Insights October 2023

Commodity overview

• Australian wool prices have experienced some stability in recent months but remain lower year-on-year and well below average.
• Wool supply in 2023/24 is lower than last season due to reduced medium wool supply, partially offset by increased fine wool.
• Demand will remain subdued for at least the next few months and prevent any substantial upside in wool prices.

The past month saw mixed movements in the Australian wool market. The Eastern Market Indicator (EMI) rose 21 cents from the end of August to mid-September. Following this positive start, the EMI lost some of these gains across the final weeks of September, falling 13 cents to 1,135c/kg. Zooming out, the EMI has held relatively stable in the first quarter of the new season, up 0.8 per cent from the end of the 2022/23 season. Stability in prices is a good improvement from the first half of 2023 which saw the EMI fall 15.5 per cent. Producers will be searching for prices to start increasing with the EMI still 9.6 per cent lower year-on-year and 19.6 per cent below the five-year average.

Prices for both 18- and 20-micron wool have followed a similar trend to the EMI in the past month. Despite a strong lift in the middle of September, prices for both microns at the end of September were around one per cent lower than a month earlier. As has been the case in recent months, fine wools have seen larger declines compared to a year ago. The price of 18-micron wool is 13.4 per cent lower year-on-year while 20-micron wool is only down 2.6 per cent. In contrast, broad wools have seen prices rise recently. The price of 28-micron wool in the south region saw increases for 10 consecutive weeks between mid-June and mid-September. This placed the price 7.8 per cent higher than a month ago and 5.7 per cent higher year-on-year. However, this improvement came from a low base with the current price still trailing the five-year average by 38 per cent.

Total wool test volumes for the season-to-date are down 2.1 per cent on last season. This is weighed down by low volumes in July while August and September were both higher year-on-year. While the overall trend is lower, the season-to-date comparisons by micron reveal an interesting trend. Compared to last season, the 2023/24 wool clip has seen a greater volume of fine microns tested while medium wools have been in lower supply. This season has seen a 5.7 per cent increase in the volume of wool tested finer than 19-micron. In contrast, medium wools between 19-23 micron have seen a 6.5 per cent reduction in volume tested.  

Substantial upside to wool prices is unlikely in the coming months. Macroeconomic conditions in major wool markets remain challenging for consumers and unsupportive for improved demand. In addition, Australian wool supply is expected to remain near the current above-average levels. A low Australian dollar is offering support to prices having fallen below 64 USc in recent weeks.

Sources: Australian Wool Exchange