Insights May 2024

Commodity Overview

• Fine wool prices increased during April driven by results in the West early and later on with growth in the North and South before a rising Australian dollar and an accompanying decline in demand saw a reversal of these gains in early-May.
• A drop in offers and total volume sold reflected reduced international demand across all microns.

Australian wool prices strengthened across April with the Eastern Market Indicator (EMI) ending the month up 30 cents. The EMI ended April at 1,172c/kg matching the highs of early-March. Though this remains 10 per cent lower year-on-year. A falling AUD/USD exchange rate saw more limited gains in the US EMI. Price growth in the West supported the increases early in the month. Meanwhile increases in the last week of the April were more apparent in the North and South selling centres. Moving into the first week of May many of the gains made through April were lost with the EMI falling to 1,134c/kg. This was largely due to a strengthening Australian Dollar which now sits above 66 US cents.

The finer microns drove most of the increases in April, however gains were returned across most wool microns over the first fortnight of May. The largest price move for April was for Southern 16.5-micron wool which lifted by over 4 per cent to 1,852c/kg. Though this still reflected a 22 per cent reduction year-on-year with similar year-on-year declines seen across the fine micron wools despite the gains through April. The declining prices experienced over the start of May occurred across all microns. The biggest decreases were seen across the finer microns with Southern 18-micron wools dropping to 1,501c/kg after a high of 1,560c/kg during April.

The positive trend seen in the EMI towards the end of April was the most consistent since June 2022 with rises across five consecutive selling days. This was followed by five consecutive selling days of declines in the EMI. The EMI remains 13.9 per cent lower than the five-year average. Super fine and fine wools are trading below five-year averages with 18-micron wool the worst performer down -16.9 per cent. Crossbred wool also sits well below the five-year average with 28-micron wool trading at 350c/kg which is -32.6 per cent.

Early in April there was growth in the volume of bales offered which continued the trend shown in March. A peak of 50,148 bales was offered after the Easter recess, almost matching the height of the early January offerings. Rising prices combined with the lift in volumes shows that demand was decent, at least in April. Offerings are expected to contract heading further into autumn and into winter. The market continues to wait on increased demand from the global market. Reduced offerings for the remainder of the season should reflect this. Total volumes offered for sale are comparable year-on-year. However, the total dollar value sold has significantly declined, down 8.7 per cent on the previous season.

The forecast for the remainder of the 2023/24 season is not predicting any great price fluctuations. Volumes will need to reflect this to prevent supply shocks and a pricing decline. With the Australian Dollar showing gains against US Dollar this may stifle further price gains. Lower wool prices may encourage greater interest from Chinese buyers as was shown towards the end of the month, though economic performance will also be a factor. The initial forecast for 2024/25 is for a further 5.8 per cent drop in production on this season. Price improvement would require a supply drop or for an increase to demand, which appears unlikely.

Sources: Australian Wool Exchange