THE foot was back on the pedal this week as the wool market moved ahead to gain 17 cents in local currency terms and a slightly more subdued 11-cent rise was recorded in US dollar terms.
The European customers saw a 12-cent rise as both the Australian dollar and the Euro moved around significantly during the past seven days.
The best quality superfine wools continued to find favour with buyers, particularly European houses that have strong concerns about quality and quantity past Christmas.
The larger catalogues where buyers find better prepared clips and adequate volumes to be able to fill an order saw the most positive auction support.
That was until a jump in the local currency based on the release of employment numbers took some sting out of the market later on Thursday.
However all Merino categories posted rises of at least 10 cents and many upwards of 20 cents for the week.
Crossbreds and carding wools were able to erase the losses of last week by gaining 10 to 15 cents during the week.
Comments from overseas customers following the market jump, particularly on Thursday were in the main positive. Some as usual reported that their clients did not follow, but a buyer of a product will always seek to purchase at the lowest price they have been offered in recent times and for most that meant last week’s price and not the current offer.
In general terms, given the relatively low basis in US dollar terms mills are happy to see prices moving north.
It brings confidence to all those involved in the processing pipeline to see prices gradually increasing and whilst demand is still only moderate another week or two of steady gains will see many more orders committed.
Demand is present in all the major consuming countries, but the actual buying orders are being held whilst the buyers ponder whether the time is right or not.
In some of the peripheral markets or types where price levels had been cheap such as medium micron knitwear produced from multi national blends, price rises have already been significant as supplies run low.
Other downstream customers are continuously checking the current order position to exhaust old stocks, but will very shortly have to commit to new third quarter contracts.
Balancing this is the current quota issue in China that raises its head most years at this time.
Wool import quota in China expires at December 31 each year and the allocations roll over to the New Year on January 1, if the government department issues it on time.
As a considerable volume of wool has been purchased by Chinese traders from Russia and other European sources this season quota is starting to get tight.
There are reports of some wool already sitting on the wharf in China as the owners try to find quota from the few operations who still have unused allocations.
As of December 1 the issue will largely disappear however given that wool purchased in auction after that date will only arrive in China in 2016 and therefore be subject to the new quota allocation.
So perhaps one more small speed hump for the market to negotiate and then it can be plain sailing for a while.
Given past experience a smooth path for the wool industry would be nice, but also unlikely.
The Christmas recess will mean that mills need to stock up to cover the period where there are no auctions held, and then we run into the Chinese New Year holiday, which in 2016 falls on February 8.
So Chinese buyers will be reluctant to purchase wool that will arrive during the first two weeks of February, which may cause a little uncertainty for the Australian auctions in early January.
Offsetting these restrictions is the fact that the pipeline contains very little stock and an increase in demand, that is expected given the muted buying patterns at present, will force mills to scramble for raw material no matter what day of the week or time of the month it happens to be.
This leaves growers with a relatively positive outlook, however in the volatile global environment a number of factors can upset the apple cart and it is only with the benefit of hindsight that one will be able to explain these instances.
So in the present situation where forward prices are actually at or above the spot market for the next six months all growers should be looking to cover at least a portion of next year's clip.
Some already are doing this and good volumes have been booked on both Riemann and Southern Aurora Wool platforms, but with 21 micron currently selling above the 95th percentile for the last decade all growers should be taking advantage of the current conditions.
A large portion of this current price is no doubt due to favourable currency conditions and with analysts varying in their forward predictions for the AUD/USD from 0.58 through to 0.82 the currency outlook is far from certain.
