Traceability prized by wool manufacturers

Traceability prized by wool manufacturers

Sheep
The start of the year saw the EMI at 1862c/kg, then bullish markets for two months saw that indicator break through the 2000c/kg barrier in February.

The start of the year saw the EMI at 1862c/kg, then bullish markets for two months saw that indicator break through the 2000c/kg barrier in February.

Aa

The predominant factor eroding Merino wool prices is the quality of the offering.

Aa

The first four months of wool selling of 2019 has seen wool prices increase by 4 per cent or 74 cents a kilogram (clean).

The start of the year saw the Eastern Market Indicator (EMI) at 1862c/kg, then bullish markets for two months saw that indicator break through the 2000c/kg barrier in February.

Prices have since dipped through March and April to be sitting at 1936c/kg in mid-April. The price decay from the tops of earlier this year has been slow though, and not very convincing. This underscores the strength of demand that has pushed wool prices to these historically high levels.

The predominant factor that is currently eroding Merino wool prices is the quality of the offering, and the continued short supply of the mainstream Chinese commodity types of 19.5-micron and 21-micron.

For early stage processors, these types are traditionally the "turnover generators" as any stocks of these wools can be liquidated almost immediately when required. Wools of a finer micron are not so readily disposed of and as such, are a far greater risk to take into a stock position for buyers.

With the drought continuing unabated across a large section of the wool growing areas of Australia, the national clip has "fined up" considerably, pushing volumes of the 19-micron and finer higher and the broader wools lower. Medium to long-term supply volume concerns remain at the forefront of buyers' minds, particularly on the Merino fleece sector.

Crossbred wool types on the other hand are heading in the opposite direction and surging upward into record territory. Coats and fake fur as well as the traditional outerwear knits are leading the demand scenario, with manufacturers turning to the lower priced area of the market to try and extend margins. Some innovative blending with finer Merino wools is also helping to push the market along.

On the opposing and positive side, the US is holding its economic position and small signs of better conditions are becoming evident, particularly with regards to a promising resolution of tariffs and trade with China.

With approximately half of the 71pc of Australian wool that is imported into China now consumed domestically, it is significant that they remain in a growth pattern, albeit at levels not as strong as the past. China's manufacturing sector saw a surprise return to growth in March, with operating conditions improving for the first time since last November.

A trend continuing to emerge for the wool industry is traceability. This is the most requested element from manufacturers and brands wanting to use wool.

In effect, traceability opportunities are proving successful for marketing leverage, so brands are focusing more on it. This is largely because traceability provides a level of assurance for consumers when they purchase a garment, which inevitably increases retail sales. Full supply chain integrity and transparency will continue to grow in importance.

Aa

From the front page

Sponsored by