Elders upbeat on wool prices
Low stocks of Merino wool and a healthy appetite for the fibre will continue to define the Australian market into 2019, according to Elders general manager operations David Adamson.
Mr Adamson said he expected the Eastern Market Indicator would stay in the high ranges of the past 18 months.
“If it stays dry (in the Eastern States), there will be further pressure on supply, and demand will remain, and it will take a long time for growers to rebuild their flock,” he said.
“I think we are going to be short on supply for some period of time in Australia, and this will put positive pressure on prices moving forward.”
Mr Adamson, who spoke recently at the Australian Association of Agricultural Consultants WA annual conference, said the fundamentals of the global wool market were low supply, low stocks and firm demand.
“These three factors in any market are great, but the two things . . . that are a long way out of our control are the China and US discussions and the overall level of price that the wool market sits at,” he said.
Mr Adamson said China was a significant producer of wool in itself; however, most of the fibre produced in that country was used in textiles.
“On a greasy basis they produce more wool than Australia but their net yield is significantly lower,” he said.
He said China was not considered in direct competition with Australia in terms of production but it was a significant part of the wool-buying scene.
“China is by far the biggest player in Australia,” Mr Adamson said.
“They have been a fantastic supporter of the Australian industry but they do buy between 75 and 80 per cent of all of our wool.
“But if there was a political event, biological event or economic event in China, that can pretty quickly impact the market.”
Mr Adamson pointed to 2002, when a deadly respiratory virus caused the collapse of one of the four so-called “supercycles” in the wool market.
“When SARS kicked off, about 8000 Chinese people contracted the disease, and this caused the collapse of the 2002 supercycle,” he said. “This biological event highlights how close we are to events in China.”
Mr Adamson said US-China trade tensions could further affect the market, given the close ties between retailers and manufacturers in both countries. He linked the recent volatility in the wool market to these discussions.
However, he said wool as a fibre in clothing had gained in popularity, with exciting developments in active wear and even footwear. This was echoed by an Australian Wool Innovation spokeswoman, who pointed to developments in overseas retailers using wool and the continued demand for Australian fibre.
“Leading international brands and sport companies, such as Nike and Adidas, recognise a heightened interest and demand for natural fibre, and in particular wool, in clothes, running shoes, and soft tailoring. So we see demand strong for some time,” she said.
“The US market, relative to its population, has a low wool consumption. We endeavour to change this. In our new consumer campaign, we are challenging synthetics head on in this market.”