100 happy weeks

Tasmanian Country - - NEWS -

THE Aus­tralian wool mar­ket is in a “su­per­cy­cle”, hav­ing been on the rise for 100 weeks.

But a loom­ing trade war be­tween the United States and China could be its demise.

In a ma­jor win for grow­ers that have stuck with the fi­bre, the bench­mark East­ern Mar­ket In­di­ca­tor has reached record highs 15 times this sell­ing sea­son, most re­cently last month when it hit 1834c/kg.

Ac­cord­ing to the Aus­tralian Wool Ex­change, $2.5 bil­lion worth of wool has been sold this sea­son, and the EMI sits 238c/kg above the same time last year. The Aus­tralian Bureau of Agri­cul­tural and Re­source Eco­nom­ics ex­pects the bench­mark in­di­ca­tor to av­er­age 15 per cent higher year onyear at 1630c/kg for 2017-2018.

Na­tional Coun­cil of Wool Sell­ing Bro­kers of Aus­tralia ex­ec­u­tive di­rec­tor Chris Wil­cox said since the end of the re­serve-price scheme in 1991, the wool mar­ket had typ­i­cally gone through a seven-month cy­cle from bot­tom to peak.

But in that time there had also been su­per­cy­cles where prices sus­tained high lev­els, and Mr Wil­cox said it was safe to say the in­dus­try was ex­pe­ri­enc­ing its fifth su­per­cy­cle.

“It varies as to why we have a su­per­cy­cle – in 2010 and 2011 it was down to cot­ton prices go­ing through the roof, cot­ton prices went to 100-year-plus highs,” he said.

“This time around we are see­ing very good eco­nomic growth in the US and the EU, as both of those economies fi­nally re­cover from the global fi­nan­cial cri­sis, so we have seen all com­modi­ties rise, in­clud­ing wool, which is also see­ing less sup­ply.

“It has been go­ing for 100 weeks now, longer than any other su­per­cy­cle we’ve had, ex­cept for one in the late 1980s which went for 111 weeks.”

Mr Wil­cox said while the wool price would “even­tu­ally tip over and head back down”, af­ter past su­per­cy­cles prices had set­tled at lev­els that were higher than be­fore the cy­cle.

“Part of that is the lower pro­duc­tion of Merino wool we have seen, but I think we are also see­ing some sus­tained im­proved de­mand of some seg­ments of re­tail,” he said.

Mr Wil­cox said that when su­per­cy­cles hit a re­treat phase it was typ­i­cally caused by ex­ter­nal fac­tors, such as the 1980s su­per­cy­cle end­ing in the col­lapse of the Soviet Union and the Tianan­men Square in­ci­dent in 1989.

This time around he holds real fears that any trade war be­tween the US and China could be the trig­ger.

“While trade re­stric­tions are un­likely to in­volve any prod­uct that has wool in it, the is­sue with trade wars is no one wins,” he said.

“If the US econ­omy pulls back that will have an im­pact on wool prices. That is why we have seen stock mar­kets in the US and Aus­tralia fall.”

Se­nior sales di­rec­tor for Ital­ian wool spin­ner Tol­legno, Steve Gronich, sup­plies wool to ma­jor re­tail­ers and brands in the US. He told Aus­tralian Wool In­no­va­tion’s Fe­bru­ary pod­cast that Aus­tralia was fi­nally start­ing to ed­u­cate not just the US, but the world, on why it should use wool.

“The North Amer­i­can mar­ket is re­ally ab­sorb­ing all the in­for­ma­tion you are giv­ing us about the prod­uct, and we are fi­nally start­ing to un­der­stand that wool is prob­a­bly the most tech­ni­cal fi­bre out there — it took the US mar­ket 100 years to re­alise that,” he said.

Mr Gronich said be­cause wool was hit­ting the ath­leisure mar­ket, it was break­ing out of the tra­di­tional uses of suit­ing and sweaters.

“I never thought I would see Nike and Adi­das us­ing wool, but it is hap­pen­ing.” Wool Re­port re­turns next week when wool sales re­sume

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