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Insights November 2021

9 November 2021 |Wool
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Insights November 2021

9 November 2021 |Wool
The November update provides an analysis of production and pricing trends for Australian wool producers.

Commodity Overview

  • Australian wool prices fluctuated over the last month with the Eastern Market Indicator (EMI) averaging 1,340c/kg.   
  • The number of bales sold during October 2021 was 18.2 per cent higher than October 2020.
  • Sufficient on-farm feed and a large grain production year will see the national sheep flock continue to grow.

The Australian wool market was volatile in October with gains one week followed by falls the next. The EMI averaged 1,340c/kg, down 10c/kg compared to September. The shifts in price were due to changing demand mainly from China. Electricity rationing in China is reported to have slowed down manufacturing at Chinese wool mills which is impacting confidence. China continues to dominate Australian wool exports with the other minor players being India, Czech Republic and Italy.  

The outlook for the Australian wool market remains favourable even with the recent price volatility. Demand for Australian wool will recover as consumer spend on natural fibres increases. The Australian clothing retail industry revenue is forecast to rise 0.7 per cent in 2021/22. If this is indicative of other advanced economies, retail spending on woollen clothing should also recover. Well grown apparel wools are selling particularly well which has been seen by strong bidding for these types at sale centres. The general trend in society of being more conscious of where clothing comes from, how it is made and the impact it has on the environment should benefit the wool industry. This has been seen with premiums for non-mulesed wool and the growth of programs like SustainaWOOL which aims to improve integrity and traceability in the Australian wool industry.

Super fine and fine microns have continued to perform better than the broader types. The 28-micron wool price remains well below average with estimates that a third of crossbred clips are being held back from market due to the current low demand. The outlook for broader wool is not looking positive, so there is discussion around whether it is even worth holding. With summer shearing not far away, producers have drawn down stockpiles to create storage space. Plenty of feed on offer has seen microns increase for many farmers which has put more pressure on medium and broader wool prices. Wool prices are still expected to rise gradually over the next six months with increased wool production helping to improve profitability even if prices fluctuate.      

Compared to a year ago, wool prices are looking much better which has resulted in more wool offered at sale. October 2021 saw 22.4 per cent more bales offered at sale centres than October 2020. The number of bales sold has also increased with 18.2 per cent more bales sold in October 2021 compared to 12 months prior. Improvement in prices has seen stockpiles drawn down, particularly for finer types.    

 

Sources: Australian Wool Exchange, Australian Wool Testing Authority

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