Short sup­ply promis­ing sign

Tasmanian Country - - THE STOCK REPORT - Damien White­ley

THE wool mar­ket seemed to strug­gle against op­pos­ing forces last week. Some were call­ing for fur­ther cor­rec­tion while oth­ers were keen to se­cure sup­ply and con­tent to push prices higher.

De­spite an of­fer­ing of just under 50,000 bales, the loom­ing Christ­mas re­cess and the gap in sup­ply won the ar­gu­ment and prices closed higher.

The bas­ket in­di­ca­tor rose by 7 cents across the week, but thanks to a weaker Aus­tralian dol­lar it only gained US1c and lost slightly in Euro terms.

Mel­bourne is pro­vid­ing more than half of the weekly national vol­ume and run­ning three-day sales while Syd­ney and Fre­man­tle can only muster enough for a two-day week.

The mar­ket splut­tered early but buy­ers re-en­tered the fray, chas­ing in par­tic­u­lar the bet­ter spec wools in Syd­ney, which was again a des­ig­nated su­perfine sale. To close out the week buy­ers re­mained ac­tive, with Chi­nese de­mand the driver.

So there seemed to be an over­whelm­ing mood of op­ti­mism from China in con­trast to mixed views from seven days ago. There had been plenty of buy­ers and pro­ces­sors in China say­ing the cor­rec­tion had fur­ther to run as cur­rent prices were still too high, cash was run­ning short, the end of the year was ap­proach­ing and a myr­iad of other ex­cuses.

How­ever, in a very short time many have jumped the fence. Now the col­lec­tive view from China is much more op­ti­mistic and they are buy­ing with al­most gay aban­don.

Other key mar­kets such as Europe and In­dia still re­main cau­tious or re­luc­tant to see higher prices at this point. Per­haps some of the Euro­pean voices are try­ing to talk the mar­ket down or re­store a po­si­tion of lead­er­ship as the cur­rent pro­cess­ing ac­tiv­ity in Europe does not re­flect price pres­sure or a slow­down.

The In­dian trade, which is steadily grow­ing as a con­sumer of Merino thanks to some mar­ket­ing cam­paigns link­ing with Bol­ly­wood stars, is strug­gling to keep up with cur­rent mar­ket move­ments. Of­ten their price ideas or bids seem to be one week or more be­hind the cur­rent price level, which in the case of su­perfine Merino can be nearly $1 below.

As sum­mer be­gins with Test cricket on the ra­dio but with south­ern Aus­tralia ex­pe­ri­enc­ing un­sea­sonal wet con­di­tions it is dif­fi­cult to find too many pes­simists in the wool trade. With only lim­ited sell­ing re­main­ing for 2017 and prod­uct mov­ing freely in China, at least most par­tic­i­pants are lin­ing up on the side of firm to stronger prices.

The wool mar­ket has of­ten sur­prised us in the past, and if we do en­counter a speed bump it will up­set a lot of peo­ple. To date there has been very lit­tle chat­ter about wool quota run­ning low in the Chi­nese mar­ket with the ex­cep­tion of a few try­ing to use up their New Zealand quota that have not been in high de­mand this sea­son.

Cash flow must be an is­sue with ex­porters, traders and pro­ces­sors need­ing 21 per cent more cash to fund the same turnover as last year. How­ever, with care­ful jug­gling and keep­ing over­due pay­ments to a min­i­mum, no ma­jor prob­lems have been en­coun­tered.

The dwin­dling grower-held stocks are an­other rea­son buy­ers are re­luc­tant to stop.

The just-released AWTA stats for Novem­ber in­di­cate that Aus­tralia has pro­duced 5 per cent more wool sea­son to date com­pared to last year, yet AWEX fig­ures show we have sold 9 per cent more than last sea­son. This con­firms that we are sell­ing more than we are pro­duc­ing and we will not see a big in­flux of wool com­ing to the mar­ket in the new year.

Add to this the dis­pro­por­tion­ate in­crease in cross­bred wools and Merino wool may be­come scarce in 2018.

If you have any ques­tions send email to damien.white­ley @el­ders.com.au.

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