Low supply lifts the mood

THE Australian wool market climbed off the canvas last week, initially thanks to favourable currency rates and then a generally more upbeat tone from buyers in a low- supply environment. 

On Wednesday there was a fairly dramatic drop in the local currency as election results became apparent from the United States, with Donald Trump returning to power. 

On the Thursday Melbourne was selling in isolation and the positive tone continued with Merino fleece adding a further 10c/kg to previous levels. 

By the close of the week, the added a further 10c/kg while, Elders currency was actually higher again, but the market had managed to add 7c/kg in local currency terms and US13c/kg. 

The best superfine Merino types sold very well, with the lower-spec lots understandably struggling a little more. 

Medium Merino fleece gained a solid 20c/kg for the week as did skirtings. ‘Crossbred wools followed their rise the previous week and carding types were also mostly positive. 

As on, the calendar rolls buyers for early-stage processing are starting to think about the need to build stocks to cover the Christmas recess. 

The low volume of greasy wool available each week in auction is making it almost impossible for the exporting fraternity to sell forward aggressively and this is holding up a base in the market price. 

As far as demand is concerned, not a lot has changed, but at least one uncertainty has been removed with Mr Trump set to occupy the White House for the next four years. How this change will affect the wool industry is not really clear, but at least the question has now been answered. 

Potentially more significant has been the collapse of the German governing coalition as this will no doubt create further turmoil in Europe’s No.1 economy. 

Elections are slated for January, but a clear and decisive political and economic outcome is far from guaranteed, so the long-awaited European recovery seems to have been pushed back again. 

However, the wool industry is nothing if not resilient, and European processors soldier on purchasing their share of the best superfine clips while they are available. 

The Chinese Government too removed some uncertainty hanging over the market by announcing a further large stimulus package totalling 10 trillion yuan for local governments.

It is aimed at long-term balance-sheet repair rather than directly injecting money into the economy as some had been hoping, but many expect more stimulus. 

The other positive gaining momentum is the retail season emerging in shop windows and social media feeds across the globe.

Stocks in the wool pipeline are still incredibly low, so any positive outcome from retail events will generate further demand. 

Futures trading is indicating a market lift for the coming months and whilst not always decisive, the futures market is usually accurate at predicting the trend. 

This week was set to see the greasy market continue to build in the run-up to the recess, and everyone will be hoping for a more positive 2025.