Australian wool open-cry auctions will continue amid COVID-19, following government lobbying by the National Council of Wool Selling Brokers of Australia, Wool Industries Australia and other national wool industry organisations.
The continuation of auctions is essential to give those growers who want and need to sell the opportunity to offer their wool and for buyers to meet the orders that are coming in - albeit at a reduced level.
The auctions are conducted each week on a reduced selling program, ensuring government social distancing and personal hygiene requirements are met.
There is no doubt the restrictions and lockdowns in Europe and India have reduced the level of orders, although China's mills have returned to work and are seeking to buy wool.
After showing impressive resilience in February and March, the Australian wool market finally succumbed to the negative pressure in early April, with prices falling by about 11 per cent in the week.
Since then, prices have steadied and lifted a little, with Eastern Market Indicator now at around 1300 cents a kilogram.
There has also been a commercial online open-cry auction in Sydney using video conferencing app, Zoom, as well as electronic auctions held by AuctionsPlus and WoolQ with volumes in all three options from 250-400 bales each.
In mid-April, the International Monetary Fund released new forecasts for economic growth in 2020 and 2021 for the world and forecasts for each country to account for the COVID-19 pandemic and the associated lockdowns and travel restrictions imposed by many countries.
They made for grim reading.
"This crisis is like no other ... the loss associated with this health emergency and related containment measures likely dwarfs the losses that triggered the global financial crisis," the IMF stated.
The IMF predicts a sharp contraction in all economies before a sharp rebound in 2021.
For world economic growth, the IMF forecasts world economic output will fall by 3pc in 2020 before bouncing back in 2021 by 5.8pc.
The predicted contraction in 2020 is much more than the 0.1pc decline seen in 2009 in the wake of the GFC.
All of the major wool consuming countries and regions will see a large decline in economic output in 2020 according to the forecasts.
The IMF predicts that China's economy will still grow in 2020, but by a measly 1.2% before growth of 9.2% in 2021.
Consumer confidence has slumped in all of the major wool consuming countries and regions in the Northern Hemisphere in the past two months.
The impact of the Covid-19 pandemic will bring much reduced retail sales.
For example, China's clothing retail sales were down by a massive 33% in January-February compared with a year earlier, although South Korea, which was hit by Covid-19 after China, reports that retail sales were down by just 0.3% in March.
Data from the other major wool consuming countries is not yet available as the impact won't be seen until the data for March is reported, and more likely in April.
The downturn is already being seen in retail orders to garment and fabric suppliers, with anecdotal reports of cancellation of orders by retailers, and some major retailers refusing to accept shipments.
It is impossible to know how this will be translated through to the Australian auction market.
The question is, has much of this negative impact already been realised in current wool price levels, given the drop seen at the start of April and given the low wool production levels in Australia?
Or will the gradual removal of restrictions, notably in Europe, result in a modest recovery in raw wool demand?
- Chris Wilcox an executive director with the National Council of Wool Selling Brokers of Australia.