Insights March 2020
Insights March 2020
- Australian wool prices are expected to take a positive tone over the next month as a sense of normality starts to return to the Chinese market.
- Further spread of Coronavirus into other unaffected countries or renewed restrictions within China would likely bring further weakness to local values.
- Despite recent rainfall on the east coast, wool production this season is expected to remain around nine per cent lower than last season.
Australian wool markets are expected to remain volatile following the spread of Coronavirus to Italy, which is the destination of approximately five per cent of Australian wool exports. Despite the economic uncertainty, sentiment in China is improving with reports throughput through local factories is beginning to pick back up following the coronavirus induced shutdown.
The impending northern hemisphere winter is also supportive for sentiment in wool markets and is expected to contribute to a stabilisation of local wool values.
Improved sentiment is expected to result in renewed interest from Chinese buyers at Australian wool markets and an uptick in demand. Any drop off in demand from Italy in response to the Coronavirus outbreak there has
the potential to temper some of this support.
In support of wool values has been the weakening of the Australian dollar relative to the US dollar in response to global economic uncertainty.
Currency moves alone are not expected to outweigh the impact of reduced Chinese buying activity.
Notwithstanding this, the Australian dollar is expected to remain under pressure in the coming months, and this should be supportive to wool values.
However, should we see the virus spread into other unaffected countries, worsening of the spread across Europe, or a return to increased restrictions across China, we would expect buyers to step back from the market
again, bringing pressure to local prices.
Source: Australian Wool Exchange, Australian Wool Testing Authority