Skip to main content

Insights October 2020

9 October 2020 |Wool
Wool image

Insights October 2020

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

Overview

  • Prices rebounded for three consecutive weeks in September before falling at the end of the month.
  • Wool prices are unlikely to recover this year as sporadic increases in offerings are not being matched by increased demand.

The Australian wool market is likely to experience weaker demand in the next month as buyers have satisfied near term commitments and are looking to firm up business before securing additional volumes. Further increases in prices will depend on consumer confidence returning as economies such as Europe and the United States recover from COVID-19 outbreaks. However, any improvement in prices will likely be stifled by a rise in supply as producers seek to offload on-farm storages of wool carried over from last season. 

The 2020/21 wool season continued to be defined by volatile supply and intermittent demand last month. Prices rallied for three consecutive weeks in September, a welcome sign for sellers with large volumes still on hand, before the market went backwards in the face of a large (week on week) increase in the offering. 

The Australian Wool Testing Authority statistics show that 7.1 per cent more bales were offered in September 2020 than the equivalent period a year ago. It is worth noting that the number of bales on offer in September 2020 was 27 per cent below the five-year average for September, a reminder that destocking during the recent drought years is still impacting wool production. The larger offering was met by somewhat increased demand which resulted in a 10.6 per cent national pass in rate for the month, slightly lower than the season to date pass in rate of 12.6 per cent. 

The Eastern Market Indicator (EMI) is currently 34 per cent lower year-on-year. All micron grades regained some of the losses from August, with increases of around 57 to 232 cents per kilogram in September. The finer microns fared better than the medium and broader types given increased confidence from exporters. Chinese demand continues to underpin Australian wool prices, as the Chinese economy is recovering from COVID-19 more quickly than its European and American counterparts.

The AUD/USD spot exchange rate trended downward during September, almost to the 70USc mark. The depreciation in the Australian dollar stimulated international buyer appetite, enabling them to stay in the market. The United States dollar will likely experience volatility in the coming month due to uncertainty surrounding the US election, COVID-19, and trade. The AUD/EUR exchange rate also shifted lower, a positive for European buyers, however many were unable to capitalise on the depreciating Australian dollar as COVID-19 continued to impact demand and consumer confidence in that market.  

   

Sources: AWEX, AWTA

Related Topics

Most Popular

Wool 09 November 2020
Insights November 2020
Wool 07 September 2020
Insights September 2020
Wool 09 June 2020
Insights June 2020
Wool 10 August 2020
Insights August 2020
Rural Bank - A Division of Bendigo and Adelaide Bank Limited
© Copyright 2020 Rural Bank | ABN 11 068 049 178 | AFSL/Australian Credit Licence 237879