Magnificent follow-up rain has delivered near perfect opening growing conditions throughout much of our southern sheep and wool growing regions.
Lamb and mutton markets are booming, however wool values continue to soften as demand overpowers lack of supply.
Most noticeable is the absence of key bulk buyers from both China and Europe.
Some of these companies have reported difficulty selling wool tops from as far back as August last year.
The impact of poor ongoing wool top sales is evident as they remain out of our spot markets.
These companies will reduce their production volumes and only re-enter our market once prices reach levels that fuel profitable and ongoing wool top sales.
It is unfortunate but we are yet to see the bottom of this price cycle.
Our three-week Australian winter recess period cannot come soon enough.
Wool broker warehouse stocks are building rapidly as some selling brokers pass in up to a quarter of their offerings.
Add to that our recent strengthening AUD against the USD of more than 3 per cent, further pressure remains on our spot market.
Riemann forward financial trade levels are factoring in further reductions as growers/sellers reluctantly move into the new lower trading ranges.
It is time for perspective.
We would all like prices to rise, but before that occurs we need to navigate our way through a period of global economic uncertainty.
This is linked directly to poor international consumer confidence.
All markets are driven by sentiment and currently our wool export trade is unsettled, hesitant and cautious.
The trading trend has moved into short selling mode as opposed to selling from a stock position.
Spring shearing will soon commence and larger offerings will occur from October onwards and add warehouse surpluses to the mix.
Understand that today's price levels are still profitable and most likely will grind lower into the new season before they recover.
History has a habit of repeating itself and possibly we are entering a medium-term cycle of wool trading at lower value ranges.
Note the previous five-year average of 21-micron fleece wool is 1600c/kg, with closing 2019 M52 spot levels at 2070c/kg, some 470c/kg higher than the average.
Why not continue to be sellers at these levels as the alternative may be more costly to your business?
Once we get through this cycle and value starts to build, our sustainable fibre is perfectly positioned to recover rapidly and trade beyond the record prices levels we all enjoyed in 2018.
KareeWool trade tips:
- Increase average bale weight up to maximum 204kg
- Attend wool auction sale and build networks with target wool buying markets
- Ask your wool service provider to explain your wool selling costs and benchmark their rates
