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Insights March 2021

8 March 2021 |Wool
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Insights March 2021

8 March 2021 |Wool
The March update provides an analysis of production and pricing trends for Australian wool producers.

Overview:

  • The AWEX EMI has continued to trend upwards over the past month despite some price volatility, with the market retreating during the last sale in the month of February.
  • Fine and stylish merino wools continue to see the highest levels of demand amongst buyers with fine wool prices currently sitting in the 6-decile range.
  • Thanks to good seasonal conditions we should see plenty of broader lots coming through over the next month, this additional supply will continue to put downward pressure on broad wool prices.

The AWEX EMI has continued to trend upwards over the past month despite some price volatility throughout February with the EMI currently sitting at 1,306 c/kg, 17.4 per cent lower than the corresponding period last year. In US dollar terms the EMI is only down 1.1 per cent for the same period due to the strengthening Australian Dollar.

This general upward trend in wool prices over the past month has bought additional sellers to market leading to an increase in the overall offering, the increased supply has allowed buyers to be more selective when purchasing wool, with pass in rates also trending higher. An increase in shipping times due to heavier than usual sea traffic has seen international buyer sentiment fall, with the recent Lunar New Year celebrations also reducing demand from Chinese buyers. Recently released wool export data has reiterated how important the Chinese market is to Australian wool producers, with China accounting for 87 per cent of Australian wool exports by volume in the December period. Demand from other key export markets dropped substantially, with Italy and India reducing their imports of Australian wool by 67 per cent and 43 per cent respectively. 

Australian wool producers continue to keep a close eye on international markets with hopes the continuing rollout of the COVID-19 vaccine and easing of various restrictions will encourage consumer spending and confidence to return. Additional consumer demand for woollen garments will enable wool mills to further ramp up production with the additional demand flowing through to Australian wool producers.

Fine and stylish merino wools continue to see the highest level of demand amongst buyers with fine wool prices currently sitting in the 6-decile range over a 10-year timeframe. This trend of greater demand for finer wools is anticipated to continue with Chinese demand expected to pick up over the next month following the recent slowdown due to the Lunar New Year celebrations. It is anticipated that fine wool supply will struggle to meet demand as Autumn shorn wools tend to see quality reduce slightly as the wools carry more dust, burrs, and seeds. Thanks to good seasonal conditions we should see plenty of broader lots coming through, though this additional supply will put downward pressure on prices with crossbred wools in particular expected to struggle.

 

Sources: Australian Wool Exchange, Australian Wool Testing Authority

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