Wool market remains calm amid global panic

Wool market remains calm amid global panic

The AWEX Eastern Market Indicator closed down 41 cents a kilogram for the week.

The AWEX Eastern Market Indicator closed down 41 cents a kilogram for the week.


In a dramatic week across the globe currencies crashed, equities soared then crashed, then boomed again, and the wool market eased a little bit.


In a dramatic week across the globe currencies crashed, equities soared then crashed, then boomed again, and the wool market eased a little bit.

Seemingly immune to the fear and panic played out in supermarket aisles across the nation, the wool market is transacting change of ownership in a calm and orderly manner - now that the Talman system is working again.

The overall market indicator, the AWEX Eastern Market Indicator closed down 41 cents a kilogram for the week, with US52c/kg being shaved off the price for the majority of the trade who are working in that currency, and for those Europeans still working they saw Aussie wool EU59c/kg cheaper by the end of the week.

Most of the reduction occurred on the first selling day, in what was another large offering as the backlog from the 'Talman recess' was cleared.

By the time buyers fronted up on Thursday, the market had reached a level where the trade was able to operate and prices were reasonably steady.

Cash did become an issue and some buyers closed their books early, leaving some holes in the Fremantle room later in the week, and 25 per cent of the wool overall remained unsold as growers decided not to meet the offered prices.

Processors are still struggling to find enough of the bread and butter wools to fill orders with the current selection.

Merino fleece makes up only 50pc of the wool on offer, with a large portion of that being tender or lower yielding clips.

A plethora of crossbred lambs and adult crossbred wool, often with a fair amount of confinement feeding dirt and chaff added is struggling to find a home, with minimum yield restrictions still in place for many export orders.

Discounts for strength and style are not massive, but certainly larger than usual for this time of year - but there doesn't seem to be a lot of normality around the world at present.

There is, however, more interest from Chinese processors and traders now that the market has eased in price, and that would be considered a normal response.

With a dramatically lower currency on Thursday night, then again on Friday night, quite a few orders have been booked.

The Australian dollar opened the week around .6650 and then after some of the viral developments, and in particular as the economic response packages were announced, it stepped down to .6300 on Thursday night.

Then after another fairly wild night on overseas markets, traders awoke on Saturday to see it had bottomed out at .6150 before settling for the weekend at .6180.

This should, in theory, equate to a jump in wool prices of 75c/kg from last Monday to the weekend.

But there is a fair bit going on about the place and where the currency will be sitting by Tuesday when auctions fire up again in Melbourne, is anyone's guess.

Considering the way in which the world has been turned upside down over the past month or two, the wool industry has remained incredibly calm.

The procedures for transferring ownership, logistics for shipping, processing, ordering and dispatching can almost be done in one's sleep despite the fact that it may involve five or six changes of ownership, transport to three or four different countries, and a processing journey of several months.

After a processing hiatus with the extended Chinese New Year, mills in China are more or less back up and running.

Shipment times from Australia to China for greasy wool have blown out a bit, as have export journeys from China to Europe and the like.

But there are still mills in Korea, Vietnam and Europe spinning the tops they receive from China in order to make the fabric and garments destined for other parts of the world.

How quickly these goods flow through the final stages of the pipeline is going to be a bit of a question mark.

For some retailers who are working a large portion of their sales online, it is business as usual in a relative sense anyway.

They continue to 'talk' to their customers digitally and transferring product from warehouse to customer is still functioning as before.

Those with bricks and mortar establishments are obviously noticing a big drop in foot traffic and this will have an effect on ordering from suppliers at some point.

The timing of the recovery and the government cash splash to assist this will be a huge factor in determining wool prices in the longer term.

In the short term, the industry is just focusing on refilling the pipeline and getting on with the job.

Once things settle down, people will be forced to look ahead to the important autumn/winter season where retailers will get serious about woollen garments again to stock their shelves from September onwards.

So much is unknown at this point with the turmoil going on around the globe, but how the consumer is going to be feeling, and spending in September is a wild guess.

Perhaps governments will spend their way out of it, so people will be flush with cash after lazing on the beach over summer.

Perhaps they will still be stocking up on pasta and rice and toilet paper.

Or perhaps the penny will finally drop that natural fibres are so much healthier to wear that we won't be able to keep up with demand.

It is certainly not a time to panic or make rash decisions because there are just too many variables and unknowns at the moment, but the next couple of months will be interesting.

No doubt 2020 will provide case studies in just about every university degree in future years about how things could have been done differently, and which industries became stronger as a result.

With a bit more rain to wash some of that dust out of the wool, the wool industry may be one of those with a positive story to tell.

The story Wool market remains calm amid global panic first appeared on Farm Online.


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