Insights May 2021

Commodity Overview

• The Australian wool market saw a slight upwards trend in April despite volatility in price movement across all micron price guides (MPGs).
• Despite strong production numbers and large national offerings, strong export demand is expected to keep prices trending upwards in the short term.
• Demand from Asia and Europe has become more apparent over the last month with buyers in these regions beginning to provide some competition for Chinese mills.

The Australian wool market saw a slight upwards trend in April despite plenty of volatility in price movement across all MPGs due to seller resistance and an unpredictable Australian dollar. The Eastern Market Indicator (EMI) currently sits at 1,319 c/kg with current wool price indicators having now well and truly recovered to price levels last seen 12 months ago prior to wool values declining during the middle half of 2020. The AWEX EMI currently sits at 1,319 c/kg, up 18 c/kg on last month. A high national offering of 54,754 bales in the coming week will likely maintain downward pressure on prices however prices are still expected to trend upwards over the longer term.

As the market heads into the winter months, wool offerings are expected to increase slightly with the Australia wool clip forecast to increase by 1.7 per cent this season to 288,000 tonnes. This is despite a five per cent decline in the total number of sheep shorn, showing the positive impact that good seasonal conditions are having upon sheep condition and wool yields. This estimated increase in supply is expected to translate into a rise in wool export volumes with forecasts anticipating that Australian wool exports will grow at a similar rate to production, helping to limit domestic wool stockpiles and keep prices stable. Fine Australian wools with low vegetable matter levels are expected to continue receiving the greatest level of buyer demand in the short term with broader lots also having performed reasonably well over the past month.

Buying interest from outside of China has become more apparent over the last month with major subcontinent and European buyers beginning to provide strong competition to Chinese mills. The recent outbreak of COVID-19 seen across India will likely impact export demand from Indian buyers for the foreseeable future. While there is some nervousness within the industry as to the ongoing trade tensions with China, (the largest importer of Australian wool), there has been no indication of any changes to current wool export levels, with China expected to remain our primary source of wool exports in the medium term.

 Sources: Australian Wool Exchange, Australian Wool Testing Authority