Wool back in action

After weeks of softer wool prices and a minor price surge in the last week before the mid-year recess, there have been rumours of a boost in Chinese competition in the second half of this year to turn the market around.

ANZ research analyst Paul Deane said unlike the cotton stocks in China which were extremely high, wool lacked this overhang.

He suggested there was potential for prices to rally in the second half of 2014 as Chinese mills returned to the market.

This was on the back of wool imports to China being the lowest in five years.

Landmark risk management’s Anthony Boatman said offering volumes for the 2013-14 wool selling season were as much as 114,000 bales less than the 2012-13 season.

This was nearly six per cent lower than the year-on-year total.

“At the same time Australian wool exports declined by an estimated 2pc in 2013-14 with shipments of superfine greasy wool (19 microns and less) jumping close to 15pc and exports of broader wool falling about 20pc, reflecting the changing trend in production,” Mr Boatman said.

Elders wool sales manager Bruce McLeish said reports from China suggested many mills carried minimal greasy wool stocks and while sales had been sluggish, the Chinese would need to continue to buy further quantities in the final weeks before the recess to cover processing requirements until auctions resume.

“European mills already have one eye on their approaching holidays and are only calling in wooltop or yarn to cover their exact requirements to process during the days before they shut down for summer,” Mr McLeish said.

He said this hesitant buying and invoicing regime created the inverted price situation evident in the Aussie market.

But, Mr McLeish said providing the European economic recovery didn’t stall, the new season fundamentals appeared quite positive.

“A three-week recess with very little wool available to exporters during that time will build some demand, as the majority of mills in Asia do not reduce production at this time of year,” he said.

“Their (China’s) annual shutdown is usually during the Lunar New Year in January/February and so while many are on a reduced capacity at present, Asia will continue to consume greasy stocks during the next month, meaning a larger appetite when sales resume in the first week of August.”

He said there had been inquiry for wooltop from Korea.

“Add in the meteorological data from across Southern Australia which will reverse the previous years trend of increased superfine production and the current inverse pricing should soon disappear.”

Growers could take advantage of the recess period by posting on Wooltrade, said Wooltrade market operations manager Tony Benson.

He said during last year’s recess more than 6000 bales were sold to 20 wool buyers for positive results.

“After the success of last year we are very keen to offer this service again,” Mr Benson said.

“The AuctionsPlus sale will be held on July 31.

WOOLGROWER David McPhie, “Ravensworth”, Cooma, has just wrapped up shearing 1400 Merino ewes.

Mr McPhie runs 2500 ewes and had split his shearing into quarters to stagger income throughout the year.

His adult ewes average 19-micron and cut about eight kilograms a head.

“Because I shear every quarter I generally meet the market and sell straight away,” he said.

“Years ago when I was first farming you could afford to hang on to it, but I’ve changed my operation so I now have income every three months.”

Mr McPhie said the controversy surrounding the wool industry after video of sheep being mistreated in shearing sheds was made available by People for the Ethical Treatment of Animals (PETA) was concerning.

Before farming, he had been a shearer from the age of 14.

“I’ve been around the industry a long time. As a farmer I look after those sheep 365 days of the year and a shearer comes in and handles them for three minutes; if anything goes wrong in that time, I’m not happy.”

– SIMONE NORRIE