To the pleasant surprise of many greasy wool prices were stronger this week. Even better, forward bids pitched around spot are available out to mid-2021 indicating some confidence in current auction price levels.
At this stage top makers are yet to see spinners lifting their price ideas, which implies limited upside for greasy wool prices for the time being. Feedback is now filtering through which indicates that the silk and cashmere supply chains have been hit hard by the pandemic like wool.
With continued rolling waves of infection in Europe and the Americas demand is unlikely to stage a full scale recovery. This throws up the prospect of wool prices settling into a range trading pattern for the time being, until demand does begin to recover in the key export markets for processors based in China.
In the meantime fine merino wool premiums are firming, while discounts for over length and low tensile strength remain at minimal levels. This will be tested in the coming months as the supply of long and low strength fine wool increases in line with normal seasonal supply patterns.
Prices for fine cardings have lifted as well in the past year, so that the gap between fine combing wool and carding prices has narrowed. This leaves little room for fine combing wool prices (MPGs) to fall unless the fine cardings do as well. Fine merino fleece lots with high mid-point breaks and low staple strength started to have increased discounts this week.
The 19 MPG lifted this week, not falling as speculated upon last week. The 19 MPG remains in the upper part of its price range traded across since late August, and probably remains a good level at which to sell physical wool. No real pull through demand has been reported from retailers. It is too early yet to expect this.
The quality of broad merino wool being offered for sale has improved immensely since early in 2020 (as it has for the clip generally). Unlike the fine microns, staple strength is not low for the broader merino categories. The increased supply of broad merino is likely to push 21-23 micron price down in relation to the finer (19 micron) and broader (26 micron) categories during the balance of this season, in the order of 10%.
Stocks of crossbred wool in China continue to be reported as high, but demand was solid this week at auctions in Australia. Finding forward bids for crossbred wool is difficult at present which reflects a lower level of confidence in prices, especially as crossbreds now face a period of the season where supply rises.
Provided by Elders Wool. Prepared by Andrew Woods (Independent Commodity Services) with contributions from the Elders wool team.