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Insights February 2020

3 February 2020 |Wool
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Insights February 2020

3 February 2020 |Wool

Overview

  • The Australian wool market will remain sensitive to the further spread of Coronavirus.
  • The AWEX EMI is likely to have a softer tone over the next month as the market watches for developments on the Coronavirus outbreak.

Australian wool markets remained volatile over January with day-on-day declines in the eastern market indicator (EMI) which fell 20 per cent below year ago levels, with further downside potential.

Wool markets have been reactive to Coronavirus and speculation as to the impact on the Chinese economy.

Market estimates indicate, if the impact of Coronavirus on the economy was to mirror that of SARs, China’s economic growth outlook could fall from 5.8 per cent in 2020 to 4.3-5.3 per cent.

Approximately 75 per cent of Australian wool is exported to China, hence this market will be susceptible to a prolonged slowdown in the Chinese economy.

Until there is some stability around the outbreak of the virus the market is likely to track sideways to slightly lower, taking a “wait and see” approach.

Summer shearing has caused a relative over supply of high micron wool to enter the market, which is expected to cause some weakness in coarse wool prices.

Recent rainfall over parts of New South Wales and Queensland could bode well for wool production.

Production is still expected to fall year-on-year, however there are signs that conditions are beginning to improve. If further rainfall eventuates, wool production is unlikely to fall by as much as the 9 per cent year-on-year that was
forecast for 2019/20 before conditions began to improve.

      

Source: Australian Wool Exchange, Australian Wool Testing Authority

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