AUSTRALIA’S wool market will need to be carefully managed when demand recovers post-COVID-19, according to national broker body leader, Rowan Woods.
With potentially 350,000-400,000 bales held in post-farm storage and an unknown number of clips still on farms, the impact of a mini-stockpile on the depressed market’s recovery is concerning stakeholders.
Mr Woods is the new president of the National Council of Wool Selling Brokers of Australia and believes the market is getting “quite near the bottom”, after the AWEX Eastern Market Indicator dropped to an 18-year low of A858c/kg clean.
Mr Wood said there are currently “two trains of thought” dictating the sale of wool at Australian auctions.
“There are those people who just need the money and are meeting the market because they have little choice.
“But the volumes are decreasing because more and more growers, with advice from their brokers and advice they are receiving from the trade, are being told ‘if you are not in a position where you need to sell, don’t – so they are holding.’”
Cost of production concerns
He said he has been advised by some of his bigger grower clients that the current greasy wool prices are well below the cost of production.
“So they’ve elected because of that to hold (wool in storage).
“Obviously there are people for which these prices are not below the cost of production but there is a percentage that they are.”
Mr Woods said a lot of Australia is looking at a good year for crop yields.
“So people are going to be able to afford to hold it.
“But where that has a kicker is for the likes of a wool broker whose stores are at storage capacity – everyone is holding a lot more wool than they normally would.”
Mr Woods the flow of wool onto the market with any recovery in demand will have to be managed carefully.
“It’s going to have to be the duty of wool brokers and their clients to carefully manage the flow of wool back onto the market.
“It’s been proven time and time again that in the current environment, 20,000 bales is a manageable volume every week, but 40,000 is too many.”
Mr Woods would not speculate how many bales might be in storage or held on farm, but conceded more clips were being held in growers’ sheds.
“There is a mini-stockpile building, but it is nothing like the old stockpile of 4.2 million bales.”
Industry needs to pull together
Mr Woods urged understanding from growers of the plight of exporters struggling to get orders in the current global economic climate depressed by the COVID-19 pandemic.
“These guys are the insulation blanket that we have from the overseas agent, who make sure that the grower gets paid and they are in a lot of pain.
“The issue is that in the current environment with the low amount of wool being required around the world – with people not buying woollen clothing from retailers — everyone along the pipeline is hurting, no-one is trying to take advantage of anyone else,” he said.
Mr Woods said exporters are battling the issue of “no demand.”
“They are trying to stay alive when they’ve got non-one to sell to, they literally just cannot get an order.
“There has got to be an element of pulling together through this time, otherwise there are not going to be enough of us coming out the other end.”
Mr Woods said the market from here will be helped by the unwillingness of growers to sell at the current prices. He said there is a strong belief that the industry’s recovery depends on a coronavirus vaccine to overcome the global lack of trading confidence.
“If somehow there can be a vaccine introduced and people start to feel that they’ve got some protection against this virus and the world can open for trade again, I actually honestly believe that the recovery will be profound and it will happen quickly.
“There is so much willingness there to stay alive until this (pandemic) can be managed better I really think we will see a profound recovery when it comes, but it will take a while.”