As expected the market was 20 to 30 dearer last week as weakening demand was offset by the reducing supply.
With the trade in Fremantle having the week off, the East coast selling centres managed to sell a combined total of 31,000 bales with generally favourable results.
By the close of auctions on Wednesday the overall Eastern Market indicator had risen by 24, 26 and 23 cents in AUD/USD and Euro terms respectively, highlighting the relatively calm currency markets for a change.
Having said that, volatility resumed not long after the auctions closed and the Australian Dollar dipped by more than a full cent against the US Dollar on Friday morning.
The Euro also experienced plenty of volatility later in the week following the various Central Bank meetings and monetary policy changes.
The European Central Bank announced it would end the stimulus bond buying program on July 1, and would also look to raise interest rates by 25 points at that time as well.
Inflation in the Euro Zone had been predicted to be 5.1 per cent, but the economic boffins now think it will be more like 6.8pc this year, which will put a strain on household expenditure, and the amount left over for discretionary purchases.
The common currency dropped sharply following this policy announcement, making it more difficult to sell wooltop and yarn to those spinners and knitters working in that part of the world.
However, given the 'normal' volatility of currency markets, deals can perhaps still be concluded in coming days when the wheel turns again.
The American economy is leading the charge when it comes to inflation, and also forcing their Federal Reserve to adjust policy settings quickly and aggressively, but it is also still leading the charge in consuming of product, perhaps pointing to successful economic management despite the nay-sayers who are predicting an imminent recession for the world's largest economy.
Sales of finished garments and fabric for high quality suiting are increasing nicely, and providing positive signs for the upcoming selling season for woollen products.
Although the office attire has changed in the western world, and not many people don a suit in the home office, it seems that more and more people are rewarding themselves with new flash outfits for when they do venture out.
Wool's move into more casual, but still stylish apparel, rather than the traditional suit and uniform, has certainly allowed it to capture a slice of this market.
The ever-increasing sustainability and natural fibre appetite is helping to drive the cotton price to extremes, and making wool seem less expensive by comparison.
From a peak of nearly seven-to-one, the comparison of Merino carding prices only five years ago, the relative price ratio is now back closer to two-to-one.
This is in part being driven by the dry conditions in the cotton growing areas of the USA, but also by China's aggressive purchasing of remaining stocks in America.
This has been surprising the market, given that China normally holds large stocks of cotton, mainly to allow it to manage price spikes which can be damaging to growers and processors there, as we saw in 2011 when the cotton price went on a huge run up, followed by a subsequent crash.
The actual level of the cotton reserve is not publicly available, however the buying activity by Chinese concerns would suggest that either the stocks are much lower than anticipated, or that much of China's cotton is persona non-grata with the world's consumers because of where it has been grown.
Either way, the high, and increasing price of cotton is a positive for wool, and who knows, a 28-micron woollen sweater, with plenty of Basolan treatment for softness, may actually feel the same as cotton, and may soon be a cheaper, more viable product.
Other markets for wool vary greatly in their degree of activity at present, as the calendar ticks along, and the inflation bogie causes unrest.
The Japanese market had been very active but is now struggling given their recent economic challenges.
This is having a ripple effect across China and South East Asia with the early and middle stage processors there being forced to turn to other markets in the short term.
The Chinese domestic market remains very stagnant, and although Shanghai residents are now allowed out of their homes, visitations to and from Shanghai or Beijing are still not possible.
So, the fabric producer, or garment maker in another province, is still unable to visit his customer, or have them come to the factory to see and feel the new range of products they would like to sell this season.
The governments strict adherence to the COVID-zero policy is unwavering, but it is also affecting the mindset of the population, with most Chinese citizens now more concerned about potential lockdowns, than actually contracting the disease.
A consumer in this frame of mind is less likely to go forth and spend, than one who sees light at the end of the tunnel.
For the wool industry, the timing is critical, as typically at this time of year, the Chinese processors are winding up to full speed to supply the local market.
At present it is extremely difficult to find a domestic order, let alone get paid for those which have already been produced. Whilst there was good widespread competition at the last Cape sale for the season, with no Chinese orders due to the FMD issue, the absence or reduction of their orders would be a massive challenge for the Australian market either side of the recess.
There will be enough stock building and European or Indian business in the next four weeks to keep things moving, but after the recess we will need to see a China domestic scene in a much healthier state.
- ELDERS WOOL
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