Wool market drifts on back of buyer hesitancy

With a more hesitant mood from a couple of the major buyers last week, the market drifted somewhat - in a similar vein to a livestock sale when one of the major processors is out of action.

The prices certainly didn't plummet, but other buyers were able to pick and choose their purchases a little more, and no new price records were set.

The better tested lines were more or less unchanged in price compared to the previous week, whilst the low yielding types again struggled to find new homes.

Scouring plants around the world continue to struggle to cope with the lower yielding wools this season as effluent controls tighten up, particularly in China.

A stronger local currency made the negative price movement appear worse than it actually was in US dollar terms, and with no sale last week in Fremantle a paltry 21,700 bales were offered to the trade, of which 15.5 per cent failed to sell.

The Merino fleece indicators all eased by about 30 cents, as did the skirtings and cardings.

Crossbred wools eased only slightly and the market's broad indicator - the Eastern Market Indicator (EMI) closed down 23 Aussie cents, but only 7 US cents.

Given that most of the processing trade is now focused on the upcoming yarn and fabric fairs in Europe a market which ebbs and flows, searching for direction is not surprising.

All of the major production for the 2019/20 season in the northern hemisphere has more or less been completed, and these garments will be on the shelves in late August for the selling season.

Mills in Europe are currently preparing their new collections, with on average a thousand swatches of fabric or yarn having been prepared in different combinations, as they search for the new inspiration to kick start orders again.

In Florence, Italy this week Pitti Uomo is being held, which is flagged as the world's most important platform for men's clothing and accessories.

Every major brand will have a presence at Pitti this week, not just from Europe, but also from China as well, trying to make a statement about where they see the future of fashion.

For the average punter some of the designs may seem a little "out there", but the trickle-down effect to mainstream fashion will ultimately determine what consumers see on the shelves in a little over 12 months' time.

The propensity of natural, sustainable fibres whereby consumers can follow the story of the garment's creation, will no doubt be front and centre as so many European mills have made this more of a requirement of late.

The feedback of this event will not be immediate, as customers will take time to mull over the offering, and decide how it fits into their own collection, but the tone of participants will provide an important guide to the season ahead.

At present, the market is in limbo waiting for direction, so a positive feeling at Pitti will go a long way towards maintaining wool prices through until the recess.

Of course, early stage mills will need concrete orders in the meantime and for top-makers and spinners, these orders are getting a little thin on the ground.

Some of the larger mills have been unable to sustain their required volumes of sales, so rather than produce stock, they have reduced production by having a week off every month.

With available quantities of greasy wool less than 30,000 bales a week for the rest of the month, this may be enough to keep the status-quo in price terms.

However, any significant order for fabric hitting the market in China, from either government uniforms or private concerns, will easily change this to the upside.

Whilst the wool industry has eyes on the catwalk, many others are watching the developments, or lack thereof, on the trade issue front.

Not seeing much in the media or Twittersphere doesn't mean there is not progress being made, and one would expect some sort of announcement at the G20 meeting in Japan later this month.

Some in China acknowledge that there are cooler, more reasonable minds in Beijing these days, than the dogmatic, China-First proponents of previous administrations.

The Chinese government continues to inject measured amounts of stimulus into their economy to keep things moving, but there is a limit to how much they can do before the wheels start slowing.

The effects of the increased tariffs are beginning to show on the other side of the Pacific as well, with American port activity reducing markedly, and the US Fed Reserve now talking about cutting rates again rather than increasing.

Mexico appears to have dodged the proverbial bullet this week ,as Mr Trump seems to have decided that threats of tariffs can solve his problems on many fronts.

The Europeans are keeping their heads down at the moment on the trading front, but they have plenty of their own issues to deal with, trying to pick a new team captain from the 900 odd EU parliamentarians just elected to manage the 27-member bloc - or perhaps 26 if Boris gets in and gets his way.

So, the outlook for the wool industry remains relatively positive with the continuing spot fires burning of price resistance and poor quality, but some showers on the way in the form of new fashion and the looming auction recess.

Merino fleece prices should more or less hold until the July break in sales, although it looks like the micron basis will continue to close.

Crossbreds will drift, waiting to see if the fake fur phenomena takes off in China or not. Cardings will be likely to trend lower as their season closes much earlier than the longer wools.