While merino prices in Australian dollar terms drifted sideways this week, in US dollars they drifted lower. Expectations from the buy side has been for prices to ease, but the resilience of the greasy wool market continues to surprise, which is a nice change.
From this perspective the merino market continues to track a very similar path as prices for the main apparel fibres, as is normal. The out performance of knitwear types (short staple combing wool and cardings) continues with some very strong prices for medium/fine merino categories. Discounts for cott and colour in these types shrank this week, as exporters sought to fill consignments.
There is a nagging concern overseas that Australian growers will flood the market with farm held stocks but the experience at present is that farmer held stock numbers are stable, with some wool being sold and some fresh wool being added. Cashflows are such that forced sales of wool held is unlikely. Reports indicate that New Zealand farmers are selling their stockpile of carpet wools down in response to improved prices, but the calculus for these wools is quite different to merino wool.
The strength of cardings prices mentioned last week turned up again this week for 15 through 19 micron short staple wool and cardings. For the 17 MPG resistance persist at the 2100-2150 cents level, with some of the shorter staple categories trading at very small discounts to the full length fleece price.
The 19 MPG is finding the 1600-1650 cents level a hard level to rise above. With domestic Chinese demand the main driver for the greasy wool market at present, the market will have to wait until around May before Chinese processors spark up production for the 2021-2022 season.
The strength seen in fine/medium merino cardings and short staple prices does not extend out to the short broader merino categories. 21 MPG, reflecting full length 21 micron fleece, still looks to have upside but in the very near term a correction is possible. This fits with early stage processors in China being in their “quiet” period and the issues of cashflow imposed upon exporters by shipping delays.
Despite some life showing up in the broad crossbred markets with carpets wools which were nearly unsaleable early in the year now picking up, the 28 MPG slipped to 0.4 of the 21 MPG this week. There has been some improvement in demand for shorter, finer crossbred wool.