Wool market plays catch-up

Wool market plays catch-up

Wool
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Many of the reports from last week look worse than the market actually was.

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Darren Hayward, Omeo, Victoria, Geoff Pollard, Helimed Auxiliary, Russell Foster, Omeo, Victoria, Luke Nicholls, Stratford, Victoria and Helimed Auxiliary president Minke Bennett. Photo by Elders.

Darren Hayward, Omeo, Victoria, Geoff Pollard, Helimed Auxiliary, Russell Foster, Omeo, Victoria, Luke Nicholls, Stratford, Victoria and Helimed Auxiliary president Minke Bennett. Photo by Elders.

Many of the market reports from last week look worse than the market actually was because they are still playing catch-up from the previous week and the disjointed opening to the selling season, not to mention the crazy gyrations we saw the previous week.

In essence the market was down a few cents for the week, and perhaps for a change we should only publish the Western Market Indicator as the most reliable barometer for the industry, which showed a relatively benign minus 2 cents a kilogram.

Basically, superfine Merino fleece is getting slightly dearer, medium Merino fleece is coming off a bit, especially where the strength is low and the mid breaks are high.

Knitwear types are generally following the fleece sector, whilst cardings are having a normal seasonal push.

Crossbred wools are struggling under sheer weight of numbers at this time of the year, but with the price of lamb at present, things still look OK for those producers.

So, although some ill-informed customers in the industry around the globe, or even in Australia will look at the reports from last week and see minus 30c/kg on the EMI and think it was a big drop, the market was actually quite good.

Somebody trying to talk the market down - so they could buy cheaply, would no doubt point out that medium Merino fleece in Sydney was quoted 100c/kg lower, but that was simply a catch-up from a rather disruptive roster the previous week, which saw Sydney rostered to sell early in the week when half the buying trade were still on holidays somewhere in the South Pacific.

Overall, since the market paused back in December, 17-micron fleece is up by 85c/kg, 19.5-micron is unchanged in price and 21-micron is around 10c/kg cheaper.

Crossbred wools are some 80c/kg cheaper, whilst the carding segment is 80c/kg dearer.

So, depending on which segment of the market someone operates in, they may be looking at a different price scenario at the moment, or not.

From a demand point of view there has not been a lot of change since mid-December either.

Retailer's generally had a good November/December period, although there were obviously a few that didn't hit the sales targets they wanted.

Mostly at the high end of the shopping neighbourhood, be it physical or digital, there was plenty of exchange going on.

So, retailers of high-quality wool products fared quite well compared to those selling the cheaper, mass produced disposable clothing lines.

There are still plenty of processors in China expecting the "new" fad to emerge and miraculously create a surge in demand.

It would be nice, but not something that you can build a business around, so the smart operators are getting on and talking to their customers, working on getting the basics right and building on the numerous attributes of the Merino fibre which tick the boxes for today's customer.

If we are prepared to remain logical and dispassionate and not get caught up in the media hype surrounding the coronavirus situation in China, there is a lot of upside potential in the next two to three months.

Plenty has already been written comparing the wool industry situation in 2002/03 (SARS) to the current position of moderate prices and low supply that should dispel any unnecessary concern.

However, the 'group think' taking place in China at the moment is quite extraordinary, and fuelling the western media who obviously need a new catastrophe to follow now that the rain has dampened the bushfire threat - at least temporarily.

No doubt the Chinese government is keen to show their own citizens they are in control of the situation, and that they can manage this 'crisis' even though they as individuals have been having a tough time in the last 12-months with the sluggish economy, increasing price of food and general lack of optimism about the place.

Perhaps this helps explain the terminology being bandied about such as medical troops on the frontline in this war and the like.

A rallying cry of togetherness and patriotism can often distract from perceptions of government failure in other areas such as economic management, jobs and cost of living pressures.

Providing that the current medically induced isolationism does not hamper world trade and movement of tourists the global economy looks set to improve in 2020.

The US economy is showing signs that it is holding up well, and no doubt more serious pork-barrelling is about to get underway in the lead up to the election in November.

Britain has much work to do and growth to generate in its new status a recently single player, and no doubt Boris will be footloose and fancy free as he tries to fill the dance card quickly.

Europe has been struggling in recent times but a new President of the European Central Bank in Christine Lagarde has kicked off her term with a firm view that they need to re-examine the way they define the rules around inflation and the like - so there may be a bit of pump priming coming over there.

So, in the short term we will see a wool market searching for stability, direction and guidance, but as the Lunar New Year celebrations wind down across the whole of Asia we will see some of this emerge.

This week will probably see another one step forward, one step back affair, but European and Indian interests will no doubt be more active whilst the Chinese, Japanese, Koreans and Vietnamese are feasting and sleeping.

Gong xi fa cai.

The story Wool market plays catch-up first appeared on Farm Online.

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