Insights May 2023

Commodity overview

• Merino wool prices have improved with the strongest gains in medium types.
• Annual shorn wool volumes is forecast to increase by five per cent this season.
• Wool testing volumes have begun to decline as shearing makes way for lambing.

April had only three sales weeks with merino wool prices rising marginally across the Micron Price Guides (MPGs).  Merino wool above 19.5 micron saw prices with the largest growth over April bringing the pass-in rate to around 10 per cent. These stronger types continued to deliver some stability and appear to be more resilient in the face of an ailing market. Premiums have been offered for types with levels of vegetable matter (VM) less than one per cent. Autumn is generally when wool tests begin to show higher levels of VM driving discounts to these types.  This year has seen the MPGs become more aligned in terms of their trend. Finer wool has not seen the same price differential that has characterised those types since the pandemic. This price gap continued to marginally close in April due to a softening in demand for finer types of wool. Lack of buyer support has caused merino cardings to continue to fall to the lowest price since January 2021.

National testing volumes began to taper off as ewes begin to lamb and shearing slows down. April saw only 17,000 greasy tonnes tested when compared to 39,000 tonnes in March (a result exacerbated by public holidays in April). The wool being tested has a 1.7 per cent higher yield than wool tested at the same time last year. Improved yields are being supported by pastoral areas across the country which are often challenged by lower yielding wool. Higher yields are one of the strongest avenues for increasing the value of a fleece. Approximately 20 per cent of wool tested this year has been above 23.5 micron. This ratio has remained largely the same over the previous decade as prices from crossbred wool have fallen significantly. The outlook for these types remains poor.

The Australian Wool Production Forecasting Committee has released their April 2023 report. It is estimated that annual shorn wool production will increase five per cent nationally in 2022/23. New South Wales and Queensland will see the greatest year-on-year growth. This comes from being most detrimentally impacted by the last drought. The increase in sheep shorn will be driven by increased flock numbers which are estimated to reach 74.9 million this year. Seasonal conditions which have produced plentiful feed allowing growers to increase carrying capacity. Elevated national flock numbers will put pressure on the supply chain and see further increased costs associated with wool harvesting. Merino wool stronger than 19 micron makes up approximately 30 per cent of the Australian market. Prices for this wool may show some stability but during this year have largely remained below their five-year average. Over this five-year period the cost of shearing has doubled in some sheds. A sustained increase in the national flock will exacerbate these pressures.

Sources: Australian Wool Exchange, Australian Wool Testing Authority