Lower wool prices due to weaker consumer spending – AWI

Sheep Central, June 30, 2023

LOWER auction wool prices have been blamed on weaker consumer spending in China and globally, according to Australian Wool Innovation.

The Australian Wool Exchange said the wool market this week finished the 2022/23 season weakly, recording overall losses for the last two months and eight consecutive selling weeks.

AWEX said most of this week’s losses were recorded on the first day.

“In the east, the individual Micron Price Guides (MPGs) for Merino fleece 20 micron and finer fell by between 8 and 51 cents.

“In the west, where the losses of the previous series were still to be realised, the falls were larger.”

AWEX said the Fremantle fleece MPGs dropped by between 45 and 86 cents and the AWEX Eastern Market Indicator (EMI) lost 11 cents for the day.

“The second selling day the market steadied, with smaller price movements recorded.

“In the east, the MPG Merino fleece movements ranged between plus 3 and minus 14 cents and the EMI dropped another 2 cents.”

Worth noting was that Fremantle selling last finished strongly, AWEX said.

“The western Merino fleece MPGs added between 5 and 19 cents.”

The EMI closed the season at 1126 cents/kg clean, down 13 cents.

AWEX said the EMI has fallen by 304 cents for the season, a drop of 21.3pc.

“In US dollar terms, the EMI closed at US748 cents, a seasonal fall of US239 cents, a 24.2pc reduction.”

Seasonal offering marginally higher

AWEX said the total amount of wool offered this season was marginally higher than the last.

“There were 1,876,638 bales put through the auction system, 14,716 bales more than the previous season, an increase of 0.8pc.”

The total dollar amount of wool sold in the 2022/23 season was $2,417 million dollars, this was 173 million less than the 2021/22 season.

Demand for wool hit by weaker consumer spending – AWI

Wool prices again struggled to hold value at this week’s Australian wool auctions, reflecting the gloomy global economic conditions, AWI trade consultant Scott Carmody said.

“Very strong auction purchasing from the Chinese top makers helped enormously, but that support was unable to prevent further losses despite the forex (foreign exchange) rates assisting greatly by trading 2pc to the theoretical benefit to local sellers on a week to week basis.

“US dollar pricing continues to highlight the demand story by being 3pc lower for the week as opposed to the 1.1pc lower in AUD pricing,” he said.

“This provides a huge price advantage for the overseas manufacturers and traders, making wool of all types an extremely attractive value proposition for them.

“That was evidenced by the stronger buying interest at Wednesday’s auctions and the higher closing price basis  most types concluded selling at, particularly in Fremantle where all wools closed 10 to 20ac higher than Tuesday,” he said.

“Demand for wool is being hit by globally weaker consumer spending.

“This is most felt in the Chinese domestic market as that country buys approximately 80pc of Australia’s wool and is thought to consume at least half of that import domestically,” Mr Carmody said.

“Of course, the other half relies on exports to nations that are struggling with retail sales presently until the Northern hemisphere winter sales provide volume sales.

“China’s economy is deeply integrated with the world economy.”

Mr Carmody said the past decade has seen mainly the exports from China lead global growth, so a natural reliance from most industry stems from that nation.

“Wool is no exception.

“Following the whimper that was the China post COVID lockdown recovery, the strongest potential for wool price recovery seen for months is that China has now embarked on stimulus packages,” he said.

“Their first move, unlike many other nations around the world that are raising their interest rates, China is opting for interest rate cuts in an effort to bolster its faltering economy.”

Mr Carmody said the 2022/23 season concluded this week with just 782 more bales sold this year compared to last season. The EMI finished about 20pc lower and recorded seasonal averages of 1295 cents and US870 cents. The WMI averaged 1434 cents.

AWEX said next week marks the start of the 2023/24 season.

“It is the first opportunity for those wishing to sell in the new financial year, making it traditionally one of the larger sales of the year.

“This year’s poor market conditions have discouraged many from the market, pushing the quantity lower than normal,” AWEX said.

Currently, there are expected to be 42,878 bales on offer. Click here to see the latest AWEX Micron Price Guides.

Sources – AWEX, AWI.


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