitting at 1134c/kg, 200c/kg higher than at the same time last year.

While those whopping price rises couldn't be sustained for long, the rest of the year was considerably strong and the WMI didn't dip below 1100c/kg.

The highest prices were experienced in the second last sale of the year.

The market hit 1189c/kg, the highest levels since May 2012.

It finished the year at 1188c/kg but on the final day of sales all centres closed on a strong note.

Elders wool sales manager Danny Burkett said the good finish signalled a good start for 2014.

"The last two and a half months wool has traded at strong levels," he said.

"Twenty one micron wool struggled to break 1250c/kg clean but when it has done that it has traded to 1270c/kg.

"We are getting back to some very profitable levels for wool growers."

Mr Burkett said the indicator was about six per cent better at the end of this year compared with the same time in 2012.

Looking forward Mr Burkett said everything pointed to a good wool market in 2014.

"The forecasting committee is forecasting no major lift in production, so we will still be producing a similar amount of wool as we have been over the last four years," he said.

"And if China remains strong you could form a very good argument that the wool market will remain strong well into next year."

Landmark business development manager Ben Silverman said 2012 overall was a good year for wool producers.

"Prices closed above the 90th percentiles for 20 through to 24 micron," he said.

"Even fine wools which have been struggling due to lack of demand and over-supply with a large volume of hunger fine wool in the east coast, resulting from dry conditions in the first six months of 2013, closed between 50th and 75th percentiles.

"Twenty one micron has remained above 1050c/kg throughout 2013 and closed at 1267c/kg at the end of the year."

Mr Silverman said it was never an easy task to predict the future but the talk among the wool trade indicated a good start to 2014.

"Historically the period between Christmas and Easter has been a good time for woolgrowers to consider marketing their wool clip," he said.

"Certainly if I had wool between the 20 to 24 micron range, I would offer it up for sale as you cannot go wrong selling in the top 90pc of prices in a 10-year price cycle.

"Improving world economies have pushed demand higher overall and supply has kept at a relatively steady, but historically low level."

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