Wool market closes 17 cents higher

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Thanks to a lower Australian currency woolgrowers in Australia saw much more positive return with a 17 cent rise in the AWEX Eastern Market Indicator (EMI) figure for the week. In local currency terms, every indicator was higher with merino fleece price guides increasing by as much as 30 cents.

The knitwear types were well supported and carding wools returned to a positive environment with a 15 cent rise on average across the nation.

Crossbred wools continued their heady performance of 2019 and gained another 30 to 60 cents, depending on the micron. Some are now saying crossbred prices have peaked, whilst others are punting them higher - time will tell.

Whilst the major Chinese indent buyers chose to sit on the sidelines last week, or some of the Chinese mills and traders did, by not placing orders to buy, the local export fraternity and a couple of the major topmakers took the opportunity to gather some quantity in their absence.

Given the forward auction roster of less than 35,000 bales a week from here on, this may be shown to be a prudent move. Also, with some sort of an autumn break being received over much of southern Australia more diesel burning will occur than sheep shearing for the next couple of months.

Quantities of wool offered in Australia normally declines during May, and this year will be no exception, but it would also be surprising to find many growers needing to hold wools over to the new financial year, given the amount of supplementary feeding expenses most have already incurred.

Overseas processors are still working on a hand-to-mouth basis with very little stock in the pipeline. The South African clip, whilst only selling every second or third week as usual for this time of year, is still prohibited from being exported into China, adding to the tightness of supply.

Hopefully by the time the Cape returns to their new season in Mid-August the gates are open again, but the SA government seems more concerned with pending elections than actually fixing the current problem.

With more rain forecast for this week over much of the wool producing areas, one can only hope that we are able to get a bit of pasture growth happening before soil temperatures decline too much.

The Bureau of Meteorology (BOM) is still pointing to a 70 per cent chance of another El Nino event, however thankfully it is also saying it will be short lived if it does occur. That may well lead to a dryish spring, and possibly a wet summer, which will not be ideal for the rebuilding of the Australian wool flock, but at current returns growers are very likely to persist with even the old girls.

Mutton will no doubt become a very scarce commodity during the next 12-months with very few surplus sheep across the country.

Mills overseas, from Italy to China are consistently reporting a decrease in orders of between 15 and 20 per cent compared to a year ago, as price resistance takes its toll. However, there would seem to be a solid base of work going on, that with current supply is enough to keep things ticking along, or in the case of good quality Merino fleece, even push up prices a bit further.

Plenty of mills are using more polyester in their worsted fabrics to try and meet the price point of their customer, but even at 80 per cent wool they need to keep buying. The new season (autumn/winter 2019/20) collections are now being prepared and these will be launched from July onwards.

There will be plenty of angst in the design departments over just how to create something new, touching all the trigger points of sustainable, natural and environmentally friendly, whilst also not blowing the consumer budget.

Thankfully it is not only Merino that is at high prices, but also Mohair, Cashmere, Angora and the other noble fibres. So, the correlation between Merino and luxury, or environmental and investment will be a common theme.

Those who want to help save the planet will actually have to put their money where their mouth is.

Low emissions and clean rivers and oceans are great ideals, but the consumer needs to move on from $5 T-shirts and $20 polar fleece jackets at some point.

Of course, this is going to be much easier if the world economy keeps moving forward and doesn't get tripped up on any of the speed bumps along the way.

With Kim Jong-un lighting a few penny bungers last week to get a bit of attention, presumably after getting the cold shoulder in Moscow, consumers in Japan and Korea will be on the back foot again.

Overall the sense of pessimism that had been hanging over the world economy has begun to lift in recent weeks, according to a report in the Economist.

America's retail sales have been strong, and even Europe's beleaguered manufacturing sector has shown flickers of life.

The elephant in the room, according to the Economist, could be the surging oil price. With Venezuela struggling to install a new government, Iran sanctions being reinstalled, and war disrupting the Libyan supply, oil prices have hit a six-month high.

Whilst this will eventually push up prices of synthetic fibres it does not help those trying to sell Merino garments.

Consumers spend more on heating and transport, leaving less for discretionary items. The success of the world's central banks, to juggle the opposing forces of inflation and growth promotants over the next three months will largely determine the outlook for wool into 2020.