The rise in wool prices last week was welcomed by Australian producers and adds to the upward tendency in the wool market in Australian dollar terms during the past month.
But for buyers and processors, the raw wool market has been directionless in US Dollar terms.
The subdued price action in the wool market for exporters and processors has been counter to the volatility in other markets.
As concerns have increased about the implications of the latest COVID variant - Omicron - emerging, other markets, such as crude oil and cotton, have fallen sharply.
In early December, crude oil and cotton prices fell by 10-15 per cent in a week.
In contrast, the 3pc increase in the Australian Wool Exchange Eastern Market Indicator (EMI) in the past month for producers can be attributed to currency.
A month ago, the Australian Dollar was trading at US73.7 cents, before hitting a low earlier last week of US70.0 cents.
In a stable demand environment, which best sums up Australian wool auctions at the moment, weekly fluctuations in the Australian Dollar will continue to be influential as we head into the Christmas recess and as the market re-opens in January 2022.
One of the contributors to prices remaining stable has been a willingness by some producers to respond to any price weakness by withdrawing wool from sale.
New wool receivals and the amount of wool tested have also slowed significantly in recent months, adding a greater level of uncertainty as to what full season Australian wool production may be.
The amount of wool tested by the Australian Wool Testing Authority (AWTA) during October and November 2021 was 11pc lower, compared with the seven-year average for the same months.
While comparisons of AWTA test data to the prior year normally holds the wool industry in good stead in how production is changing, that is not the case this year.
As AWTA has been warning for some time, the pattern of wool delivery and testing for 2020-21 was so abnormal that it is significantly distorting the usefulness of annual comparisons.
Historically, peak volumes occur in the first half of the season, with another spike in March before receivals fall away sharply into winter.
But for the 2020-21 season, the skew was reversed.
There was less wool tested in the first half of the season and a record amount of wool tested in the second half - relative to the past seven years.
A safer comparison for this season is to use the average of the past seven years.
While the longer term average consists of years where sheep numbers and wool production are notably higher than this year's forecast, the seven-year average equates to 336 million kilograms (greasy) for the full season - or 6pc above the amount of wool AWTA tested in 2020-21.
Coincidently, the Australian Wool Innovation (AWI) Australian Wool Production Forecasting Committee (AWPFC) is also forecasting a similar increase in Australian wool production.
This allows the longer term average in AWTA test data to provide a useful benchmark for the 2021-22 season to see how actual test data is tracking relative to production forecasts.
For global wool demand, there is a positive and highly synchronised recovery in demand by consumers in many of the major wool markets.
High vaccination rates for COVID have been reached in the second half of 2021 in much of the developed world.
Japan is a positive example where consumer confidence jumped sharply during September and October as COVID emergency measures were introduced at the end of September 2021 to contain the rise in COVID infections.
Before this, Japan's household spending in August contracted as the Japanese government expanded emergency curbs to contain new COVID cases.
But as COVID cases ebbed and restrictions eased in Japan, consumer confidence rebounded.
This is happening across much of the developed world.
Although, there is slightly less optimism in parts of Europe - and globally - as the latest wave of COVID infections from Omicron takes hold.
This is ill-timed heading into the important Northern Hemisphere winter for wool apparel sales.
If economies can remain open despite the latest growth in COVID cases, the other benefit for wool apparel sales is likely to be pent-up demand for in-store shopping.
This will favour more expensive garment sales, where consumers have been reluctant to buy unseen.
With COVID there was a very large shift in spending patterns during the past 18 months, as consumers spent on goods - such as clothing and whitegoods - and less on services - such as experiences like dining out and travel.
The latest results from Burberry, the global luxury fashion brand, indicate how higher end fashion sales are benefiting from consumers returning to stores to experience fashion.
Compared to pre-COVID times (2019), Burberry's same store revenue sales in the past six months are back to pre-COVID levels - but with a higher proportion of full-priced sales, not discounted, which has boosted profit margins.
This trend will benefit all luxury fibres, including Australian Merino wool, into 2022.
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