Australian Wool Network Client Newsletter Issue 37. Autumn Best Returns in 30 Years

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1 Net ork NEWS Australian Wool Network Client Newsletter Issue 37. Autumn 2017 Best Returns in 30 Years The Australian wool industry finds itself in a very exciting place with a consistently high Eastern Market Indicator (EMI) proving very financially rewarding for woolgrowers. Some growers are reporting their best returns for years as they reap the rewards of a buoyant and optimistic wool market. Much to the delight of growers records have been smashed as the Australian wool auction markets surged into record territory with the week ending March 3 seeing the highest EMI level of 1500c/kg recorded up to that point. The market has rallied on the back of a superfine resurgence with 17 micron wool being the outstanding performer. In the same week the EMI hit 1500c/kg, 17 micron wool rose 89 cents to 2182c/kg. AWN NSW State Manager Mark Hedley said the market had been a relatively flat line across the micron range and had been this way for some time with only about a 100 cent difference across the board. We are now seeing a real drive in demand for the finer wools. In October the difference between 17 and 20 micron wool was only 200c/kg clean whereas today we see the difference at 565c/kg clean, he said in March. This is great news for fine woolgrowers. The fine wools need to be up there and getting these returns as we all know they don t cut as much wool as the sheep producing the broader micron wools. Predictably supply and demand is playing a major part in price gains however Mark also Cont d on page 3 Top Stories Investing in Agriculture AWN steps back into the rural property market with a world-wide team. See page 4 Succession Proves Successful AWN clients have access to Australia s best wool and sheep specialists today, tomorrow and into the future. See page 8 Can The Price Surge Continue? What s driving the price surge and most importantly...will it continue? See page 10 Staff Profiles Meet our newest team members; Jeff Denny, Rick Maybury and Andrew Partridge. This newsletter proudly brought to you by The sun shines once again on the finer end of the wool market. Follow us on

2 Contents Best Returns in 30 Years 1 Best Outlook for Agricultural Investment 4 Managing Director s Report 5 Hysport Update 6 Staff Profile - Rick Maybury 7 Succession Plan Proves Successful 8 Hedrena Natural Lifestyle Wear 9 Can the Superfine Price Surge Continue? 10 Wool Buying Division Expands 12 Vic, Tas, SA Update 12 New this Winter from MerinoSnug 14 Woollen Garment Sales on the Rise 15 Social Media Expands Network 16 QLD Seasonal Report 16 NSW Seasonal Report 17 On the High Seas 18 AWN Business Divisions 19 AWN Calendar Grow. Make. Wear. 2 NETWORK NEWS Australian Wool Network

3 Best Returns in 30 Years Cont d from page 1 attributes the price rise for the finer wools to another player. I believe the biggest influence in the price rise for these finer wools is men s suiting. Those wools went through a rough time during the global financial crisis. Bankers across countries around the world lost their jobs and they are the people who wear this product. The rise in men s suiting sales has to be a big driver for demand, he said. A lot of mills have been caught short and have allowed their stock to run relatively low. I m surmising that when prices started to increase in the latter half of 2016 some of the mills thought this would be unsustainable so they sat back and didn t purchase. They were banking on the price coming down but demand is now driving the mills into having to enter the market and buy. AWN Regional Manager Northern NSW and Queensland Harold Manttan echoes these comments. Demand is being driven by the Chinese wanting to use more finer wools and the Italians have had to keep up with them, he said. We are now seeing a real drive in demand for the finer wools. It is also a case of supply and demand as there is not a lot of fine wool around at this time of year. In the New England (NSW) pretty much everything is shorn by the end of October. The big question is are these prices sustainable. It s looking like these prices can be sustained. The futures are certainly saying that as they are nearly up with the market. It seems everyone is comfortable with this level, Harold said. This year 17 micron wool has gone up 240c/kg. It did the same in 2011 when it got to 2500 in February and held to September then crashed. I m hoping we don t see that this time around. Despite this I believe there is definitely reason for optimism. There is very little wool in the pipeline and the Chinese certainly seem to have an extra appetite for the finer wools. In December the Australian Wool Production Forecasting Committee (AWPFC) forecast shorn wool production for the 2016/17 season to be 332 million kg greasy. That s a 2.2 per cent increase on the final estimate for the 2015/16 season. The committee predicts production will increase in NSW, WA, SA and Queensland with Victoria to remain steady and Tasmania slightly lower. Mark is also optimistic about the sustainability of these prices. We have seen spikes in the wool market before but Australia is producing one of its lowest quantities of wool for many years, he said. With meat prices the way they are I can t see producers leaving the fat lamb and cattle industry to enter the merino market. Also Merino ewes are in very short supply and the cost would be prohibitive. Grain prices are low so if it does get dry we might see people who would normally be forced to sell their sheep be in a position to feed their ewes for a reasonable price and retain them. Both Mark and Harold were pleased to see the gains benefitting growers right across the board with the carding industry also at an all-time high. Knitwear is also seeing strong demand resulting in skirtings also selling well. It is quite interesting to see this portion of our industry so entrenched in fashion but there appears to be a real demand for different types of woollen fabrics including felted products. Such is the cyclical way of fashion! Mark said. A classic market situation of short supply and strong demand is benefiting fine wool growers. Australian Wool Network NETWORK NEWS 3

4 Best Outlook for Agricultural Investment Rarely in Australia s history have all the indicators in the agriculture sector been as positive. These are the words of Shane McIntyre, Head of agribusiness at Colliers International in Melbourne. AWN and real estate specialists Colliers International have formed a strategic alliance to establish a specialised property division which sees all AWN wool representatives available to discuss the sale or purchase of real estate in conjunction with experts from Colliers International. Shane said lifetime low interest rates, the strong likelihood of a La Nina weather pattern, a favourable exchange rate and a commodity outlook across all sectors of agriculture that is positive and looks to remain so for the medium term had resulted in unprecedented demand for rural properties. The market is under-supplied in all categories across the nation and this shortage is particularly evident in beef, sheep meat, wool, cotton and cereal-producing properties, Shane said. The dairy market is currently subdued but with the expected lift in milk prices in the latter half of this year we expect this sector to improve in annual returns and once again be in demand. The expectation is that farm gate milk prices will improve with overseas demand increasing. AWN is looking forward to continually developing its relationship with Colliers International for the benefit of its clients in the wool industry and Shane is full of praise for the staff at AWN and the alliance itself. Colliers International is delighted to have a formal alliance with AWN as it significantly increases our regional footprint and gives us access to some of Australia s most innovative primary producers, Shane explained. We can offer AWN clients a wide variety of services including valuation advice, succession planning, acquisition and sale advice and strategies along with sound research information. Currently the greatest impact on the property market is the under-supply of properties. This, combined with the an unreserved optimism about the medium to long-term future of agriculture, has led to an increase of up to 30 per cent in values in some southern cropping areas and 10 to 15 per cent increases in more marginal rainfall areas. The market is under-supplied in all agri-business categories across the nation. Shane McIntyre Head of Agribusiness, Colliers International. The emergence of foreign capital from the US, Europe and Asia in particular has created a new wave of demand particularly for broad-scale, versatile portfolios and northern beef cattle stations, according to Shane. All larger transactions are being transacted on a walk in walk out basis inclusive of livestock, plant and equipment due, in part, to the difficulty in amassing large herds or flocks, Shane said. The performance of a property is also often aligned to a particular breed or genetics which has worked well and the purchaser wants to retain this in order to maintain the performance of the enterprise. Our current research and forecast report is available on our website covering all aspects of agriculture and the likely market movements in the year ahead and beyond. Thinking of selling or buying property? Contact your local AWN Wool Specialist who can start the process for you. 4 NETWORK NEWS Australian Wool Network

5 Managing Director s Report The January to June period in the wool industry has seen a remarkable situation. The market has risen slowly (and sometimes quickly) to unprecedented levels. What has been most surprising is the turnaround in wool under 18.5 micron. At the time of writing the 16, 17 and 18 micron categories are oversold and undersupplied. No one in the industry picked the large rises in these categories which are long overdue for growers of these types. The question is of course is the current level sustainable? Supply is the issue in this case, as the strong mutton and lamb markets see surplus sheep also reach record levels. It has been, historically, an unusual time with commodity prices remaining high across many sectors. Whilst we concentrate heavily on supply being the main issue there are positive signs in the demand side to add to the fire. Most mills live hand to mouth in this day and age and do not carry large stock positions. When demand improves the market reacts quickly and can lead to volatility as the mills clamber over each other for supply. A great situation for growers. The disappointing parts of the wool market are the retreating crossbred markets as the double-sided fabric, which is marketed predominantly in coat form, goes through its fourth year in the fashion cycle and the ultra-fine wool market which has now been in the doldrums for over 10 years. The industry has failed to come up with products that support these types and achieve a price level from which growers can make a return. I still fear for the future of wools below 15 micron whilst we produce the annual quantity we are at the present. Our knitwear manufacturing division continues to provide new opportunities for AWN and it s clients. John Colley. The January to June period has been an extremely interesting one for AWN. We are bedding down the Hedrena company and our expansion into retail has come with plenty of challenges. Notwithstanding these we are confident we can turn Hedrena into a business that adds value to our clientele and achieves what MerinoSnug has done for AWN. Both the manufacturing and retail businesses are continuing to create opportunities for AWN and we see this as a strong part of our vertical integration strategy. I would like to welcome our two new senior personnel, Rick Maybury, who has taken up the role of Chief Operating Officer and Andrew Partridge who joins us to manage the private wool division, which is constantly growing. Ron Creek moves to a dual role in developing livestock and real estate. The appointments will streamline our management process and give our senior management team much more strength and back-up. I look forward to reporting more on our industry as the year progresses. The exciting part for us is the delivery of the DNA project which is now operating in 13 different areas and the development of overseas markets for the woollen products we make and as our tagline suggests GROW! MAKE! WEAR! John Colley Managing Director New to the MerinoSnug collection - Atherton Jacket. Australian Wool Network NETWORK NEWS 5

6 Hysport Update Hello all. I trust you had a great Christmas and New Year period. That seems so long ago now. Hysport has just finished selling through the international tourist period and, although visitor numbers were up, we didn t see that transfer into increased sales. There are a few factors contributing to this, one being that spending by these tourists is down. Also Sydney, which is our major tourist sales area, has had incredibly variable weather. It has had extremely high temperatures, followed by enormous amounts of rain. This has been a large disincentive for tourists to venture too far out of their accommodation. And, of course, there is the massive disruption to the Sydney CBD with the laying of the light rail line along George Street. One of our major customers, who has several stores along George Street, says sales are down by more than 50 per cent and the businesses are not profitable. The only reason he is keeping them open is to secure the real estate for when the works are finished. There is still 12 months of forecasted disruption and no compensation for these store owners. On top of this the Sydney International Airport has been through a major renovation recently and is only now starting to come online. There has been a change of guard in the retail space at the airport. Our major customer, LS Travel, lost the tender to retail rights and another of our customers, Australian Way, secured them. This has been a challenge to manage and is only now starting to recover. Anyone who has been through the Melbourne International Airport recently would have seen it too has just started major renovations. Most shops are boarded up for renos and any remaining stores are making the best of a terrible situation. Unfortunately, this too has dramatically affected our tourist sales. Now for some good news. MerinoSnug indent sales have seen a record high coming into this winter season. Indent sales are orders secured from retail customers three to six months before they need them. This gives us plenty of time to plan and manufacture the garments and guarantees the customer they will get the stock when they need it. These record indent sales gave us great confidence the customers appreciated the new Stragglers Use this web address to access our exclusive Stragglers online shop and get great deals on the last remaining stock available on a selection of luxury knitwear: MerinoSnug, OM and Only Merino. Visit: Rod Murray, CEO Hysport Pty Ltd. range of styles and colours. However, the real test of this is when the repeats start coming in over the winter period. Since Christmas we have been madly producing the winter indent garments. These are now hitting the stores. If you have a MerinoSnug retail outlet near you please pop in and say hi. We pride ourselves on having a great relationship with all our customers, either through our own sales/customer service staff, or through our fantastic agents. To expand our sales, one of our strategies is to head overseas with our unique product. We are about to launch into the USA with an online strategy. We expect this to start small, but gain traction towards the end of the year. If this model works, we will be able to replicate it for other cold climate countries. In other news, Hysport has recently updated all its packaging to reflect the price point the garments sell in. The large items will now come in a reusable high quality zip-lock bag. This will make storage at home easier and provide protection from nasty bugs. All our accessory hangers have also been updated and will be a great improvement for the merchandising of MerinoSnug instore. So, all we are waiting for is an incredibly long and cold winter. I know this probably won t be everyone s wish, but it is from all of us at Hysport. Stay safe everyone and when you start to feel those winter chills snug up with your MerinoSnug. Rod Murray, CEO Hysport Pty Ltd 6 NETWORK NEWS Australian Wool Network

7 Staff Profile - Rick Maybury You will go a long way to find a more down-to-earth and likeable guy than Rick Maybury. Rick was recently appointed Chief Operating Officer working out of Sydney and brings experience and a skill set which will add great value and support to the staff at AWN as the company continues to grow. Rick worked his way up from agronomy to senior management in the agricultural merchandise and rural agency industry where he was in charge of purchases in excess of $1bn. This is a long way from the family farm on the Lachlan River at Cowra in central west NSW where Rick grew up. Rick attended university in Wagga Wagga majoring in agronomy and agribusiness then found himself at Lake Cargelligo doing private agronomy. A move to Griffith was next on the agenda as his wife, a radiographer he had met at uni, was working there and travelling between the two towns was becoming tiresome. He secured a job with a local rural agency and the rest as they say is history. A move to Sydney saw him managing the procurement team handling a budget in excess of $1bn before being promoted to run a rural supplies division which distributed merchandise through a national network. Rick said it was a very busy time. The organisation was buying a lot of agribusinesses plus integrating a major acquisition in Tasmania and this gave me extensive acquisition and change management experience, he said. Rick said after many years in rural merchandise he was looking for a change and a new challenge within the agriculture sector. So at the end of last year he packed up his wife and two children and they toured the national parks of Western Australia. Upon returning, and in what proved to be perfect timing, Rick discovered AWN was looking for someone to take on a managerial role. The expansion of the business and the purchase of Hedrena and Hysport meant added management resources were necessary. I am looking forward to helping guide the company through its next growth phase, Rick said. This company has an amazing vertical integration story taking wool from the farm gate and turning it into apparel. They are the only people in wool adding true value at the farm gate. Rick Maybury - a wealth of experience and an all-round nice bloke! AWN is filled with lots of passionate people with lots of ideas on the next steps forward for the business. Working with the team we will prioritise these ideas and execute the plan so it works well and doesn t disrupt the business. I want to be able to take the strategies and implement them in a way that benefits the entire company and provides a clear direction. Having a different skill set I am confident I can add value to the team. There are many people who have had a long association with the business and I look forward to working with everybody for many years to come. Obviously a team player Rick is also a team supporter pointing out a long-standing relationship with the ACT Brumbies. A rugby enthusiast from his times back in Cowra he was quick to point out the Wallabies hadn t had a great season but with true optimism he said there s always next year. GET NOTICED! Want your stud, on-property sale or agricultural business to get noticed by Australia s leading wool growers as well as the rest of the world? Then why not consider putting your business on the AWN noticeboard located on the home page of the AWN website. This space is available to clients and advertisers on a first-come first-served basis (some conditions do apply). Contact Lisa Mottershead on or Australian Wool Network NETWORK NEWS 7

8 Succession Plan Proves Successful He s a true wool man and as good a mentor as anyone could ask for, says Russell Macgugan who took over Maurice Jolly s portfolio upon his retirement last year. It was a real privilege to work under Maurice for four years before he retired. As a wool specialist and wool technical guru based in the western districts of Victoria, Maurice built a wealth of knowledge in the 50 years he was in the wool industry and earned the respect of those who worked with him. In the last edition of Network News we incorrectly noted another young member of the AWN team as taking over from Maurice however we would like to take this opportunity to introduce Russell Macgugan as the sheep and wool specialist who took over the reins from Maurice. I was privileged to have the opportunity to work under Maurice for four years which gave me an understanding of individual clients needs and business models. Russell is coming up to his fifth year with AWN and is a familiar face around the western districts of Victoria and in the auction rooms in Melbourne. He is one of a number of young people who have benefitted from AWN s commitment to forging pathways for the younger generation. Russell grew up on a sheep farm near Dunkeld in Victoria and completed his secondary schooling at Monivae College in Hamilton. He completed a business degree at the University of Ballarat and spent the next couple of years travelling around Australia. For the next six-and-a-half years he worked as a livestock agent with a private company based in Hamilton. It was at this time he was approached to come and work as a wool/livestock agent for AWN. The team morale at AWN is very good and they continue to invest in the future by putting money into good, young staff, he Russell has been a leading example for AWN s succession plan for our clients in the Western District, VIC. said. It s a company that is continually looking to grow and work on its strengths and weaknesses. I was privileged to have the opportunity to work under Maurice for four years which gave me an understanding of individual clients needs and business models. They are big shoes to fill but the chance to transition with him has certainly assisted in the process. I spend a lot of time on the road, with my territory covering an area with a radius of about 200km from Hamilton and I am now auctioneering and part of the selling team in Melbourne. AWN is committed to ensuring our clients have access to Australia s best wool and sheep specialists now and into the future. 8 NETWORK NEWS Australian Wool Network

9 Hedrena Natural Lifestyle Wear It s been a very busy time since the Australian Wool Network acquisition of Hedrena on July By late August Hedrena officially completed the relocation of its head office and factory operation from Geelong West right around the bay arriving in Carrum Downs. Hedrena is now located under the one roof alongside Hysport. The next major milestone was to recruit Hedrena team members and over the next four months Hedrena hired a number of key roles across customer service, design, accounts and supply chain management. Meanwhile our circular knit machines were calibrated and officially commenced on-site knitting at capacity. Hedrena has made substantial changes to the supply chain management system with the closure of the local Cut Make Trim (CMT) operation at Geelong West and the commencement of a new CMT supply relationship with an international partner in China to improve efficiencies, reduce cost and maintain the Hedrena brand trademark quality. In November we opened the exciting new Sydney flagship store in the heart of the city located at 210 Pitt Street (Stockland Piccadilly Shopping Centre). This launch grew our bricks and mortar network to seven locations across VIC, NSW and SA and made us more accessible to new and existing customers. In early December our first arrival of internationally-made clothing ranges were released to the Hedrena retail network and have since been strongly supported by our loyal customers. In late February, the company relaunched its first domestic wholesale market under the new ownership. As with any major business transition there were a number of challenges in the early days which unfortunately impacted the timing of new Hedrena collection releases. Since then however we have caught up and are now releasing a number of new styles Ben says a number of new styles and exciting designs in the latest Hedrena collection will impress loyal customers. and exciting designs to our loyal customers. I feel confident that with these major milestones now complete we can look forward to a positive sales period coming into autumn and winter It will be an exciting new chapter in the next financial year when Hedrena is set to introduce the Direct Network Advantage (DNA) program in late 2017 through all of the existing pure wool ranges designed and developed by Hedrena. 100% Australian Merino Wool. Classic wardrobe options for every season. An AWN business using AWN client s wool. Australian Wool Network NETWORK NEWS 9

10 Can the Superfine Price Surge Continue? 2017 has started spectacularly for Merino wool prices, particularly for superfine wool, after an extended 18-month period of unusually stable prices. China is ramping up its purchases of fine wool which is the main, but not the only, driver for the increase. But it is shunning wool of 26 microns and broader sourced from New Zealand and Uruguay, resulting in a collapse in prices for broad wool. Signs on the economic front are relatively positive with leading indicators pointing to a continued improvement in China and in the advanced economies. This, coupled with strong consumer confidence in the US, Europe and Japan, should provide a good foundation for retailer orders in preparation for the 2017 Fall/Winter. After 18 months of remarkable stability and more than five years of low premiums for superfine wool, Merino wool prices have jumped in the first three months of 2017, led by a surge in prices for superfine wool. At the same time, prices for Crossbred wool have been in the doldrums, although there are recent signs of recovery. What is driving the prices for Merino wool higher and why are Crossbred prices languishing? Can the price surge for superfine Merino wool be sustained? It highlights the surge in superfine wool prices and the dive in prices for Crossbred wool, particularly broad Crossbred wool produced by NZ and the UK (Uruguay typically produces Corriedale wool between 26 and 30 microns which have also been hit by the low prices). As a result of the surge in superfine wool prices, compared with other wool types, the price differential (premium) for superfine wool has widened substantially. As at mid-march, the premium for 16.5 micron wool stands at 50% compared with the 10-year average of 45% and the five-year average of 28%. For 18 micron wool, the premium in March was 43%, well above both the 10- year and five-year averages. The table in Chart 2 summarises the price differentials for various wool types compared with 21 micron wool. In addition MERINO WOOL PRICES JUMP Australian wool prices have powered higher in the opening months of 2017, with the benchmark Eastern Market Indicator hitting the highest level in almost 30 years in the week ending 17th March at 1546c/kg (on a like-for-like basis). This is 191 c/ kg (12%) higher than the close before the Christmas recess. The increase has been powered by an around 500c/kg jump in prices for superfine wool (18.5 microns and finer). Superfine prices are at their highest level since At the same time, medium Merino wool prices have increased by much less, with the 21 micron price guide lifting by 94c/kg. While Merino prices have been on the rise, Crossbred prices have languished, although there have been some signs of improvement in late February and early March. The decline in Crossbred prices has particularly hurt woolgrowers in New Zealand, Uruguay and the United Kingdom. Chart 1 shows the trends in wool prices for various micron categories for Australia, New Zealand and the United Kingdom. to the widening of the price differential for superfine wool, the table shows how the price discount for broad wool has increased compared with the long-term averages. AUSTRALIAN WOOL TEST VOLUMES RISE, BUT SUPERFINE PRODUCTION DECLINES Australian wool production is on the rise, helped by much improved seasonal conditions across the country for some or all of The volume of wool tested in the 2016/17 season to February increased by 4%. This increase is in line with the most recent forecast from the Australian Wool Production Forecasting Committee, released in December. The committee predicts that Australian wool production in 2016/17 will rise by 2.2% to 332 mkg greasy. As expected, there was some catch-up in November, December and January after the very wet Spring caused shearing and delivery delays in many regions. There have been changes by micron categories which help explain the price movements this season. In the July to February period of 2016/17, wool test volumes of superfine wool (18.5 micron and finer) dropped by 5%. At the same time, wool test volumes of micron wool increased by 6% and volumes of micron wool were up by 17%. These changes reflect the better seasonal conditions experienced across the country. They 10 NETWORK NEWS Australian Wool Network

11 Chris Wilcox is principal of Poimena Analysis and Chairman of the International Wool Textile Organisation s Market Intelligence Committee In fact, the value of Australia s exports for the 12-month period to January 2017 was the highest 12 month aggregate since September 2003 (see the first graph in Chart 4). This reflects the current strength of demand, particularly when you consider that wool export volumes in 2003 were 20% higher than now. In terms of demand by micron category, the value of exports of fine and superfine wool (19 micron and finer) has lifted by 23% this season, continuing the steady and strong growth in demand for this wool (see the second graph in Chart 4). This is the second factor in the recent leap in prices for superfine wool. may also be partly the result of a shift away from superfine wool bloodlines arising from the five years of low price premiums. Wool test volumes of Crossbred (25-28 micron) and broad (29 micron and broader) wool were down by 5% and 6%. The most significant lift this season is for medium Merino wool (20-23 micron), with the export value up by 62%. This has partly reversed the downward decline seen since The added supply of this wool this season has not dampened prices as demand has bounced. In contrast to the growth in demand for Merino wool, the value of exports of Crossbred wool (24 micron and broader) has If these trends continue for the remaining four months of the 2016/17 season, production of superfine wool is likely to fall to about 82 mkg greasy for the full season, the lowest in four years. Production of medium and broad Merino wool (21-24 micron) is likely to bounce back to about 80 mkg greasy, the highest in four years after a steady decline in the past three decades. Chart 3 shows the trends in annual production volumes for each micron category since 2000/01, including a forecast for the 2016/17 season. This decline in the production of superfine wool is one reason for the surge in prices for this wool this season. It seems likely that buyers are trying to secure quantities of this wool in the knowledge that production is declining. Auction offerings have increased by more than the increase in wool test volumes. For the 2016/17 season to the week ending 17th March 2017, the number of bales offered at auction was 5.6% higher than for the same period in 2015/16. The surge in wool prices, notably for superfine wool, has probably flushed wool out from stocks being held in broker stores. AUSTRALIAN EXPORT VALUES HIT 14-YEAR HIGHS Changes in production are just one side of the coin explaining the current exceptional prices, notably for superfine wool. The other side is, of course, what is happening to demand. Of direct interest to Australian woolgrowers is the demand for raw wool. This is best illustrated by the trends in Australian wool exports. In volume terms, Australian wool exports were 9% higher yearon-year in the July 2016 to January 2017 period, almost entirely due to a 17% leap in wool exports to China. Export volumes to other major destinations (such as India, Italy, the Czech Republic and Korea) were all below the levels seen in 2015/16. The picture is a little different, though, when looking at the value of exports (which is a truer measure of demand). The A$ value of exports was 14% higher in the first seven months of 2016/17, with a 23% increase in the value of exports to China. Exports to Italy were also higher, by value. dropped by almost 20% in the first seven months of the 2016/17 season. This reflects the weakness in demand for Crossbred wool. EXPORTS FROM NEW ZEALAND AND URUGUAY DROP This weakness in demand for 25 micron and broader wool is best reflected in the exports of wool from New Zealand and Uruguay, the two major producers and exporters of this wool. In the first seven months of 2016/17, New Zealand s wool exports were down by 17%, with a massive 37% drop in exports to China (the major export destination). Uruguay s exports were down by 14% for the same seven months, with exports to China falling by 41%. It appears China s mills have excessive stocks of this broader wool in greasy, semi-processed and even in fabric, and have been cutting purchases from NZ and Uruguay in response. As well, there are reports of acrylic and other synthetic fibres being used in heavier weight fabrics for the outer coats that use this broad wool. Cont d page 13 Australian Wool Network NETWORK NEWS 11

12 Wool Buying Division Expands The team at AWN would like to welcome Andrew Partridge as our new Wool Trading Manager. Based in Melbourne, Andrew will support our direct wool buying staff who conduct a range of activities at farm level. Andrew can also provide support to our other divisions with his vast knowledge and experience in the general wool trade environment. I have a strong background in wool exporting, having joined the trade back in 1987 as a junior buyer with exporter C.Itoh and Co. I have more than 30 years experience in various fields within the wool industry and developed skill sets in both wool broking and exporting. I enjoy the cross-pollination of buying, brokering and exporting that AWN provides. Generally, export buyers do not go back to farm level, but I enjoy working with farmers, discussing their marketing needs and explaining with confidence what is happening overseas, he said. I m really excited about working for an innovative organisation like AWN. A major part of my role will be risk management, developing new marketing strategies and sharing market information with my contacts within Australia and overseas. As part of the management team I will be involved in helping to grow the business, which I am really looking forward to. John and his current team of staff have been very innovative and have really taken the business to another level. It is quite an accomplishment, I am really looking forward to working with such positive people, Andrew said of his appointment. Andrew grew up with his two brothers on the family farm, originally from Skipton in the Western district and later moved to Stawell, located in the south-eastern part of the Wimmera, both in Victoria. His father was a shearer and operated his own farm and Andrew enjoyed being around the woolsheds as much as possible as a child. AWN wool buyer Graeme Telfer showed Andrew Partridge around the AWN Horsham Wool Buying store after his appointment. I was there after school and on weekends, he recalled. I wanted to take myself as far as I could in the wool industry, so I started a course at the Gordon Wool School in Geelong and four weeks later, through a chance meeting with Tony Wilson of major Japanese exporter at the time C.Itoh & Co, I found myself working as a junior wool buyer for the largest wool buyer in Australia. It was a very lucky break I will never forget. I have spent my whole life working my way up through the industry in trading, brokerage and management for some of the best and largest exporters in the game. Every role has been rewarding and offered me new opportunities and learnings and I hope to be able to apply all these and more to my role at AWN. Married with three boys, Andrew commenced his newly-created role with AWN in early March and with his easy-going nature and desire to achieve has quickly become an important part of the team. Vic, Tas, SA Update The season has continued to roll on and the wool market is continuing to show promise. It has been very well noted around southern Australia that the continual decrease in sheep numbers occurring over the last two decades has resulted in markets now really showing how low the Australian sheep numbers have become. We have also seen the impact on the wool market over the last few weeks proving that the supply of wool in southern Australia is running low. Clients who are currently shearing can take advantage of the sound opportunities available with the forward markets while those coming into their autumn shearing are being provided with the opportunity to be able to take part in the current market conditions. It was fantastic to catch up with those clients we recently saw at the South-East Field Days held at Lucindale, South Australia and those clients who attended the annual Balmoral Show where we participated in their annual shearing competition. Also caught up with clients who attended the Women on Farms Gathering held in Harrow, Victoria, which was also a great success. We also had a presence at the Karoonda Field Days in South Australia which also went very well. We look forward to catching up with our clients at the Pooncarie Fields Days in May and our clients who plan on attending the Australian Sheep and Wool Show in Bendigo and Sheepvention to be held in Hamilton. Our DNA projects we are currently conducting in parts of southern Australia are all currently online and are coming together, due for release later this year and coming into early next year. Overall, we look forward to the new season upon us and we thank you once again for your continued support during the past wool marketing season. Looking forward to catching up in the future. Mark Quartermain State Manager VIC, TAS, SA 12 NETWORK NEWS Australian Wool Network

13 Can the Superfine Price Surge Continue? Cont d from page 11 CHINA S RAW WOOL DEMAND ON THE RISE, EUROPE REMAINS STRONG Overall, total raw wool purchases from the five major wool exporting countries for the first seven months of the 2016/17 season were slightly higher than in the previous season. This was due to slightly higher purchases by China and continued strong buying by Europe (Italy, Czech Republic, Germany, the UK and several smaller countries). Purchases by India remain below year earlier levels. The combination of improving purchases (from the five major supplying countries) by China and strong demand from Europe are the main reasons for the strength of wool prices, notably for Merino wool. Chart 5 shows the change in the 12 month moving aggregate of wool purchases by the major wool processing countries and regions. The chart highlights the strength of Europe and the upturn in China s buying. PRICES FOR COMPETING FIBRES START TO RISE BUT MERINO WOOL PRICE RATIO HIGH While Merino wool prices have lifted in the past three months, prices for competing fibres have also started to recover from the lows seen in Cotton prices are now at their highest level since mid-2014, while synthetic fibre prices have also lifted, albeit only fairly modestly from the lows seen towards the end of As a result of the comparative changes in fibre prices, the price relativity for Merino wool remains at high levels. As Chart 6 shows, the price ratio for 19 micron wool against both synthetics and cotton has continued to climb into record territory. These high levels do not yet seem to be restricting demand for 19 micron and finer wool. At the same time, the price ratio for 21 micron wool against synthetics and cotton has slipped back but remains at historically high levels. By comparison, 28 micron wool has fallen back to around long-term average levels. CONSUMER CONFIDENCE REMAINS HIGH BUT RETAIL SALES SUBDUED Economic conditions around the world are on the improve, with the US leading the way. Consumer confidence in the US is at its highest levels since mid Consumers are also relatively confident in the EU and Japan. This should help which should help boost retail sales. However, clothing retail sales growth was rather subdued in several key countries over the just-finished Autumn/Winter period in the Northern Hemisphere. Almost all of the eight major wool clothing consumer countries recorded lower growth in clothing retail sales over the Autumn/Winter period in 2016 than a year earlier. For example, clothing retail sales growth in the US was just 0.5% compared with 5.6% growth in 2015 Autumn/Winter. Only the UK recorded higher growth rates this Autumn/Winter. Even so, with consumer confidence at high levels in these countries, retailers may be confident of seeing better retail sales in the 2017 Autumn/Winter. In that case, they could lift their ordering in preparation for this crucial period for wool clothing sales which begins in October. OUTLOOK FOR has started spectacularly for Merino wool prices after an extended 18-month period of unusually stable prices. As indicated in the previous edition of the AWN Newsletter, prices for Merino wool were expected to rise, but the extent of the increase has outstripped even the most optimistic projections. This has been marvellous news for Australian Merino woolgrowers who have sold in recent months. The increase has come as a result of China ramping up its purchases of fine wool while Europe continues buying steadily. This is the main, but not the only driver, for the price increase. The other factor is that production of superfine wool has pulled back this season. However, China s mills are shunning wool of 26 microns and broader sourced from New Zealand and Uruguay, which caused the prices for broad wool to collapse, although they have now stabilised. The question is whether superfine Merino prices will continue to remain strong in coming months? Signs on the economic front are relatively positive. The OECD s leading economic indicators point to a continued improvement in China and in the advanced economies. This, coupled with strong consumer confidence in the US, Europe and Japan, should provide a good foundation for retail orders in preparation for the 2017 Fall/Winter. This could in turn sustain the recent increase in demand for Merino wool and, hopefully, flow through to demand for Crossbred wool. Merino prices might be overheating and could be due for a short-term downward adjustment, although the underlying upward cycle, particularly for superfine wool, could last until the middle of 2017 as supplies will be constrained. The high prices may face a challenge in Spring as supplies increase. On the other hand, Crossbred prices could remain low before turning up sometime in mid Chris Wilcox Principal, Poimena Analysis Australian Wool Network NETWORK NEWS 13

14 New this Winter from MerinoSnug If customers are as excited about the new designs in the autumn/winter MerinoSnug collection as the designer herself then stock should be flying off the shelves. MerinoSnug and OM design and knit technician Leann Flynn is keen to tell anyone who is listening about the new focus for this season s range. The focus is on lightness both in weight and colour. Trends towards pastels and the softer, lighter end of the spectrum are strong in fashion right now and we reflect that in our collections. We also felt that our customers in warmer climates might be missing out on experiencing our product so we wanted to offer them more options, Leann said. The new collection modernises the silhouette offering garments with less structure which drape softly over the body. New this autumn and winter are the Daintree Cocoon Wrap and the Allora jumper which give customers a more relaxed, casual, modern silhouette which you can dress up or down they are very versatile. Leann s passion and excitement cannot be ignored when she talks about some unique new styles being offered in the MerinoSnug range. We have come up with a style that is very different for us, which we ve never done before and we are very excited about it, Leann said. The Atherton Jacket is a two-toned jacket and the fabric looks like a cross between woven and knitted. You can t actually tell it s a knit. It s a very novel design and is available in the combinations of dusk/shell, oat/shell and charcoal/black. MerinoSnug has also been modernising its range to add a more youthful market to the existing clientele. Older people want to look younger, more casual and more modern so we have looked to modernise our collection for these people and to attract a younger market, Leann explained. The new winter collection for MerinoSnug features some great new designs as well as DNA wool s from AWN clients. The DNA of the wool in this year s collection is from a number of AWN clients including Kangaroo Island, Keeyuga and Jigsaw Farms in Victoria. Leann is quick to point out she is part of a three-member team which includes Hysport CEO Rod Murray and MerinoSnug and OM national sales manager Melinda Haycraft. Rod brings a great deal of technical expertise in what can be achieved in seamless manufacturing which has its limitations. He brings great ideas to the table and has many specialty areas. Melinda looks at customer feedback, design trends, what we need to offer ensuring we deliver what the customers want, Leann said. I come up with the novel ideas and trends and am always looking at styles and textures. I bounce between the technical and the creative. My day is very varied and I can be doing anything from writing reports, programming, knitting on the machines or supervising a trainee in the whole-of-garment manufacture process. I could be trying to sort out how we sew a certain neckline or checking efficiencies in terms of time or yarn there s a lot of variety. After working in the fashion industry and gaining a TAFE diploma Leann felt she wasn t using her skills so completed a textile technology degree at RMIT to allow her to pursue something more challenging. Leann transforms the design into computer language which enables the machines to knit the garments. While I am one part of a design team I have a lot of creative control because I m putting garment dimensions into the computer or coming up with different stitch structures and textures. There s so much variety and I really enjoy it. 14 NETWORK NEWS Australian Wool Network

15 Woollen Garment Sales on the Rise How enticing do the colours dusk blue, rhubarb and cypress sound? They are the new signature colours for the MerinoSnug autumn/winter collection. Cypress (a rich mid-green), rhubarb (a deep ruby red) and dusk blue (a lighter, muted pale blue with way more sophistication than baby blue) complement the other colours in the MerinoSnug range but also make a statement of their own. MerinoSnug and OM (Only Merino) National Sales Manager Melinda Haycraft said stockists were really embracing the new collection and its alluring new colours and reports that sales are on the rise. MerinoSnug had an existing customer base of people predominantly 40 plus so we have changed our designs to a more classic but modern look to attract younger customers, she said. We have more modern shapes and more options for layering. Because of our climate, layering is part and parcel of the way we dress here in Australia. Also, to fit in with our climate, we have designed some lighter weight knits like the Allora jumper which only contains 20 per cent New Zealand eco-fur (possum fur) as opposed to the traditional 40 per cent. It retains its soft handle and is perfect for layering. Melinda said the other highlight in the women s range was the Daintree wrap. This is a simply beautiful piece. It is a cocoon-shaped knit with no buttons and is easy to wear. You can just throw it on and go and it too is perfect for layering, she said. The men certainly haven t been forgotten with Melinda quick to point out the Merrick jumper. It is a new shawl neck men s jumper which is a really nice knit and suits men of all ages, she said. It is 60 per cent Merino wool and 40 per cent eco-fur and comes in the colours of charcoal, granite, indigo and sumac. The autumn/winter OM range, consisting of garments made from 100 per cent Australian Merino wool, was also being embraced by stockists. Melinda said stockists were pleased to be able to get 100 per cent woollen products made here in Australia. These products are very competitively priced with overseas imports which can be of inferior quality and often contain acrylic, she said. The OM (Only Merino) range is being well accepted especially among the younger generation which is more interested in artisan products. There is a lot more awareness and a greater interest among these people in natural fibres and sustainable products. Young professionals are very supportive of Australian industries as they associate them with quality. Melinda Haycraft National Sales Manager, Hysport Pty Ltd MerinoSnug Merricks Shawl Neck OM Capri Jumper MerinoSnug Daintree Cocoon Wrap Australian Wool Network NETWORK NEWS 15

16 Social Media Expands Network AWN is tapping into the latest trend of sharing information and stories via digital videos, EDMs and social media with its first campaign producing phenomenal results. The Jigsaw Farms campaign was a three-part series following the journey of a jackaroo and jillaroo as they went about their working days helping grow the best quality wool for MerinoSnug garments which of course are manufactured and sold by AWN. AWN s national marketing co-ordinator Lisa Mottershead explains the company s first three-part digital story campaign was shared, via Facebook, with woolgrowers and consumers. The Electronic Direct Mail (EDM) was shared with MerinoSnug customers which enabled them to look at how the grower operates and see things from the grower s point of view. They were able to see the story behind the product and then have the opportunity to buy the products, she said. The total Facebook reach was 8944 people with 631 clicking through to the video. The EDM reached 4420 people and 531 clicked through to purchase. It is phenomenal that one campaign can reach so many people, Lisa said. We are able to market wool to more people than ever before through Facebook and social media. Lisa Mottershead The up-to-the-minute digital platform is being used to educate more people about the benefits of Merino wool. Facebook not only spreads the message to existing MerinoSnug consumers but through sharing, it went further, to people who had never seen the product and never engaged with the story of wool, Lisa said. AWN s aim is to elevate the wool industry and encourage more people to seek out products that contain AWN clients wool. TOTAL REACH FACEBOOK 8944 EDM 4420 CLICK TO LEARN MORE 631 CLICK TO PURCHASE 531 Lisa said social media allowed AWN to do this. We are able to market wool to more people than ever before through Facebook and social media, she said. Social media is allowing us to educate the public about the benefits of wool and educate them about how it s grown and it enables us to do that very quickly. The story of Jack and Jill was not only shared to our followers, this campaign has reached many thousands of people outside of our network thanks to sharing. This shows the power of sharing on social media. The first video story was filmed at Jigsaw Farms, in the beautiful Dunkeld region of Victoria, where some of Australia s best wool is grown and purchased by AWN for its MerinoSnug range. While the focus was on Jack and Jill, the jackaroo and jillaroo, the hero of the story was Australian wool and the luxurious MerinoSnug garments which are produced at the factory in Victoria. Make sure you keep an eye out for our next digital campaign and video story. If you missed the three-part story about Jigsaw Farms you can watch them from the AWN website at woolnetwork.com.au/jigsaw.html QLD Seasonal Report After the excellent winter monsoon in May 2016, which covered most of Queensland with droughtbreaking rain, little or no follow-up falls have been forthcoming in most areas apart from the far North West. Areas such as Julia Creek, Winton and Cloncurry have received recent storm and monsoon influences. Unfortunately, rainfall in other areas has been very isolated. Areas around Longreach, Yaraka to Blackall and Muttaburra to Hughenden are all looking for rain at this point in time. These areas have all had good lambings so rain in the coming months will be critical. According to Fairfax Media on March 16, 85 per cent of Queensland is drought declared with only the coastal strip, Cape York and Cloncurry areas being not officially in drought. Good rain however was recorded on the Darling Downs and South East corner with up to 100mm received in mid March. Harold Manttan State Manager 16 NETWORK NEWS Australian Wool Network

17 NSW Seasonal Report NORTHERN NSW The New England region has had a much better start to the year than last year however the most easterly portion of the area is still suffering from a green drought. Hopefully it won t get cool too soon and this area is able to get some good growth from the mid-march rains. In Uralla, 300mm has been recorded for the first 11 weeks of the year and the northern portion of the region has had similar falls. There are some exceptions, with some areas missing some of the storms. In the area south of Tamworth, rainfall received has been somewhat lighter and the season is reasonably patchy. With temperatures warmer in this area, pasture growth from the March rain will certainly deliver some benefit. The North-West Slopes are experiencing one of their better seasons at this stage of the year, however conditions deteriorate to the west of Moree where it is still very dry. CENTRAL AND WESTERN NSW After a period of exceptional rainfall in many areas during the latter half of 2016, rainfall recordings declined in the early part of 2017 throughout Central and Western NSW. A great majority of areas within the region received welcome and beneficial rain during late winter and spring of This assisted with crops and contributed to significant pasture growth during the spring months and into early summer. Wool growing conditions were possibly as good as they could have been in many areas and some quite good production figures have been recorded throughout the region. With the significant pasture growth, an increase in VM content is now being experienced within the clips shorn during the early part of Growers and classers are reminded to pay particular attention to the VM content within clips. The removal of cotted edges and jowls from skirtings is certainly suggested. In cases of heavy burr/seed infestation, making a fleece line for high VM wools (eg back legs) is also a suggested option. In those early-shorn clips, staple strength figures have been affected, particularly in wool shorn from lambing ewes. There has been also an increase in the amount of discolouration caused by the wet conditions, however possibly not at a rate that many may have been expecting. A combination of a decrease in rainfall and the particularly hot temperatures throughout January and February has resulted in many areas looking for rain during early autumn. Storm rain has been experienced throughout the region during early March with areas such as Dubbo, Parkes and Forbes receiving good rain; however recordings have been quite patchy. In the far north west of the region rainfall has been minimal in recent months and conditions have deteriorated rapidly. As a result of the significant pasture growth during late 2016 and the high temperatures experienced in early 2017, some areas in this region unfortunately experienced the devastating bushfires that occurred in February. The thoughts and prayers of everyone at Australian Wool Network have been with those affected by these terrible events. Excellent seasonal conditions in Western NSW have increased wool production. SOUTHERN NSW The last six months of 2016 saw above-average rainfalls across the southern areas of NSW. This had a significant effect on the quality of sheep with damage from water saturation and quality of feed. The early months of 2017 have seen the opposite with long, hot, dry spells dominating the weather patterns with most areas seeing below-average rainfalls. Pasture growth declined significantly with generally well below-average growth across all areas of the south. Topsoil moisture is low across all areas and water storage has declined rapidly with some areas desperate for rain to replenish storage. Stock condition remains reasonably good, although the high temperatures and decline in feed quality has seen many producers supplementary feeding. There have been some stock losses due to the conditions and parasite problems. As a result of the wet winter, feet problems have also been seen across some areas. This has contributed to a minor reduction in wool production in recent months. Wools are of good quality and average staple strength with yields marginally better. MARKET OUTLOOK The wool market in the early months of 2017 has seen a substantial increase in grower returns. This, along with the buoyant livestock market, has seen producers remain positive with regard to the future. Interest in Merino sheep has increased, with producers looking to purchase merino rams for late joining. This is on the back of last season s strong ram sales and the positive outlook for the wool market. It should be noted that ewes must be in good condition prior to joining to maximise birth rates. The forward wool markets have followed the rise in the physical market, with forward sales being negotiated out to 12 months. Please contact your AWN wool specialist if you are interested in obtaining some forward prices for your upcoming woolclip. Brett Cooper and Phillip Jones Australian Wool Network NETWORK NEWS 17

18 Quetzalcoatl On the High Seas Australian Wool Network has taken to the high seas providing the crew of a Sydney to Hobart yacht race contender with Visione racing shirts and Hedrena polo shirts from its Merino wool garment range. The 10-member crew of Quetzalcoatl were full of praise for the garments with skipper Anto Sweetapple saying they wouldn t dream of taking to the water without them. Both garments were fabulous, he said. We had a yellow Visione shirt for racing and a dusty blue Hedrena polo for crew dinners and prizegivings. The Visione again proved its worth in the damp and cool conditions on the yacht and we wore it non-stop in all conditions. We particularly like the moisture wicking properties and as a base layer it is perfect for providing warmth on the cold nights. Anto explained that when ocean racing you work on a watch system so generally you are up and driving the boat for three hours and then have three hours rest. Invariably you are hot and sweaty when you go below for rest - we all wore the Visiones for the entire race and had no issues with body odour - truly a remarkable fabric and makes for a happy yacht crew, he said. The crew absolutely love them and they are worn in every race. The Hedrena polo shirts were very smart and received comments from strangers on the good look and fabric. We noticed that it always held its shape well and was cool and clean to touch. The Quetzalcoatl resides at the Cruising Yacht Club of Australia at Rushcutters Bay in Sydney and finished 45th over the line last year, fifth in Corinthians Division for amateur crews and second in PHS Division. Quetzalcoatl is a Jones40 designed yacht built of King Billy pine and was purchased by current owners Anthony Bruce, James Lee Warner and Anto Sweetapple in was Quetzalcoatl s fastest trip to Hobart. Anto said it was an amazing record in more ways than one as we carried a spinnaker for over 70 hours (wind behind us) and carried headsails for only six hours, it is unlikely we will ever have another race with such favourable winds. And, more importantly we are truly grateful to Australian Wool Network for their support of our sailing dream, they are such fine garments we would not dream of going to sea without them, he said. We would not dream of going to sea without them. Quetzalcoatl skipper, Anto Sweetapple (front centre) and his crew wearing 100% Australian Merino wool - Hedrena polo tops. 18 NETWORK NEWS Australian Wool Network

19 A Warm Welcome to Jeff Denny A country guy at heart Jeff Denny was born and raised at Balliang, between Melbourne and Geelong, and hasn t strayed too far since. A new face at AWN, Jeff is a wool technical officer/buyer in Central Victoria, and with his easy-going nature it is not hard to see how quickly he has fitted into the team. Having grown up in a farming area, and always having a love of the land, his passion for his job is immediately evident. I love being out on the farms and talking to the farmers, he said. Jeff spends two-and-a-half days a week based on the Melbourne showroom floor typing and valuing wool and helping with sale day procedures. The remainder of his week is spent out and about in Central Victoria buying wool and spreading the AWN message to growers. Jeff may be new to AWN however he is anything but new to the wool game. Upon completion of Year 12 he gained a Diploma of Agriculture in sheep and wool at the Gordon Institute at Geelong. He then took up a wool marketing traineeship, managed a wool store and did some private wool buying. Jeff then tried his hand at brokering grain which he found interesting and then spent a few years out of the rural sector. I needed to spend some time at home with my kids so they knew who I was, he said with a laugh. Married to Amanda, with three children Oscar, Beau and Eliza, Jeff has been keen to work with AWN. It s the place to be. They are very interested in young people and I feel very lucky to have this job. Jeff had a friend, some years ago, who worked for AWN and he saw that he was really going places so had been keen to forge a working relationship with the company. Grow. AWN BUSINESS DIVISIONS For the latest on what s happening in the wool industry, market updates, sale rosters, price trends, wool marketing and price risk management tools visit our website. See back cover for contact details. An AWN West Australian wool marketing company. Dyson Jones (WA) Pty Ltd, Head Office & Showfloor, 48 Howson Way (PO Box 1119) BIBRA LAKE WA 6163 P: F: Make. Hysport Pty Ltd, Head Office, 140 Colemans Road CARRUM DOWNS VIC 3201 P: F: E: natural lifestyle wear Hedrena Pty Ltd, Head Office, 140 Colemans Road CARRUM DOWNS VIC 3201 P: F: Wear. Factory Outlet, 140 Colemans Road CARRUM DOWNS VIC 3201 P: E: For national stockists: Factory Outlet, 140 Colemans Road CARRUM DOWNS VIC 3201 P: For national stockists and flagship stores visit Australian Wool Network NETWORK NEWS 19