Another week of little change in the Australian wool market again last week saw prices a smidge lower in local currency terms, and just slightly dearer in USD terms.
Good style fine and superfine Merino types are still attracting keen support from buyers with European connections, or a European final destination in mind.
These types are in such short supply that many traders are now hesitant to offer them to clients, fearing they will be unable to fill the order in a timely manner.
Not a particularly unusual situation at this time of year, but the good prices over the past season has also meant there are virtually none of these wools in hold stocks either, for traders to draw upon.
August will hopefully see an increase in supply of these wools, although the favourable seasonal conditions will also mean that micron on average will also be coarser than last year.
The medium Merino categories saw little change for the week, with the better wools dearer, but being averaged out in price by the inferior wool prices, so the average indicators showed little change.
Topmakers from China purchased according to selection, and their processing capabilities, so they operated in the auction room as quality dictated.
Knitwear types for combing were again well supported, but the seasonality of the carding wool sector appears to have peaked and those wools eased by 50 cents or so.
Crossbreds both here and across the Tasman performed poorly as the processing trade becomes more and more nervous about the global economy and consumer demand.
Everyone is closely watching the currency markets at present and hoping for a weaker local currency to boost the export competitiveness of Australian wool.
In South Africa the second-to-last sale for the season was held and failed to produce many outstanding results.
Chinese-based entities still operated, albeit at a low basis given they are still obliged to store the wool in the Cape pending a resolution of the Foot and Mouth Disease protocols, which to date have been zero. China has bigger problems on its plate it would seem, and it is difficult to gain access to the right people to get any decisions made about the biosecurity issues.
Other traders struggled to find enough good wools among the predominantly prem shorn catalogues to fill orders for Indian or European topmakers.
Although there were still 52 per cent of Responsible Wool Standard-certified wools in the Merino catalogues, the quality has deteriorated to such an extent that the RWS premium has now fallen to a mere 10pc over uncertified wools in that market now.
Speaking of biosecurity, the presence of FMD on Australia's doorstep in Indonesia is a huge wake-up call to all livestock producers here.
For the past 100 years we have been relatively secure and safe from such outbreaks, but with international borders open again and travellers bolting for the airport gates there is a much higher risk of an incursion.
Much work has already been done to map out the response should an outbreak occur, but it will not be easy to control and nigh on impossible to eradicate given the population of feral animals across much of Australia.
Similar to South Africa, an outbreak of FMD in Australia would see the immediate cancellation of exports of wool, which would be devasting for the wool industry, given our reliance on a single market in China.
A stockpile of wool would quickly build up at the rate of 40,000 bales per week, and wool growers cashflow would grind to a complete halt.
The cost of EID tags at about $1.30 each seems a relatively cheap insurance policy in the larger scheme of things, to at least manage stock movements should an outbreak occur.
That other virus is still causing a few issues in China, although thankfully Shanghai residents are now able to venture out again after more than two months of captivity.
Getting tested a couple of times a day, and showing the results to every establishment you wish to enter is pretty much the norm, but at least people and goods are now moving again.
The COVID-zero strategy would appear to be working, for now, but it has taken a huge toll on their economy.
The government growth target of 5.5pc now appears a distant memory, and although such a target has never not been achieved in modern Chinese history, it seems like this year they may miss.
The government is rolling out some massive stimulus programs to the tune of USD120 billion, and Premier Li recently had a Zoom call with about 100,000 officials to explain what they needed to do. It would have been a long Q&A session if everyone had a question.
The stimulus levers at the government's disposal are becoming somewhat limited however, with the tech sector having been spanked into submission, the property sector still reeling from bad debts and company failures.
Unemployment is already comparatively high for a country in which not so long ago, everyone had a job, government or private.
But, given the importance of getting their economy back on track prior to the National Congress meeting in November, the government will pull out all stops to make it happen, and China knows how to do stimulus.
Apart from the infrastructure spending and relaxation of rules for property development and industry we should also expect to see some vouchers handed out to citizens to encourage retail activity, as has been done in the past.
Spread across a few hundred million people this could make a difference.
The domestic processing trade is currently watching this space, and getting ready to pull the trigger if it does occur.
They don't want to act too soon, and end up with a pile of unsold garments, but the clock is ticking and they need to move soon, if they are going to meet the sales deadline.
Given the reducing supply of wool in Australia, if there is a sudden recovery in the Chinese domestic market, there will be fireworks. If there is no sudden recovery, we will still see a firm, steady market.
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