Wool surge welcome

AFTER months of flat market conditions wool prices have rallied in recent weeks as buyer confidence returns.

The improvement in demand is good news for the state’s wool growers who have battled tough seasonal conditions and low prices in the past year.

Wool brokers say while it is difficult to know how long the current lift will last, it is good to see prices finally heading in the right direction. 

Rob Calvert from Wool Solutions said a major factor in the current rise was the announcement of economic stimulus by the Chinese Government.

“Before this little improvement everyone was a bit pessimistic because it had been quite a long grind and really disappointing considering we had low auction volumes,” he said.

“Then China came out of nowhere and announced the first round of fiscal stimulus. That had an immediate effect on their share market and we started to see orders from China roll in.”

Mr Calvert said prices had kept on rising since the initial price increase three weeks ago. “After that we’ve seen fresh export sales,” he said.

“The good thing was in that first week the price jumped 20c/kg to 30c/kg which is sustainable. If it had jumped $1 it would have probably scared everyone away but it was a nice measured jump.” Mr Calvert said as well as Chinese buyers, European purchasers had been more active.

“It’s going to continue for as long as we continue to make fresh export sales from week to week,” he said.

“So, it is a weekly proposition and it’s just a matter of taking each week as it comes.”

While ultrafine wools of 15.5 microns and finer have been particularly sought after. 

Mr Calvert said Merino wool across the board had enjoyed price increases and these had flowed through to some cross bred wool.

Nutrien Wool state manager George Nichols said the Australian dollar had also played a role in the recent increase.

“We’re seeing a response to the Chinese Government stimulus to the economy but also the Aussie dollar dropped off a bit,” he said. 

“The real indicator will be if we see a change in the Aussie dollar and we see a change either way in the market but there’s certainly a lot more positivity around which is good.” 

Mr Nichols said it has been great to see more confidence.

“We don’t want get too excited because we’re coming off a very low base, but it is definitely good to see some more positivity in the market,” he said.

“We need to be smart and aware of all the factors and keep an eye on things like the Aussie dollar.”

Mr Nichols said low pass in rates at recent auctions was also a good sign. He said said many producers had been selling wool throughout the year despite low prices to maintain cashflow. 

“Because of the depressed livestock prices over the last year, particularly with Merino producers with the mutton price where it was, produces have needed to sell,” he said. 

“So, they have been pretty realistic.” 

However, Mr Calvert said low auction volumes nationally indicated there could be wool stored in shearing sheds. 

While the market improvement has been welcome Mr Calvert said it was important to keep things in perspective.

“They have only just started to improve so it’s nothing world beating at the moment, but this is probably the highest they have bene for three or four months,” Mr Calvert said. “But we’ve still got a long way to go.”