Confidence rising with prices

LAST week was a very good one for the Australian wool market.

The market gained another 4c/kg in US currency terms, adding to its 14c/kg rise the previous week in what was a very positive scenario.

However, most pleasing for growers was the change in the local currency, which meant returns increased by an average of 35c/kg, setting a few records in individual segments along the way.

For overseas customers, processors and manufacturers the market has risen by US50c/kg to 60c/kg over the past four weeks and they are trying to work out if they can pass on these prices to their customers.

On the local scene it was all bells and whistles.

With a public holiday in Sydney, Melbourne got the game started early and from the first lot the pace was fairly frenetic.

Fremantle played catch up from their previous single selling day, so increases looked even larger as they adjusted to the eastern market prices. Sydney kicked into gear on

Wednesday and quickly caught up to the Melburnians courtesy of a few flashy superfine lots. Selling in isolation on Thursday Sydney market continued to edge ahead in a fairly confident sign. 

Overall the Merino sector had a terrific week in local currency terms. Many prices rose 50c/kg on the previous week, and a couple of micron categories ended just shy of a 100c/kg rise. 

Skirting wools followed in a similar vein, and those with a bit of length and not much vegetable matter fault were priced as fleece lots. 

Crossbred wools too, enjoyed a bit of upside, although not as much as in New Zealand where prices jumped by up to 6 per cent as exporters over there were forced to buy all their October shipment requirements in a single sale. 

Carding wools were generally unchanged, perhaps leaving plenty of room for upside later in the year. 

So, it was a goldilocks sort of week, with currency movements a boon for local growers, but a good steady price rise contributing to, or resulting from growing confidence. It was not all Chinese driven action in the auction room with European and Indian-generated orders providing a supporting role as everyone watches the market carefully for signs of a genuine turnaround. 

A lot hinges on confidence but it seems to be building and the Chinese Government has provided an initial spark. At a retail level this confidence is yet to fully show itself. 

Sales during the recent Chinese Golden Week holiday rose 9 per cent year on year, after a massive surge in appliance sales thanks to tradein subsidies and some vouchers.

The general mood among Chinese consumers is better than a month ago, but their confidence is still fragile as retailers enter their major autumn/winter selling period. Uniqlo, arguably the largest seller of woollen garments globally, reported earnings for the financial year to August with a net profit rise of 26 per cent compared to the previous year. 

The Japan-based company said sales in China where it has some 900 stores were still difficult due to a sluggish economy but it did still record a slight increase in profit there. Uniqlo noted that consumers were more focused on value than luxury in a post-pandemic world. 

On the one hand this goes against wool’s credentials as a noble fibre, but it does fit with the “buy better, less often” campaign being run by many Merino wool retailers. 

There is a slight increase in rostered volumes but seemingly enough ongoing demand to accept this quantity while everyone gets accustomed to the current price level.