Low supplies arrest slump in an uncertain market

Wool prices are at five-year low and global virus fears are making for a murky outlook

Sheep
Many in the wool industry are uneasy about the price outlook, with fears that a second wave of the COVID-19 virus could negatively impact on consumer spending.

Many in the wool industry are uneasy about the price outlook, with fears that a second wave of the COVID-19 virus could negatively impact on consumer spending.

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The wool market fell to its lowest level since 2015 at auction sales last week. The AWEX Eastern Market Indicator (EMI) slumped to 1110 cents a kilogram, whic...

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The wool market fell to its lowest level since 2015 at auction sales last week.

The AWEX Eastern Market Indicator (EMI) slumped to 1110 cents a kilogram, which was 29c/kg down from the previous week and equated to 771c/kg in US Dollars.

In what has been a remarkable turn of events, the EMI is now 1000c/kg lower than it was in 2018.

Across national auctions, there were 28,029 bales offered last week - which was almost double the level of the week before.

With twice the amount of wool supplies going under the hammer, it was positive to see the vast majority found buyers. Only 11.5 per cent of the offering was passed in.

This indicates that there is some level of strength and demand in the market.

Some industry stakeholders had expressed concern that the increased supply would not be 'soaked-up'.

Looking ahead, global markets remain uneasy and fears of a second wave of COVID-19 will likely impact on consumer spending.

Many expect retail spending, especially for premium goods such as fine wool, will likely remain low until there is more major positive news regarding the pandemic.

Recent market sentiment has rapidly turned negative once again, with fears that policies will slow - or even halt - the re-opening of many businesses in order to stem further spread of the virus.

At last week's auctions there were dramatic falls in prices for all wool types.

The biggest drop was for crossbred wool, which finished the week 45c/kg lower than the previous week.

Superfine Merino fleece of 18.5-micron fell 25c/kg and fine medium Merino fleece was down 35c/kg.

This week, auction offerings are scheduled at 31,072 bales - higher again from last week.

If demand can keep up, prices may stabilise. But if buying activity slows, the industry could be in for another market drop.

No lots were sold online last week, a reflection of the higher auction supplies.

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