COVID-19 rocks wool industry

COVID-19 rocks the wool industry

Coronavirus
Simon Flick, wool specialist, Nutrien Boorowa, NSW, said every week we can sell wool is a bonus. Photo by Stephen Burns.

Simon Flick, wool specialist, Nutrien Boorowa, NSW, said every week we can sell wool is a bonus. Photo by Stephen Burns.

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Agony for wool producers as Coronavirus rocks the industry.

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Wool producers looking to sell their clip have been left wondering what options they will have after the Australian wool market fell to its lowest level in about four years.

It was a bit of a backhander delivered by the current coronavirus pandemic with the week prior suggesting some rising confidence.

But with lockdowns due to coronavirus in the US and Europe, meaning orders were cancelled, China was the only purchaser of Australian wool and buyer assurance plummeted.

Last week the benchmark Eastern Market Indicator (EMI) dropped by 155 cents a kilogram, or 10.7 per cent, landing on 1287c/kg.

This was the largest fall in the EMI since August last year and matches the largest percentage fall in the past two decades.

The national pass-in rate was 44.9pc and the withdrawal rate prior to the sale was 16.6pc.

The Australian Wool Exchange (AWEX) reported all sectors of the market were affected with falls among 18 to 22 micron Merinos of 10-11pc, while falls across the crossbreds became greater as the diameter broadened.

Those producers attempting to create much needed cash flow or splitting their risks in an already volatile market have now been left contemplating what their best choice may be amidst the uncertainty.

Woolgrower David Zouch who manages Hollow Mount Merinos at Bigga in the Southern Tablelands of NSW said it's a hard decision for growers and a risky one.

"If you are contemplating holding off selling your wool clip, you may have to hold off until after Christmas or longer, and that's a long time," Mr Zouch said.

Hollow Mount, where the wool clip averages 18.4-micron, has 84 bales allotted for sale at this week's southern auctions.

David Zouch of Hollow Mount Merinos, at Bigga on NSW's Southern Tablelands.

David Zouch of Hollow Mount Merinos, at Bigga on NSW's Southern Tablelands.

"If you're in the position where you have to sell you've nearly got to meet the market," Mr Zouch said.

"It just depends where you are - if you're out west and haven't had the feed, I'd be holding on, or sell half now and half later, but that's just my opinion."

He said the lower yielding wools were also contributing to the struggling market.

"Our wool in the tablelands shouldn't be as bad as out west as we should have more nourished wools, but we haven't had the rain here and there is a lot of dust about," he said.

"The yield is well down from previous years, and now the fall in cents per kilo, we are really going to feel the affect on our income."

Simon Flick, wool specialist, Nutrien Ag Solutions, Boorowa, NSW, warned we haven't even seen the real hiccup in the wool job yet.

He believes every week we can sell wool is a bonus.

"At the end of the day the wool market hasn't come off 20pc in most wools. I don't think that is enough of an indicator to say 'hang on to it'," Mr Flick said.

"It's fine to say sit on wool and sell 12 months out, but I'm fearful it won't get going in 12 months."

He admits his point of view may sound negative, but stresses the industry hasn't been in this sort of predicament before and a further collapse of the market is a high possibility.

"Already they are not selling cotton and synthetics like they have been, and wool is even more at the knifes edge than those commodities," Mr Flick said.

"The Europeans are trying their upmost to cancel wool sales. If we did cancel sales, even for a month, that would throw the industry into absolute chaos.

"There is no competition for China - no Europeans and no India - so every week we can sell wool it's a bonus."

He said there is a possibility that short term, China will throw a stimulus package into their economy.

"It might jerk the job up short term, but it will give a sense of false security," he said.

"And to trying and catch that job is going to be pretty bloody hard I reckon."

According to AWEX reports, originally there was to be a national offering of 44,612 bales this week with many sellers keen to get their wool to market, but new figures show the sharp losses have resulted in sellers withdrawing.

Bale numbers are now sitting at 39,172.

The story COVID-19 rocks wool industry first appeared on Farm Online.

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