Supply and demand balancing act achieved in wool market

Supply and demand balancing act achieved in wool market

At the end of last week's activity, better style Merino fleece was more or less unchanged in price.

At the end of last week's activity, better style Merino fleece was more or less unchanged in price.


The ''new normal'' saw auctions for wool conducted on Tuesday and Wednesday last week.


The ''new normal'' saw auctions for wool conducted on Tuesday and Wednesday last week, followed on Thursday by further live trials of electronic platforms actually selling physical wool.

At the end of the week's activity, better style Merino fleece was more or less unchanged in price although the major indicators used by the uneducated masses showed a drop of 20 to 30 cents a kilogram.

Unfortunately, the current composition of the clip being offered is filled with leftovers of drought affected wools, a plethora of crossbred wools, and only a few well grown, well prepared, stylish Merino lines, and as such the normal quotes get lost in all the noise generated by the lesser types.

Often in times of stress and upheaval new ideas and methodologies are born, and perhaps someone in the industry will use this time to throw up some more meaningful market indicators.

Until that time folks everywhere the market as softening, but not in a big way and certainly not quite as badly as the oil price.

The fine balance between supply and demand has been achieved according to most people with connections to the overseas market place - obviously through the reduction of supply thanks to growers heeding the message via their brokers to only offer for sale wools which they actually want to sell, and are generally the types being sought by the market.

There is very little point trying to offer bales of crossbred dags in a market that has dropped 30 per cent from earlier in the year, and everyone is hunkering down defensively.

The rose garden will be much more appreciative of this product than a finicky wool trader.

Outside the bubble that shields Australia from all the viral nastiness at present, people are working to keep the ship floating and on course.

There hasn't been a lot of change nor improvement over the past week, despite the odd moment of comic relief during press conferences at the White House.

The New Zealand wool trade has been allowed to emerge from the bunker and will resume selling, scouring and shipping from this week.

South Africa held a very slow Zoom auction last week where it took two days to sell 5000 odd bales.

Good sense has now prevailed and they will now revert back to the Port Elizabeth sale rooms which allow for plenty of social distance anyway, and are less reliant on having a reliable internet connection.

Shipping companies have no doubt endured a bit of tumult in the early part of 2020, but in what could be a prelude to how the airline industry will operate when flights resume, services are fewer and rates are significantly higher.

Goods such as wool still need to move around the world to be processed, but getting anything from A-to-B whether it is a container of greasy wool or a set of documents, it is taking up to a week longer than it did ''in the old days''.

Early stage processing is continuing in China, but not in many other places in the world unfortunately with practically every South American combing mill temporarily closed, along with most in the Middle East, Europe and Malaysia.

All of these closures we hope will be temporary, but the world wool production in still in decline according to the latest IWTO figures - albeit mainly as a result of drought in Australia.

Once we cross the bridge we hope that most of the processing machines will be humming again later in the year.

Further along the chain, mills in Europe are beginning to crank over as a gradual, cautious restart is allowed.

By contrast the slightly more unplanned, disjointed reopening in the US is seeing in one case a request for raw materials to be airfreighted in against previously cancelled deliveries.

China textile mills who are checking their inbox every day for uniform order requests are trying to manage their inventory and keep stock levels from blowing out.

Whilst there are massive amounts of government stimulus pouring out around the globe, the traditional Chinese government uniform order doesn't seem to be one of them.

Maybe they are being sent to Fiji or other Pacific Islands.

The wool industry is nothing if not resilient and creative though.

So, if you have a garment factory and the customers are being evasive about when you should deliver the next batch of sweaters, suits or active wear what do you do? Obviously sew face masks.

In factories across China, Vietnam and probably the rest of Asia anyone with a sewing machine seems to be churning out face masks at present.

Offers of masks are crisscrossing the internet as everyone gets into the latest craze.

However, there are some stark reminders of the dangers of jumping headlong into a business venture one knows nothing about as well, with stories of non-payment, or nondelivery, or customs seizures leaving people with empty pockets and disappointed dreams along the way.

As Europe and the other regions continue to relax restrictions in their own unique ways, the wool market should continue to gain strength.

Price increases may not come for a while, but there are plenty of astute observers thinking that prices will not go much lower - and some are putting their money where their mouth is.

Retail will resume once people are allowed out of their homes, but it will be different.

The future of the strip-mall and other configurations may change forever, online sales may increase permanently or we may revert back to the way it was.

What will not change is the value proposition of a high-quality Merino garment for those consumers who want to buy the best they can.

Allowing the consumer to verify the provenance of this high cost garment will also become more important to protect against cheaper, poor quality imitations if we want to see wool prices climb in the luxury area again.

The story Supply and demand balancing act achieved in wool market first appeared on Farm Online.


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