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Insights March 2022

15 March 2022 |Wool
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Insights March 2022

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

Commodity Overview:

  • February delivered strong wool testing numbers with the weight of wool tested 7.3 per cent higher than February 2021.
  • Australian wool remains in demand with prices holding up well considering consecutive weeks of over 50,000 bales on the roster.
  • The Eastern Market Indicator has fallen from its peak at the start of February but remains higher than a year ago.

Wool test volumes have rebounded in February with 33,863 tonnes greasy tested, a 55 per cent increase on January. Season to date, AWTA have tested 216.5 million kilograms compared to only 195.8 million kilograms in the equivalent period last season. Increased sheep numbers and fleece weights is contributing to greater volumes tested. Flooding on the east coast will have affected shearing and getting wool to market. The La Nina system has produced wetter than usual conditions. This will benefit upcoming winter cropping and feed availability on farm.  

The Eastern Market Indicator (EMI) has fallen from its peak of 1,449c/kg but remains 97 cents above values seen a year ago. The rising Australian dollar has made Australian wool exports less competitive. A pull back from buyers has resulted in higher pass-in rates as prices have not met grower expectations. Four consecutive weeks of over 50,000 bales on offer is also weighing on the market. Abundant supply is a result of producers keen to clear out sheds ahead of shearing and seeding. The Western Australian border reopened on March 3rd which could ease shearer shortages. The outbreak of Omicron in Western Australia may have a short-term impact on labour. As seen on the east coast, disruptions due to COVID-19 are temporary but can delay shearing times.

The Australian wool market has held up well consider the volatility seen in commodity markets in recent weeks. The conflict in Ukraine is unlikely to have a direct impact on Australian wool exports. Ukraine and Russia are not major competitors for wool exports. The greater impact will be from currency changes and rising oil prices. Bulk and container freight rates are rising which will impact Australian agricultural exports. Limited container availability will hamper wool exports in coming months. The major risk factor for Australian wool exports is if trade with China is disrupted. China remains Australia’s largest wool buyer with 76 per cent of exports in January. European buyers make up around 15-20 per cent of Australian wool exports. This exposes Australia to downside risk if consumer confidence in Europe wanes.

The outlook is uncertain for many commodities as markets react to the fallout from Russia’s invasion of Ukraine. Wool prices are expected to remain steady but could face pressure if supply chain disruptions delay wool exports. International demand is supporting prices right now, but values may ease if demand softens.

 

Sources: Australian Wool Exchange, Australian Wool Testing Authority

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