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Insights October 2021

11 October 2021 |Wool
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Insights October 2021

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

Commodity Overview

  • Australian wool market has been relatively stable over the last month with the Eastern Market Indicator (EMI) averaging 1,350c/kg.   
  • The volume of wool offered at sale in September 2021 was 37 per cent higher than September 2020.
  • Favourable seasonal conditions will see the national sheep flock continue to grow to over 68 million head in 2021/22.

The outlook for the Australian wool market remains favourable with demand for wool increasing. Advanced vaccine roll outs in major markets should see retail spend on woollen products increase. While prices have stayed steady for fine microns over the past month, the medium and broader types are meeting some resistance. The demand for super fine and fine microns is supporting the Australian wool market. Of the $1.75 billion of greasy shorn wool exported from January to July 2021, 56 per cent was 19 micron and finer. A further 39 per cent was 20-23 micron while 24-28+ microns only made up five per cent of export value. The Eastern Market Indicator (EMI) is currently at 1,337c/kg, 2.7 per cent above the two-year average.

The number of wool bales on offer in September 2021 was 37 per cent higher than a year ago. This indicates that wool stockpiles are being drawn down as prices improve. While offerings have increased compared to a year ago, there has been a slowdown in offerings compared to the first eight months of the year. From January to August 2021, the number of bales offered each week averaged 43,819 bales. In September 2021, the number of bales offered is down to an average of 34,453 bales. It is expected that much of the wool stockpiled during previous seasons has made its way to market to make room for spring shearing. However, it is worth noting that wool supply to market has become more consistent all year round as shearing patterns have changed to a six-to-eight-month cycle.

The upcoming northern hemisphere winter has provided a boost to wool demand. Retail spending in the US, UK and the European Union is increasing as restrictions ease. US clothing and clothing accessories store sales were up 38.8 per cent in August 2021 compared to August 2020, according to the US Census Bureau.

China has accounted for 86 per cent of Australia’s wool export value from January to July 2021. Reliance on China does expose the Australian wool market to changes in Chinese demand. In the past week, the EMI fell 31c/kg. The catalyst was primarily due to China’s electricity issues impacting the operation of wool mills. Electricity rationing in China may hamper the production of finished wool products. The Australian wool price is dependent on international demand and these wider market influences will dictate price movements in coming months.

A graph showing the AWEX Eastern Market indicator from January 2018 through to October 2021. The AWEX has been steadily increasing since the start of 2021 but remains steady throughout this month.  This graph tracks Australian wool production from January 2018 through to October 2021. Wool production continues it upward trend during the month and remains above the same time last year.

Sources: Australian Wool Exchange, Australian Wool Testing Authority

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