THE Lunar New Year holidays across Asia didn’t interrupt the wool selling schedule here in Australia and Chinese indent buyers still dominated the buying lists across the week.
Prices were easier in general in US dollar terms, with AWEX Eastern Market Indicator easing by US25c. However, a plunge in the value of the Aussie dollar on Wednesday night after the Reserve Bank changed their rhetoric about the possible direction for interest rates, and then the Reserve Bank Governor mentioned that rates could actually go down as easily as up in the future continued the downward trend for local currency. In Australian terms the EMI was up 10c, closing on 1944c.
This meant that prices recovered nicely on Thursday at the auction and finished the week up 10c in local currency terms. As usual the drought affected wools, or poorly prepared clips failed to entice the buyers, but they were very keen to secure the better style lots and nearly every micron group benefited more or less to the same extent.
AWEX’s North Market Indicator closed up 17c on 1995c. The 17 micron indicator closed on 2578c, 18 micron 2483c, 19 micron 2317c, 20 micron 2290c, 21 micron 2260c, and 28 micron 1045.
The specialty superfine sale in Sydney provided some best style lots for the buyers to chase, and good brokens and pieces were also pushed hard. Knitwear types in general continue to garner good support, and the crossbred sector continues to climb in price as buyers seek the cheaper alternatives but supplies dwindle.
Buyers and early stage processors are keenly aware of the supply situation in coming weeks, with the latest forecast from AWEX indicating a continuing downward trend of show-floor volumes.
It is not just the Australian supply tightening either with low volumes in South Africa causing the cancellation of this week’s sale, and anecdotal reports from Argentina showing less than 20 per cent of the current clip remaining available to the trade. Not helping the issue is the current situation in Lesotho, a relatively small, separate country within the borders of South Africa.
Most Australian wool growers and trade participants have vivid memories of a different mode of market intervention, and that too ended in tears.
- Bruce McLeish, Elders
While the annual volumes of greasy wool production are not huge on a world scale, some 40,000 bales have been traditionally sold via the auction system in South Africa.
Currently the entire woolclip is in the hands of a single trader who has convinced the Lesotho government to make him the only registered buyer of wool and mohair. Unfortunately, this individual does not appear to have the financial capacity, nor the customer connections to trade the wool, according to recent media reports. So, around 90pc of the clip languishes in warehouses with growers yet to receive any money for last year’s production, nor processors to receive anything to process.
Most Australian wool growers and trade participants have vivid memories of a different mode of market intervention, and that too ended in tears.
So, while demand is a bit subdued and selling wooltops and yarn not as easy as in seasons past, the current level of machinery activity and the fact that there seems to be very little if any, prompt processed stock available means that buyers are unable to take their foot off the pedal.
Most early stage processors are fully committed until April but this production requirement would have been largely satisfied with wools bought since the resumption of sales after the Christmas recess until now.
Going forward if mills are to maintain their current capacity they may have to get even more aggressive and creative with their purchasing. As previously reported the ‘feeling’ in Europe is quite positive with a reasonable attendance at this week’s Idea Biella fabric exhibition held in Milan.
As usual at this time of year the exhibition is for the spring/summer collections, but each year there is more and more wool appearing in the lighter weight summer range. The number of customers attending the fair was similar to previous years, or perhaps a little lower depending on who you spoke to.
Sustainability was the key theme and of course Merino wool ticks that box very quickly unlike a few of the plastic derivatives. Overall the exhibitors were satisfied, with some commenting that although there are less orders around this year, we have certainly had far worse seasons.
However, the bears are coming out in the media – at least those who want to push a gloomy scenario and get their minute of fame on the television or twitter and the like.
Both the Bank of England and the European Commission dropped their forecast for 2019 growth and this coupled with a softening of the US economy is herding the flock toward the risk-off paddock.
The Aussie dollar is easing and commodity prices are generally on the slide. Equity markets in the US also took a bit of a hit as a ‘source’ commented to one media analyst that Messrs Trump and Xi may not have time to actually meet in person before the March 1 deadline. However, there are plenty of others working on it, and plenty of incentive on both sides to come up with an agreement that avoids an escalation of the problem.
Mr Trump’s singular focus is obviously on the wall, which currently looks like turning into a ring-lock fence, but once that is organised he is certain to turn his focus to other pressing matters. As we have seen so often in the past, analysts and the media in general can be quite easily manipulated to focus on one side of the story, until those feeding them have loaded up on cheap stocks, then suddenly the angle changes and currencies and shares almost predictably rise again – allowing for a bit of profit taking.
Meanwhile the wool industry cruises along in a very good space, with the futures market indicating very little change in prices over coming months and a bit of moisture starting to fall somewhere else besides Townsville.
- Bruce McLeish is Elders northern wool manager.
