Wool market makes a modest recovery

Wool buyers continue to be lured in by Merino fleece

Sheep
The overall market indicator, according to AWEX, increased by 4 cents a kilogram in local currency terms.

The overall market indicator, according to AWEX, increased by 4 cents a kilogram in local currency terms.

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A recovery of sorts occurred as expected for the wool market last week.

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A recovery of sorts occurred as expected for the wool market last week, and hopefully, it was not just a dead cat bounce.

The increase in the value of the Australian dollar versus the US dollar meant prices were much higher for overseas buyers, but that has provided a degree of confidence that the wool market has not, and will not, fall off the proverbial cliff.

The previous week saw prices drop significantly and settle at the 2015 level for many Merino fleece types.

If the market had fallen through that important support level, confidence would have evaporated.

However, the technical boffins re-drew the line on their charts and the market bounced as the textbook dictates.

The overall market indicator, according to AWEX, increased by 4 cents a kilogram in local currency terms, whilst in US dollar terms it rose by a significant 53c/kg, and EU49c/kg for the few Europeans still at work and focused on the industry.

Merino fleece continued to be sought after, but buyers remain selective about the usual quality constraints of yield and fibre strength, which are particularly pertinent with downstream customers becoming even more selective about the quality of deliveries in this uncertain environment.

Crossbred types meandered about, with buyers wondering if they are good buying or not.

Carding types bounced around all over the shop as buyers basically couldn't decide if they were Arthur or Martha.

Overall, mills in China had to get some quantity in order to keep their machines running now they have restarted again, and so orders were in the market.

Some have now bought enough, but some still have more to go.

The rostered quantities of wool keep climbing, as some brokers, in particular, seem determined to clear their warehouses just in case auctions are locked down.

Given there are other ways being trialled to actually exchange ownership of wool such as electronic auction systems or video streaming, the actual auction will still go ahead in some form or another.

For brokers or growers to be filling up selling days past their agreed limit so that buyers have to remain in close proximity for more hours than usual, is selfish and stupid.

It would seem the virus is having a greater effect on behaviour than physical health in some areas, but it is certainly changing the world as we know it.

Consumers are still active in some market segments, but almost absent in others, and this will affect the wool market to some degree down the track.

Here in Oz retailers such as supermarkets, office suppliers (for home office set-ups) and even hardware stores are "killing the pig''.

Others are faring less well, with department stores and fashion houses seeing deserted stores and virtually none existent sales as social distancing rules make a shopping excursion difficult.

Those selling online may be faring better, but nevertheless the always discretionary of purchase of clothing items mean there are less being made at present.

How the world bounces back from this pandemic will be watched by all and sundry in so many industries.

There will be no doubt a renewed focus on health and wellbeing once the virus has been defeated.

Greta and her band of millennial eco-warriors will be back on the social media tubes imploring people to do the right thing to save the planet.

New slogans and advertorials will remind people of what led to the virus in the first place.

There will be an opportunity for wool to secure a more important position in the new normal, and make a statement about the benefits for not only the health-conscious consumer, but also for those that care about the planet as well.

Although the forthcoming retail season across the northern hemisphere is looking like being less cheerful, September is still a long way off in this rapidly evolving situation, wool only needs to secure a bit over 1 per cent of apparel sales to fill its market share, and government stimulus is open-ended at this point.

Already the Chinese domestic market is back open again, and although it is too early for shoppers to be racing to the department stores, a country of 1.4 billion people, which consumes around 45pc of Australia's wool is a welcome return customer.

A large part of China's consumption has always been uniforms for railways, postal, bank, customs, police and so forth.

In recent times the percentage of wool has been declining due to cost, however with prices in US dollars back to 2015 levels hopefully the blend will now increase again.

But simply in terms of numbers, with tens of millions of government employees across various industries, a new uniform for everyone will cover much of the shortfall being experienced at retail.

The raw material for these uniforms doesn't all have to be Australian wool, but this is basically the only Merino wool available to processors in China at the moment.

With New Zealand under lockdown no wool is able to be exported.

South Africa has cancelled auctions, and therefore exports for 21 days minimum and Argentina exports are also shut down at present.

It is too early in the year for either Chinese domestic wool or Russian wool to be available, apart from last year's leftovers, so the only place to actually buy fresh Merino wool this week is Australia.

So, the clarification about ScoMo's comment on auction houses being shut down was quickly relayed around the world.

As are the constant updates and musings from people within the industry about the auctions and the industry in general from shearing teams, testing laboratories, warehouses, show floors, dumps and shipping facilities.

At this stage, the industry is proving flexible enough to adapt to social distancing and hopefully, we can continue to do this so there are no interruptions to the very long pipeline.

The world may not "need" wool like in centuries past, but they will "want" wool to feel better about themselves when we come out the other side.

The story Wool market makes a modest recovery first appeared on Farm Online.

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