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Insights November 2020

9 November 2020 |Wool
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Insights November 2020

9 November 2020 |Wool
The November update provides an analysis of production and pricing trends for Australian wool producers.

Overview

  • The recovery in Australian wool prices over the last two months is expected to be short-lived as resurgent COVID-19 outbreaks in the United States and Europe are expected to weaken demand.
  • Wool markets will continue to be affected by volatile supply as producers offload on-farm stockpiles.


The recovery in Australian wool prices seen during September and October could be short-lived as waning demand for the remainder of 2020 is expected to add downwards pressure to prices. The Eastern Market Indicator (EMI) recovered by 42.1 per cent from early September to the second last week of October. However, weaker demand meant a return above 1,200c/kg for the first time since May only lasted a week as the EMI fell by 6.6 per cent in the final week of October. The EMI is currently 28.6 per cent lower year-on-year with smaller year-on-year price declines for fine wool and larger declines for broader wool.

The recovery of Australian wool prices was highly dependent on a recovery in woollen apparel demand in Europe and the United States which is now expected to be delayed following the resurgence of COVID-19 cases in these countries and the subsequent enforcement of lockdown measures in some European countries to control outbreaks. This is expected to see apparel demand weaken and impact demand for wool from Chinese mills for the time being. While there is expected weakness in American and European demand, Chinese domestic consumption will continue to be a source of more stable demand due to a more advanced recovery from COVID-19.

Australian wool markets will continue to be affected by volatile supply as producers seek opportunities to sell bales stockpiled on-farm from the 2019/20 season. The number of bales offered in October was up five per cent from September but down 18.8 per cent from October 2019.

Sources: Australian Wool Exchange, Australian Wool Testing Authority

 

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