TOP-end Italian fabric manufacturers are paying a premium for selected WA wools that east coast woolgrowers cannot supply enough of because of the drought.
Vitale Barberis Canonico, which can trace its weaving fabrics for menswear heritage back to 1663, and Successori Reda, a family company that only goes back 154 years, have been buying WA wools through their Australian arm, New England Wool.
Barberis and Reda joined forces in 1990 to create New England Wool which originally only purchased Merino wool in New South Wales – as its name implies – but has since spread its operations across Australia and into New Zealand and South Africa.
Although it did not make the Australian Wool Exchange (AWEX) list of major buyers at the Western Wool Centre (WWC) last week because it only bought small lots, New England Wool’s name was called often enough by auctioneers to warrant surprised looks between competing bidders and comment by brokers in the viewing room.
On Thursday in particular, New England’s buyer at the WWC, Darren Calder, was prominent as he outbid other buyers in spirited and often extended contests for between 80 and 90 bales – roughly half of the small volume of top quality wools on offer.
New England Wool only buys declared pain relief or non-mulesed, ‘spinner’ or ‘best’ styled sound wools with 40N/kt staple strength or stronger.
It openly admits on its website it is prepared to pay a premium to reward woolgrowers who make the extra effort to produce the sort of wools it wants.
Other WWC wool buyers estimated the premium New England Wool was prepared to pay last Thursday was up to $1 a kilogram on specific, already relatively highly-priced selections.
“Basically, it’s a premium on top of a premium for certain selections that are the right stuff,” said Scanlan Wools’ buyer Steve Noa.
“While it’s great for the growers who produce that wool, it (extra premium price) tends to skew the whole market, it sends the wrong message, because in reality it’s only about half of what makes up just 20 per cent of our (WA) market.
“All of New England’s wool goes to Italy for the top-end worsted market, where as the main market for WA wools is primarily China,” Mr Noa said,
Several buyers ribbed Mr Calder about the premiums after selling finished on Thursday.
He had just paid top price of the day, 1874c/kg greasy (2610c/kg clean) for a nine-bale line in the Dyson Jones catalogue appraised as MF5S, with specifications of 17.6 micron, 1.1pc vegetable matter (VM), 42N/kt, 96 millimetres staple length and 71.8pc yield.
Mr Calder said the impact of the drought on the wool produced in NSW, South Australia and northern Victoria had “possibly” led New England Wool to relax its stringent specifications “slightly” and to source wool across a wider range to guarantee supply.
“I think the selection of suitable wools in the Eastern States has been restricted because of the drought so they are looking more to us to secure supply,” said Mr Calder, who also buys wool for two other trading companies.
“The type of wools they buy is a little bit restricted (compared to the Chinese woollen mills clients he also buys for).
“There are certain criteria the wools have to meet – they have to be 17s, 18s and 19s (micron), sound, stylish wools that look the micron, have good compression and low VM.
“I’ve always been buying for them, but I suppose I have bought a bit more recently – we’re trying to fill a container,” he said.
Both the AWEX and Australian Wool Innovation (AWI) weekly wool market reports last week commented on the two-speed nature of wool markets across Australia and hinted at the premium New England Wool and possibly other European mill suppliers are paying for a very limited selection of wools.
But AWEX and AWI preferred to describe it in terms of a discount for lesser specification wools rather than a premium for top wools.
The AWEX report noted total volume of wool offered this season, up to the end of last week, was down 177,047 bales compared to last season.
This highlighted the contraction in overall supply, but not that a high percentage of that reduced supply is low-yielding, high VM, tender wools due to the drought.
“Better style wools, with favourable additional measurement results continue to attract excellent buyer support,” AWEX said.
“Off-style types, wools carrying higher vegetable matter and those with high mid breaks lacked the same support.
“The 20-40 cent reduction in these wools was the driving force behind the reductions in the individual micron price guides,” it said.
AWI’s report pointed out the strength of wool auction prices last week was “somewhat of a surprise to most trade participants”, given that the Australian dollar moved 2.2pc against the United States dollar, making wool dearer on international markets where it is paid for in US dollars.
“Most (market participants) expected a softening as China heads into their new year recess over the next two weeks, but this largely failed to eventuate,” AWI said.
It pointed out the Eastern Market Indicator (EMI), as a guide to the strength of the Australian wool market, had risen 7c to close at 1934c/kg clean last week (the Western Indicator closed 2c up at 2094c/kg).
“But this average market number is hiding some radical price improvements and some minor losses in specific categories,” AWI said.
Prices at the WWC last week were led by a 39c rise for 18.5 micron wools on Wednesday – with 19 and 19.5 micron prices not far behind – and a 17c fall by 19 and 20 micron wools on Thursday.
Wednesday’s pass-in rate of 15.2pc dropped back to 10.6pc on Thursday, with a total offering for the week of 9188 bales, down 613 bales on the previous week.
This week’s WWC offering is expected to drop again to 8768 bales and may drop again next week before it is expected to stabilise for a while.
Brokers report wool is flowing steadily into wool stores from summer shearings, despite rumours of a shortage of shearers.
However, they expect the wool supply to dry up by early April as farmers get ready to sow next season’s grain crops.
p Latest national wool test data shows some of the impact the drought in Eastern States is having on the quantity and types of wool available.
According to Australian Wool Testing Authority (AWTA) statistics comparing January data to January last year, WA displaced NSW and took over second spot behind Victoria as Australia’s biggest volume wool producers.
WA woolgrowers produced 4.3pc more bales to a total of 37,360 in January and they were 1.1pc heavier.
The number of bales produced in NSW in January dropped 22.5pc to 34,849 and they were slightly lighter.
The number of bales produced in Victoria in January dropped 12.7pc to 59,857 and again, were slightly lighter – the main Western District wool growing area in that State was not impacted by drought but mixed grain and wool producers in the Wimmera and Mallee were.
Nationally, the January wool clip was down 12.5pc to 151,013 bales weighting on average 0.3pc less.
Average yield in WA in January eased 1.1pc to 63pc compared to January last year, average fibre diameter shrunk 0.4pc to 19.4 microns, average staple length eased 0.8 of a millimetre to 84.9mm and average staple strength was down 3.3Nkt to 28.2N/kt.
In comparison, yields in NSW and Victoria dropped 2.9pc to 62.3pc and 1.9pc to 67.4pc respectively and average fibre diameters in both states reduced 0.6pc to 20.4 microns in NSW and 22.8 microns in Victoria.
Average staple lengths shrunk 3.6mm in NSW to 81.3mm and 2.7mm to 84.3mm in Victoria, while average staple strengths dropped 5.1N/kt to 30.1N/kt in NSW and eased 1.1N/kt to 33.1N/kt in Victoria.
While average WA wools in January were longer than average wools in NSW and Victoria and better yielding than NSW wools, they also closed the gap on suitability for manufacturing.
Incidence of mid-break in WA wools decreased 1.3pc while the far more manageable tip-break – a legacy of last year’s dry autumn and late break winter – increased by 11.7pc.
In NSW wools, mid-break increased 4.1pc and tip-break dropped 8.9pc.
In Victorian wools, mid-break increased 2.8pc and tip-break was down 4.9pc.
So far this season AWTA has tested 188 million kilograms of wool compared to 213.7mkg for the same period last season.