Wool market rebounds | My Machinery
CASE Agriculture
Wool market rebounds

The wool market in Australia finally rebounded last week into positive territory after falling for 12 consecutive selling days. AWEX reported that over this time the EMI has declined by 127c or 11.4pc, thus a change of direction was most welcome. After initially opening the week with further losses on Tuesday despite more than 10pc of the offering being withdrawn, the market found some stability on Wednesday and then the better quality catalogue on Thursday especially in Melbourne saw buyers up the ante and prices increased across the range by between 20 and 40c. The movement in the wool market which was once known as one of the most volatile commodities in the world was dwarfed by that of gold which at one point had fallen by 16pc in two days. The percentage fall in gold prices was the largest fall in 30 years. CBA analysts said there was no catalyst for such a massive fall and the plunge left commentators scratching their heads for possible explanations. But the fall was from exceptionally high levels and follows an extended period of strength and the huge fall in its price without a major catalyst highlights the idiosyncratic nature of the commodity. Similar volatility was seen in the Australian dollar during the past week which opened the week at US105.2c and fell spectacularly to close at US102.9c which meant that while the market was 6c dearer in our currency it was actually 16c lower in US dollar terms. There was a mixed reaction from traders and customers overseas this week with some business being conducted now that the market has reached a price level similar to last October. The forward market began trading again after a lacklustre couple of weeks with ICAP trading several parcels of 14t and over 50t trading on the Riemann board, some of which were traded for 2014 and 2015. Wooltrade, the electronic offer board also saw a large increase in turnover highlighting it’s effectiveness as a selling tool in this sort of market situation. Any wool not currently rostered for a physical auction should be catalogued onto the board to take advantage of sudden upturns in price. Similarly having an order in place for a forward sale at can mean that a hedge strategy is fulfilled on a day when the market turns around briefly and such an opportunity may not last very long. The domestic market in China remains subdued as the cautious nature of the new government weighs on the minds of consumers and industry alike. The release of first quarter GDP numbers slightly below forecast seemed to have a disproportionate effect on the world markets, but the Chinese government will be no doubt planning for a slow and steady increase in coming months. Very few uniform orders have been issued to date and some garment and sweater makers who were left with unsold stock last season are reluctant to place their usual volume of orders this season. Other companies who are receiving orders are only buying exactly the required amount of raw material to fulfil the order and are not prepared to gamble on gaining a follow up order. While this creates angst for those who are required to purchase stocks to continue running machinery it also leads to a situation where prompt delivery requests will become the norm and as a result price volatility can be expected to continue. While no one can say the international trade is buoyant at the moment, those at the high fashion end of the market maintain that interest for autumn-winter 2014-15 is good and some of the top quality mills report better turnover this year. Wool is a long term fibre as it takes 12 months to grow the fleece, and at times another 12 months to design, create and market the garment and so the focus for prices also needs to be long term which is much better than the present market price.

Share this:

CASE Agriculture