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Rabobank figures return to work will suit fine wool

Sheep Central, February 16, 2022

Rabobank analyst Dennis Voznesenski: workers will want wool suits.

DEMAND and prices for fine and medium micron wool is forecast to pick up as workers return to offices around the world, according to a report by agribusiness banking specialist Rabobank.

In the bank’s recently-released Agribusiness Outlook 2022, report co-author, Rabobank agricultural analyst Dennis Voznesenski said while consumer confidence is waning in the world’s two largest markets for wool, the US and China, there are positive factors that will push prices higher.

“First, US retail apparel sales are continuing to grow, with December data showing an 18 per cent rise versus pre-pandemic levels.

Second, the latest woollen suit import data for October 2021 shows a full recovery to pre-pandemic levels in France and only 26 percent below pre-pandemic levels in the US,” he said.

Mr Voznesenski said this reflected a return of office workers in the EU and US, a trend expected to strengthen through 2022.

“The recovery in office-wear demand may see suit sales growth rise above general retail apparel in 2022,” he said.

“Even if we see an interest rate-induced slowdown in the world economy this year, we expect the demand for wool from workers returning to offices and buying suits to be the more important variable for wool.”

The bank forecasts Australian wool’s Eastern Market Indicator will trade, on average, between 1,350c/kg and 1,500c/kg in 2022, up seven percent on the 2021 average.

Mr Voznesenski said on the downside for wool, consumer confidence had declined in late 2021 in both the US and China.

“And this is likely to continue this year, especially if economic conditions slow in the post-Covid-stimulus era. China’s retail apparel sales, denominated in yuan, also slowed to a mere 2.6 per cent above pre-pandemic levels in November,” he said.

The report said Australian wool’s export exposure to China had remained high in 2021.

The latest ABARES export data for Australia shows exports for January to November 2021 reaching 317 million kg, up 39 per cent on Covid-disrupted 2020. Australia’s export exposure to China rose to 84 per cent over this period, up from 83 per cent the prior year.

In 2022, increased processing activity outside of China may ease our reliance on the Chinese market, the report said, but not significantly, the report said.

Mr Voznesenski highlighted the need to watch the trend of office casualisation in China.

“There has been anecdotal evidence of casualisation among Chinese office workers, with more emphasis on business casual and less on suits. Whether this is temporary or permanent will determine the micron type and volume required for the domestic Chinese market in the future,” he said.

Mr Voznesenski said on the volume front, the bank expected to see total Australian wool exports rise in 2022 as production increases and favourable prices prompted farmer selling.

For production, the report said, the Australian Wool Production Forecasting Committee estimates 2021/22 Australian wool production at 318m kg greasy, up eight per cent on 2020/21 levels due to favourable seasonal conditions, with the largest year-on-year gains seen in NSW (+6.7m kg), Western Australia (5.8m kg), and Victoria (5m kg).

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