The first week of wool sales performed admirably to begin the new calendar year and as far as we are concerned, the eighth wonder of the world is wool knitwear.
The pressure on micron continued this week as it has over the previous months. We have discussed numerous times in the past few years how knitwear demand has been supportive of the pricing structure of the market, well now it has gained the status of being the structure of the wool market with everything seeming to revolve around the segment including the pull through of volumes in the supply chain.
Fox & Lillie export’s dialogue with various clients they ship to in China, confirms that most of the wool being purchased is destined for knitwear in the many forms it can take. This is supported by the minimal discounts on lower NKT lots or even overlong types which used to get well discounted. Some long wools up to 125 MM in the 18 and broader selling only 4-8 % lower than sound normal length types. Even the overlong with 20 NKT selling in this range!
Even though the Europe market is much slower than usual, they are showing equal interest to China for knitwear products. Similar microns and types are being sold to Europe to end up as knitwear, rather than woven into cloth for suit wear like it would traditionally. Even in Europe, knitwear is a positive story but they have so much of their machinery set up for cloth production.
The earlier mention of over-length in fleece is certainly an end result of such a superb growing season in so many parts of eastern Australia. But another factor making wools even longer is the limited availability of shearers with some districts at least 2 to 5 weeks behind. COVID-19’s impact creating the lack of New Zealand shearers here in the last 9 months and border closures between Australia states last year are just more examples of the far-reaching consequences of the virus.
Some other positive signals at the moment are coming from Fox & Lillie Rural’s forward markets, with much better levels being bid on out to the end of this year. These levels are much better than even a couple of weeks ago which reflects the greater market. From a risk management perspective, clients who want to protect themselves from downside for upcoming shearing, certainly have much better opportunities for themselves at the moment.
Fox & Lillie’s article also appeared in the Stock & Land.