WEEKLY MARKET REPORT 

Week Ending 27th March, 2020

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HOW FAR DO WE LET THIS GO?

We thought we had seen it all over the years, stockpiles, droughts and the like but nothing really compares to, or conditions us to the marketing environment we are presently faced with. All players in our industry, from growers through to retailers, are in a bind and trying to choose between a raft of poor options in front of us.

Firstly, to deal with our own situation, on Monday I called a staff meeting to put a hold on all non essential travel for staff. This means that, unfortunately, we won’t be making shed visits or sending extra staff with clients to wool sales. The woolstore is operating at present as normal with transport so far unaffected and we are still testing wool for sale whilst they continue. Some staff have been asked to take leave and stay at home and some staff have been asked to work from home where possible but our office and store are manned and functioning well. Ian Sharp, who is based in Sydney, is collaborating with other brokers in our group who are also only sending one person to the sale.

The real question that is spinning round the industry is how long should we keep selling for, or how long we will be able to continue selling? There is real pressure mounting, particularly from European processors to call a halt as, whilst we sell into a downward spiral, it continues to erode their inventory positions but they cannot purchase whilst their borders and factories are closed. The same is the case for wool destined for India with Australian buyers sitting on quantities of purchased wool that they can’t ship. There is real fear that, in some cases, contracts will be reneged or renegotiated which will cause severe financial loss to some traders.

Whether we continue to sell or not, in the short term there is no doubt that the wool market is in for a tough trot like many commodities. We don’t know where the bottom is and can’t honestly advise growers whether they should sell now or wait. For those who choose to wait, it could be months before we see an upturn. My view is that we need to continue selling in some form. I’m not convinced that the public auction right now is the best way to do it. There are various private selling options and electronic sale methods currently being trialled. The EMI lost 155 cents this week or nearly 11%. We don’t need too many weeks like that but the major brokers have stated they will continue to sell regardless and allow growers the choice to sell or not and, as we saw last week, those that did decide to sell (which was only about half of the offering) still bore the brunt of a market with no confidence. Would a one, two or three week recess help? I think a brief recess is needed to judge better the global situation and allow traders time to catch up with their finances which are stretched to the limit.

Next week there will be 44,400 bales to be offered and growers need to think carefully about their selling instructions and consult well with their broker. Please keep safe and well, and we look forward to catching up in person when this has past.

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