Thread of hope for wool price

Rollercoaster ride for wool continues but positive signs as fashion season switches

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Wool analysts hope Chinese and European consumers will embrace the fibre as the fashion season changes over - as part of a mindset shift to more natural and traceable purchases. An example of this was a Country Road campaign - where Rodger Kelly's 'Corringle' farm produced the wool for the brand's Australian Traceable Merino sweater. PHOTO Country Road

Wool analysts hope Chinese and European consumers will embrace the fibre as the fashion season changes over - as part of a mindset shift to more natural and traceable purchases. An example of this was a Country Road campaign - where Rodger Kelly's 'Corringle' farm produced the wool for the brand's Australian Traceable Merino sweater. PHOTO Country Road

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Wool hopes hang on China policies and European consumers embracing the natural fibre as pandemic lockdown measures start to be wound-back.

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One step forward, two steps back - but still on its feet - best describes the wool market in the past week.

Prices in Australia defied early expectations to open on a relatively positive note in Melbourne on Tuesday, with good support from a range of buyers.

Midway through the first day of selling, things were looking decidedly upbeat.

But, as attention turned to the western region - with a decidedly lacklustre Fremantle catalogue in terms of quality - buyers became even more selective and the market noticeably sagged.

The current regime of single auction centres offering on alternate days in Sydney and Fremantle saw an east coast-only sale on Wednesday, with even less enthusiasm than had been evident in the west.

Perhaps the doubts surrounding the validity of the US COVID-19 vaccine trial crept into buyer sentiment, as had occurred on Wall Street.

Or, perhaps there was some unease about Australia's agricultural exports in general.

As a result, the wool market on Wednesday failed to reach any great heights. The exception was the carding sector, which did manage to gain about 20 cents per kilogram.

As headlines changed throughout the week - when world leaders made some outlandish statements - global stock markets made further gains. But currency markets jumped about and the US Dollar fell to a two-week low against the Euro.

The Australian Dollar was well above recent trading levels as well, which meant the drop in wool prices in local currency terms was about 20 to 40c/kg. This registered a fall of single digits in USD terms, but an easing of 10-20c/kg in Euro terms.

Some, but not all, exporters reported doing business late last week.

This means, given a national offering of only 20,000 bales on offer in Australia this week, just one or two decent orders of Merino fleece wool will be enough to put a bit of backbone into the game.

Commentary from China in recent days about the wool industry has been cautiously optimistic, with talk of some brands calculating how many units they will need for the forthcoming autumn-winter selling season - and others asking for updated prices and samples.

As bad as the retail sector may be today, or has been in the last couple of months, it will get better as consumers re-emerge from pandemic lockdown restrictions.

Retailers are unlikely to be able to sell a T-shirt or a tank top in the winter collection - unless it is made from high performance 'ath-leisure' wear fabric made from pure Merino fibre.

A whole new range of garments needs to be offered to the public in new designs, styles and colours for the first post-COVID-19 collection.

Retailers who want to simply roll-out product left over from last season will not excite their customers, especially if they have black and grey tones, as the new trend is at the other end of the colour spectrum.

There remains an understandable degree of caution, and some difficult business transactions, but new samples and tentative orders are emerging as the seasonal calendar ticks-over.

It is not that hard to convince designers about the merits of Merino wool, given the education process that has occured in recent years.

Conversations with purchasing managers is now not so difficult either, given the current price point for Merino wool.

Consumer awareness is significantly ahead of where it was 10 years ago, so there is already a platform to build-on.

There is still some way to go, however. A simple Google search of 'wool clothing' produces 397 million results and a 'cotton clothing' search request elicits about twice as many.

There are so many consumers emerging from COVID-19 lockdown restrictions with a different perspective on life, family, health, global activities and their place in the future that Merino wool, in particular, can tap into and tick a lot of boxes very quickly and succinctly.

More astute retailers already have their story boards in place on their websites, and a simple visit to The Woolmark Company website allows enquiring minds to quickly and easily link through to a vast array of Merino wool stockists.

These companies are already telling the story of the natural fibre, the people behind the fibre and the environmental benefits that Merino wool brings to a post-pandemic world.

Attention is also focussed on Beijing, where the Chinese People's Political Consultative Conference (CPPCC) is being held - with more than 2000 delegates from across the country.

Each day, legislation will emerge from the congress to establish the principles by which China will operate in the next year or two.

Policies are not expected to directly mention wool, but directions to improve the business environment translate to better lending criteria, further business support and - hopefully - new uniforms for many government departments to kick-start the textile industry again in China.

Until the general direction, and the text of the public announcements had been issued, no State-Owned Enterprise had been willing to contract new orders in case they contradict the intent of the CPPCC.

During this week, the way forward should be much clearer and the green light given for many projects which had been 'on ice' in China.

How much translates back to more demand in the wool auction room is not yet known.

In the past, Chinese uniforms have provided a boost in demand for 19 to 22-micron fleece in particular.

This tenuous development - and the continued opening-up of society in Europe - will be enough to maintain a floor in the basement of where the wool market currently resides.

We expect this will persist through until after the auction recess in July, when higher volumes, better quality and more stable demand should reinvigorate the market.

The story Thread of hope for wool price first appeared on Farm Online.

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