Buyers suggest wool sale boycott as auctions continue

Terry Sim, April 3, 2020

AUSTRALIAN wool exporters, some brokers and processors are proposing the postponing of auction sales as the market is hit by a lack of competition caused by COVID-19 impacting global supply chains.

The Australian wool auction market’s benchmark indicator dropped 155 cents this week, with 45 percent of the offering passed in nationally and 16pc of the rostered bales withdrawn before auctions started.

Despite the return of Chinese mills to work, a lack of buying orders from the COVID-19-hit European and Indian markets, and lack of retail demand in key markets, has cruelled raw wool demand and competition.

On March 31, prior to the Week 40 sale this week, the Australian Wool Exchange’s National Auction Selling Committee was told several buyers, on the advice of their clients, oppose the Week 42 sale and would not attend.

At that time, committee secretary David Cother advised in an NASC update there was insufficient support for the committee to change its decision to hold the Week 42 sale, recognising that some brokers and growers want to offer wool.

However, after the dramatic slide in the market this week, some brokers are calling for next week’s sale to be abandoned and are supporting a proposal by the Schneider Group to bring forward a scheduled three-week recess July.

There are concerns that further sales now could crash the market indicator further, with the exporters unable to market the quantities available and risking current contracts for unshipped wool around the world bought at higher prices earlier this year. There also significant quantities of wool available for private sale outside the Australian auction system, with brokers’ storages overflowing Australia-wide.

Bring the July recess forward – Schneider

Schneider Australia managing director Tim Marwedel has suggested the trade consider moving the three-week recess in July forward, effective immediately.

“Our company view is that sales should not be proceeding under these extraordinary circumstances.

“We have almost the entire global retail sector closed down,” he said.

“The impact this is having down the supply chain is enormous.

“Access and availability to the necessary cash is not there,’ he said in his company’s weekly report.

“The unwillingness of buyers to buy when they have unpaid, undelivered and un-shipped wool on their books with little to no interest from clients is impacting significantly on the market.

“These are not normal circumstances.”

Mr Marwedel said trial auctions via video link appear a real option for the industry, but without the necessary cash to support the wool that is coming onto the market, price levels have been affected.

Mr Marwedel said is the July recess was brought forward, the trade could then sell through July as a compromise and might also encourage some European businesses to work through August.

“This would help our European business, including clients, who are in lock down now.”

Schneider Group CEO Giovanni Schneider said while all other wool selling countries have decided to stop auctions during the COVID-19 emergency, for healthcare reasons and to protect the market, AWEX’s NASC has asked the Federal Government to recognise wool as an essential industry and therefore to continue to operate.

“Wool is not an essential industry and while 50pc of the global wool processors are in shutdown, buyers do not have the cash flow to operate.

“As a consequence, the market dropped 250 cents since the beginning of March,” he said.

“I firmly believe AWEX has not been operating in the best interest of the Australian wool growers and is delivering the wool market in the hands of a few operators who in the future will be able to influence its price according to their needs.”

Lunacy to go ahead with sales – Macdonald

Macdonald and Co. Woolbrokers managing director, Don Macdonald believed it was “lunacy” to go ahead with a sale next week where results were reported to the market. He also opposed the Week 42 sale and believed the trade should consider bring forward the July recess.

Mr McDonald said processors had wool in New Zealand and South Africa ports they couldn’t ship and where auctions have been halted, “whilst we continue to sell and let the market erode.”

“So what happens is that wool sitting on the docks, they can’t open the letters of credit until it sails and they are scared the contracts are going to be ripped up, because if is now 200 cents cheaper.

“We’re undermining the global wool market, not just our market, and inevitably it will lead to a weakening of competition when things resume.

“We know growers need to sell wool, but there are other means by which they can sell wool, by private negotiation, either by tender or electronically.”

Auctions should continue – Colley

However, Australian Wool Network managing director John Colley said he believed auctions should continue, next week and in Week 42.

“The reasons being the industry has done an enormous amount of work to ensure that it operates from shearing to port under government COVID-19 regulations.

“We are even making plans to reduce the exposure of people to people, by conducting video auctions through platforms like Zoom.”

AWN will sell the first 50 lots in its catalogue live next Tuesday on Zoom “with full buying support”, to prepare for the possibility of further indoor personal space restrictions, he said.

“The only reason we would suspend sales was if there was a breakdown in the pipeline that interfered with the government regulations.

“For example, like logistics, if they said that trucks were found to the biggest mover of COVID-19 and they banned all trucking.”

Mr Colley recognised that COVID-19 has already interfered with the operations of other players in the global wool pipeline such as exporter and processors like Schneider.

“The reality is that Italy and India has closed down and we are making all of our growers fully aware that the market over the next 2-3 weeks will be Chinese dominated.

“We are fully aware that the market has fallen considerably this week, but we are also aware that we have to give our growers the opportunity to sell on a fully informed basis,” he said.

“The reality is that world is in for a reset and prices are being renegotiated, contracts are being re-written, orders are being reneged on world-wide in any and every industry and every pipeline.”

He is aware of wool supply contracts that have already been reneged on, including in AWN’s manufacturing business. AWN has stopped private buying at its store two weeks ago.

“Because at this stage I don’t believe the wool market has reached the bottom.”

Mr Colley said if brokers put up big bale catalogues at coming auctions they were likely to see bigger price falls.

‘Wool growers need to know that we are against it’

Endeavour Wool Exports trading manager Josh Lamb said the market drop was a function of the increased volumes available and exporters’ inability to increase business accordingly.

“And at the moment, other countries around the world for various reasons to do with the coronavirus, aren’t buying Australian wool, such as India and Europe.”

Italian woollen mills have closed down in the last two weeks and ports into other processing countries such as Egypt and India have closed, he said.

“What that does is it takes limits out of the market from origins other than China … it reduces competition in the sale room.

“So at the moment the market has fallen back to China and they are not prepared to stump up for these quantities at the moment, because things there aren’t great either,” he said.

“They are very much back at work – we are hearing 90 percent or better — but they are now facing challenges on the export side of things; they can’t export anything out China that is wool related, because those markets are closed.

“So it is falling back to a domestic price and domestically China is starting to see the effects of their coronavirus shutdown and economically their numbers aren’t good,” he said.

“Our agent said to us yesterday: ‘people aren’t prepared to go to the shops and spend yet’.”

Mr Lamb said the market needs an alternative to open cry auctions during this period “just in case” physical wool auctions are included in COVID-19 restrictions.

“You have to think that the further this goes on, the more chance we are of having to stop at some stage, although we have put in good contingencies to keep open cry going.”

The trade has held online auction trials using Zoom, and AuctionsPlus and WoolQ have also held demonstrations for the trade.

Mr Lamb said buyers are completely perplexed as to why brokers see the need to have another wool sale “in this environment” in Week 42, normally a recess week.

“Wool growers need to know that we are against it.”

Giant German-based worsted spinner and weaver Südwolle has also advised that Australian industry that it favoured the postponement of Australian wool auctions.

In an email circulating the industry, Südwolle purchasing department director Mirko Lindner said he and Südwolle Group CEO Klaus Steger thought it would be right to postpone wool auctions in Australia as this had been done already in other places around the world.

Mr Lindner said this would not only support too many people coming together in single places.

“Furthermore it will give the world-wide wool industry a chance to get a clearer picture for future.

“With hopefully more confidence to the market on a later stage we can prevent too low prices for farmers and hopefully later on dramatic less wool availability for all of us.”

Growers must be able to sell wool – WoolProducers

WoolProducers Australia president Ed Storey said WPA would support any recommendations about the orderly marketing of wool.

“The one caveat is that there still has to be an avenue for producers who wish to sell to be able to sell their wool.”

He said there are other options such as video sales, private treaty arrangements and AuctionsPlus Wool are other options to sell wool.

“Our principal position is that auctions should proceed, but we are cognisant of the fact that we are in extraordinary times.

“Our second and third largest markets are really not accepting wool – Europe and India,” he said.

“We will represent growers passionately who wish to sell wool.

“We’ve been through a drought and many producers have large feed bills, and individual businesses have different cash flow requirements at different times.”

Mr Storey said he was happy to sell wool in Sydney this week, despite the lower prices.


Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.


  1. Peter Scanlan, April 4, 2020

    AWEX’s Mr Cother and most of the committee should stand aside. Sales should be cancelled until consumers come back to the shopping centres and the Northern Hemisphere is heading into summer. There is no demand; wool is not wanted.

  2. Jack Cleary, April 4, 2020

    A great deal of mixed thinking has been examined in the article. I think that a really good service. To think that capitalists and corporate controllers are not actively seeking opportunity to kick suppliers when they are down is delusional.

    The article writes: “The unwillingness of buyers to buy when they have unpaid, undelivered and unshipped wool on their books with little to no interest from clients is impacting significantly on the market.”.

    Well, how will we collect if they fail to pay? What condition will the wool be in for resale even if contractually nullified? It seems to me that one necessity might be that buyers have bank guaranteed funds, accessible prior to departing Australia or a maximum of 30 days from purchase, before being allowed to bid. What do others think?

  3. Michael You, April 3, 2020

    To be honest, wool is cheap enough, but there is still no demand. Price is not the problem, so to continue auctions is meaningless. Is there any chance that T55 (21 micron) will drop to US$5/kg? If so, most factories will go broke.

    Michael You

Get Sheep Central's news headlines emailed to you -