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Insights April 2022

12 April 2022 |Wool
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Insights April 2022

12 April 2022 |Wool
The April update provides an analysis of production and pricing trends for Australian wool producers.

Commodity Overview

  • The Eastern Market Indicator has fallen for three consecutive weeks to its lowest level since early January.
  • All micron price guides across the three selling centres have eased over the last month.
  • Wool test volumes for the year are still considerably larger than this time last year.

Wool test volumes have continued to grow throughout March to 37,787 tonnes but remain 800 tonnes short of the same time last year. Despite this, the cumulative total for this marketing year remains 8.5 per cent larger than last year. Vegetable matter sat steady at 2.2 per cent and yield fell by only 0.2 per cent to 65.3 per cent. Added to that, wool strength has increased by almost 5 per cent since February to 35.4N/ktex. These figures reflect the strong seasonal conditions for wool producers. This comes as welcome news after initial delays in shearing due to staff shortages and wet sheep. Wool offerings have seen minor falls but are set to rise to 50,000 bales in the coming week. 

The Eastern Market Indicator (EMI) has fallen for three consecutive weeks reaching its lowest level in three months. The easing of the EMI to 1,375c/kg is still 75c/kg higher than this time last year when supply was still growing rapidly. The declines come off the back of the increased value of the Australian dollar over the last month. The Australian dollar is now buying more than 75 USc. The exchange rate has meant the EMI in USc has strengthened slightly, finishing at 1,032USc. Losses have been recorded across all micron price guides. This is despite signs earlier in the year that super fines would be a source of strength in the industry. The best lots of super fine wool are still attracting high prices due to an increase demand in suits in Europe.

Australia has now concluded the negotiations for an interim free trade agreement (FTA) with India. This FTA includes the removal of the current 2.5 per cent tariff on Indian wool imports from Australia. India only accounts for around 7 per cent of Australia’s wool exports but that could rise when the agreement is implemented. Unfortunately, there are challenges on the global wool market with COVID-19 returning to China. Shanghai is currently experiencing record daily case numbers which have seen lockdowns implemented across the city. Shanghai is the world’s busiest container port causing concern over even greater freight costs and delays. Furthermore, China’s zero-COVID policy has raised concerns of a potential economic downturn for one of Australia’s largest wool export markets. 

An import ban put in place by China on South African wool due to an outbreak of foot-and-mouth disease may benefit Australian exporters. A similar ban was introduced in 2019 but the preceding excellent market conditions made the direct price outcome difficult to determine. South Africa makes up for only eight per cent of China’s wool imports while Australia holds 74 per cent of the market share.

 

Sources: Australian Wool Exchange, Australian Wool Testing Authority

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