Insights November 2024

Commodity Overview

• Wool markets will be looking for an uplift in consumer demand to give the market support in the lead up to Christmas. Improved consumer sentiment may offer support, although forecast strengthening in the AUD will limit upside.
• Prices have remained lower year-on-year, with reduced supply and the weaker Australian Dollar unable to stop prices deteriorating.

The Australian wool market gained ground in October. The AWEX EMI gained 52 cents across the first two selling weeks, reaching 1,139 c/kg in week 15. Prices lifted due to improved buying sentiment following the announcement of Chinese economic stimulus measures. The second of the two weeks also benefited from favourable currency movements. The Australian Dollar eased 1.3 cents between weeks 14 and 15. The market then stagnated throughout the rest of October, as the EMI lost 14 cents over the next three weeks. The easing of prices was mainly focused on the merino fleece types, with reduced European orders and lower consumer demand being noted as the main detractors of the market. The market softened despite the Australian Dollar easing throughout this period. The AUD fell 3.6 cents (-5.2 per cent) throughout October. This saw the EMI in USc terms finish the month 13 USc lower at 736 c/kg. The EMI in AUD terms finished the month 38 cents higher at 1,125 c/kg. This trails last year by 4 cents (-0.4 per cent) and is 142 cents (-11.2 per cent) below the five-year average.

The supply levels at auctions lifted in October. There was an average of 33,916 bales offered per week in October. This marks a +17.1 per cent increase month-on-month but is still lagging -10 per cent lower compared to October 2023. The offering at Fremantle recorded the strongest increase in October, jumping 41.9 per cent month-on-month. The season to date offering is now trailing 118 thousand bales (-19.4 per cent) below 2023/24. The Western Australian offering has seen the largest proportionate decline this season. Western Australia’s season-to-date offering is down 26.8 per cent, while the eastern selling centres are trailing by 17.9 per cent. The eastern selling centres have accounted for 84.4 per cent of the offering so far in 2023/24, up from 82.8 per cent last season. The national offering has declined due to dry conditions in major wool growing areas which has slowed growth as well as led to increased turn-off of stock. The current reduction in supply is well ahead of the forecast reduction in overall production, indicating that more wool is being held on to rather than offered at the current price levels.

Source: Australian Wool Exchange (AWEX)

The fine and medium micron wools strengthened throughout October. Although most indicators handed back a fair portion of gains in the last two series of the month. The 18-micron wool in the southern region lifted 53 cents (+3.7 per cent) throughout October to finish at 1,486 c/kg. Although this indicator did reach as high as 1,532 c/kg in the middle of the month. This was similar for the 20-micron wool, which gained 42 cents (+3.3 per cent) but fell from the highs seen three weeks prior. The crossbred wools in the southern region lifted throughout October. The 28-micron wool price finished 33 cents (+9.1 per cent) higher month-on-month. This marks a 22 cent (+5.9 per cent) uplift year-on-year, but still trails the five-year average by 65 cents (-14.2 per cent).

Source: AWEX, Australian Wool Testing Authority

Source: AWEX, Australian Wool Testing Authority

Australian growers will be looking to see if buyer sentiment will improve in the lead up to Christmas. So far, consumer demand in China and Europe has remained subdued. European orders, which are predominantly fine micron wools have been notably low. The market is expected to face pressure from the strengthening Australian Dollar. The AUD has had a volatile few weeks due to ongoing uncertainty ahead of the US election. With the RBA holding the cash rate and the differential between the RBA and other major economies (like the US) continues to grow, the AUD is expected to strengthen. Although currency markets are likely to see volatility over the next few weeks following the US election. The market is also likely to face pressure from an uptick in supply. Offerings generally increase in November and December. With the market unable to see significant uplift following the recent run of lower supply, an increase in supply is expected to force the market lower. Sellers will be hoping for an increase in consumer demand, with prices otherwise expected to continue sideways or lower.