THE Australian wool market made a small recovery last week, following the fourth session of weaker sales amid speculation Chinese mills had started stockpiling wool and banks would move to rein in access to finance and contain threats of runaway growth.
The Eastern Market Indicator (EMI) strengthened one cent a kilogram to 916c/kg, while the northern indicator sat on 942c/kg, a slight dip at the end of trading last week.
Commentators are cautious that Chinese buyers have reined in their orders after their strong January rush in reaction to central banks in China winding back lending and European retail sales remaining stalled.
However, despite several weeks of weaker sales, Rodwells’ wool manager, Michael De Kleuver, doesn’t expect the correction to persist and said the wool market should continue to strengthen through the year, particularly as supply drops off.
“Business with China has been a bit difficult in the last month, which has put pressure on the market.
“But while the benchmark indicator may have changed, the medium wool is still trading high and cardings are continuing to sell on a 20-year high.
“I can’t see anything really freighting in the long term”.
The AWEX-EMI has had its seventh consecutive week of floating in the 915c/kg to 926c/kg range.
A little closer to home, regional wool managers remain optimistic about wool prices.
Wool supply usually becomes a little thin at this time of the year, but according to Australian Wool Network (AWN) Central West regional wool manager, Brett Cooper, Mudgee, it’s rarely been so low.
He said floods in Queensland and north west NSW had restricted the amount of wool producers could obtain.
Prices, however, remained quite good and he tipped the market to remain steady in the coming months.
“Most categories are doing well. It’s the fine wools that are suffering, because the Italians have gone quiet in the market because of the global financial crisis.”
He said all sectors of wool were staying afloat, but fine wools were lagging.
Although it seemed grim, he said it was only a matter of time before the Europeans returned to the market, it was just difficult to say when.
“They have their own supply they are living off, but they will come back to our wool at some stage.”
Currently the market was being driven by the Chinese, he said.
AWN northern region wool manager, Harold Manttan, Uralla, said most people were opting to sell their wool straightaway, in his area.
He said the wool market had come ahead in leaps and bounds since before Christmas, and from November 2009 until February this year, 17-micron wools had risen up to 50c/kg (greasy).
He said as a result of good sheep meat prices people were bailing on wool and buying sheep with shedding fleece.
“I think if people have stayed with wool for this long and still have their sheep, they won’t switch now.”
He said at the moment wool producers could have the best of both worlds as when their old wethers were sold they were able to get good money for them.
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