Finer merinos on the up but mediums drift lower

A RATHER interesting week in the Australian wool market this week saw the market initially stronger particularly as a result of recent currency movements, and then seemingly everyone took a chill pill and the market settled back down to end the week with not a lot of change.

Overall, the finer merino types are gaining in price as their supply continues to drop away, as are the crossbred wools. The medium merino types are drifting lower as their relative supply increases on the back of more favourable growing conditions in south-eastern Australia.

Overall the AWEX EMI declined by 12 cents in local currency terms but was 8 US cents dearer and a single Euro cent higher by week’s end.

As usual the devil is in the detail and the superfine merino fleece types were actually quite a bit dearer with 16.5 to 18.0 micron closing up by 25-30 US cents, while the 19.5 through 21.0 micron were unchanged in USD prices. 

Skirtings or pieces for the knitwear trade were similar if not more extreme as most of the demand present last week was again for these knitting types.

Despite the ongoing demand for knitwear types the carbonising types are not feeling the love and continued to correct last week highlighting that the knitwear being produced is the higher quality ‘next to skin’ active wear and the like, rather than generic knitted sweaters and such which are often produced from shorter carbonised woollen yarns.

Crossbred wools continue to find a growing demand, on both sides of the ditch with the 28 micron indicator in Australia rising by 14 US cents, and over in New Zealand the Coarse Crossbred indicator still managing a gain of 2 USC after what has been a pretty stellar run over the past five weeks.

How these markets perform when supply does increase later in the year is an ongoing question, but at present there is simply no stock in the pipeline and mills need to purchase enough raw material to keep their machines running and produce yarns against existing orders hence the price keeps rising.

With growers in all of the wool producing countries showing the preparedness to pass in wools if they fail to meet their target price (10 per cent in Australia this week and 12 per cent in South Africa) and the pipeline continuing to remain virtually empty the chances of the wool market actually falling are very slim.

On the other hand the chance of a sustainable rise in price at the moment is also pretty small given that a portion of the trade are fighting against price resistance from their final customers and we are still only in September which is too early in the cycle generally to see much demand coming back down the pipeline. 

So, even though many exporters from Australia, South Africa and South America are heading to China to visit customers and prepare for the annual Nanjing Wool Market Conference this week it will be difficult for most of them to sell their stock at prices much more than they paid over the past couple of weeks.

No doubt some will find a perfect match and cover their travelling expenses, but others will be forced to unload a portion of their wares at discount prices rather than come home with a backpack full of certificates and a glum face to face the boss. 

There is expected to be a very large crowd in attendance at this year’s conference of around 400 people. 

This event has grown significantly in size and importance over the past 20 years to basically become the pre-eminent industry gathering as its location means that it is always easy for the trade to get to, and the timing seems to suit most players in the wool industry being on the cusp of the retail season when hopes are rising and normally new wool production is also coming on-stream too.

Looking a bit more deeply into the crystal ball and the outlook is a bit harder to discern. European economic numbers were starting to turn the corner with Germany leading the way, but election results over there last weekend now have everyone in Europe wondering what the future holds. 

Of course, the American mid-term elections are just sixweeks away, too, and while it is expected that the Democrats will control both houses as a result, how Trump et al behave afterwards is anyone’s guess. Currently the American consumers are doing their bit and continue to buy strongly, but with high gasoline prices and potentially another couple of interest rate hikes on the cards things may get a bit less cheerful at a retail level in coming months.

DAMIEN WHITELEY, Elders District Wool Manager