Latest wool testing data reveals some key production and market trends

May provides an unusual influx to test house

Sheep
SURGE: The Australian Wool Testing Authority dealt with more than 30,000 tonnes of wool last month, which was a 72 per cent increase year-on-year.

SURGE: The Australian Wool Testing Authority dealt with more than 30,000 tonnes of wool last month, which was a 72 per cent increase year-on-year.

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Australia's recent surge in wool deliveries and testing volumes continues.

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Latest data shows May was the third highest month for Australian wool testing volumes so far in the 2020-21 season.

This eventuated despite May typically being one of the quietest periods for wool deliveries and coring.

The Australian Wool Testing Authority (AWTA) tested more than 30,000 tonnes of wool in May 2021, which was a 72 per cent increase year-on-year.

The authority has tested a total of 295 million kilograms (greasy) from July 2020 to May 2021.

This is a 5.5 per cent increase on the same period in the 2019-20 season.

If June 2021 testing volumes are similar to last year, the AWTA will test a projected 311 million kilograms (greasy).

This is higher than the Australian Wool Production Forecasting Committee's (AWPFC) April 2021 forecast of 290 million kilograms (greasy) for 2020-21 Australian wool production.

The increase could be due to this season's wool testing data including production from earlier seasons, which indicates a run-down in on-farm stocks.

There has been a stronger than expected rise in fleece weights post-drought.

Delays in shearing have also increased the wool growing period, as growers harvest wool that would typically be included in the 2021-22 season.

The delays in harvesting, due to COVID-19-related labour shortages for shearers, could continue to reduce the reliance on AWTA test weights as a strong guide to changes in 2021-22 Australian wool production.

Still unknown for the 2021-22 season is the extent to which farm labour supply will return to typical levels during spring 2021, and if producers with delays in 2020 can - or will - revert to pre-COVID-19 shearing schedules.

COVID-19 and its impacts on retail conditions were hot topics at the International Wool Textile Organisation (IWTO) 2021 conference, which was held in May.

Common themes through many of the sessions were the impact of COVID-19 and the increasingly broad topic of "sustainability".

Some retailers at the conference summed-up 2020 as "twenty years of change all rolled into one."

From a retailer perspective, COVID-19 has accelerated many of the trends already in place globally.

These include the focus on the planet and resource use of humans.

The pandemic has heightened consumer awareness about, and focus on, the planet.

And sustainability, including broad descriptions of a "sustainability ecosystem" - consisting of grassland preservation, animal welfare, hazardous chemicals, fair work, carbon, water, plastics and manufacturing waste.

Such a focus skews even more consumers into the "lifestyle of health and sustainability" (LOHAS) category.

This describes a segment of global consumers who have a lifestyle focused on attention to health, wellbeing and environmental sustainability.

The LOHAS movement was niche 15 years ago. But one in four Americans now align to this segment.

LOHAS consumers have multiple dimensions, but two are particularly relevant to textiles - being "ecological orientation" and "social responsibility".

When purchasing, LOHAS consumers are concerned about the entire lifecycle - in terms of how the product (garment) is made, sold, consumed and discarded.

From a social responsibility perspective, they are interested in social issues connected with what they eat and wear.

Related to this is the "consumption guilt" mindset that some consumers have.

Overall, the key implication is, with a renewed consumer movement - which represents such a big part of the market - this mindset is now driving the behaviour of major and mainstream brands.

In other wool market news, we are continuing to see weakness in crossbred wool prices.

Economic growth is rebounding globally, but the extent to which COVID-19 is inhibiting demand in the interiors commercial market remains significant.

So, Australian crossbred wool prices are pushing even closer towards parity with cotton.

The segment of the market that is driving these values lower is a reduction in demand from the commercial or contract component of the interiors textile market.

This consists of demand for broad wools in carpets, and furnishings for hotels, casinos, exhibitions, office spaces, airlines and cruise ships.

In many cases, the business models for these industries either remain significantly constrained or are only just starting to re-open.

The loss of business to date, and the ongoing threat that COVID-19 still poses, creates a high degree of uncertainty.

For businesses, this typically means a reduction in capital expenditure - including new fit-outs of interior spaces.

On the flipside, while demand for interior wools has benefited globally from consumers spending on - and within - the house from the "work-from-home" movement, it appears not enough to offset the losses in the commercial interiors textile market.

The growth in the "home improvement" category of spending, which is much broader than just interior textiles, has been dramatic.

This is highlighted by the latest quarterly results from Home Depot, which is the world's biggest home improvement retailer.

From February to April 2021, Home Depot posted a 33 per cent year-on-year increase in sales to US$28.2 billion.

This poses a challenge for the retailer - or a good problem to have - in what its chief executive officer described as "unprecedented demand for home improvement projects".

The other factor is wool supply.

Coinciding with continued weaker demand in the global broad wool market is a local increase in crossbred wool offerings this season.

Season-to-date - July 2020 to 20 May 2021 - AWTA data shows it has tested almost 20,000 tonnes (greasy), which is about 116,000 bales, of wools measuring 28.5-micron and coarser in Australia. That is a 25 per cent increase year-on-year.

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