The wool industry's benchmark indicator is predicted to drop in 2023 on the back of ongoing world economic pressures, lower consumer sentiment and China's continued zero COVID policy.
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Coinciding with these pressures is the expected lift in production as favourable seasons in 2021 and 2022 has led to the continual aggressive rebuilding of the flock.
This is according to the latest Rabobank Agribusiness Monthly, which revealed prices eased across most micron ranges during August, as global economic prospects declined and swelling interest rates tamed inflation.
"Looking into 2023, an Eastern Market Indicator (EMI) range of 1100-1200 cents per kilogram would not be unrealistic given the current economic environment," Rabobank's agricultural analyst for wool, grains and oilseeds Dennis Voznesenski said.
"We saw much lower figures during the GFC - below 1000c a kilo. But I don't think we are heading to that point just yet."
But when the EMI went below 1000c during the GFC, it came off a much lower base.
Since then, Mr Voznesenski said the market has been trading at much higher levels.
"We should also note there are so many different factors at play now compared to what was in play during the GFC, and we have had Covid in the mix as well," he said.
"What we can take away from this now is the directional move - typical supply and demand factors indicate the price should be lower."
Currently, wool is already feeling the weakening economic backdrop as the market became more tangible through less new business.
Independent Commodity Services analyst Andrew Woods said unfortunately the economic weakness has some time to run.
"Demand is likely to continue weakening through the spring," Mr Woods said.
"Bidders in the forward wool market are limiting their interest to the near months due to economic uncertainty."
But he said a lower Australian dollar should help cushion the effect at Australian markets and the finer Merino categories are currently trading at high price levels.
Premiums for RWS accredited wool, with at least reasonable specifications, are also receiving sizeable premiums, across the Merino micron range.
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Mr Voznesenski said the latest June data for Chinese consumer confidence revealed the lowest index since record keeping began in 2000.
"While a partial recovery in consumer confidence is expected post lockdown, the risk of further lockdowns is very real and will keep consumer confidence and demand very volatile," he said.
And he warned a year-on-year decline in retail sales in the US could also be on the cards in 2023.
"However, US woollen suit import volumes have remained strong for another month - only 12pc lower compared to 2019 levels," he said.
"But some of this demand may be related to larger than usual retailer purchases to avoid supply chain disruptions from Chinese lockdowns as opposed to consumer demand."
