WOOL prices dropped further in auctions this week despite the much smaller offering, heavily influenced by a strengthening Australian dollar against the American currency.

The Australian Wool Exchange said the auction market was again heavily influenced by currency fluctuations this week, with a strengthening Australian dollar making purchases more expensive for exporters when converted to US dollars.

“This shift in exchange rates was quickly reflected in market behaviour and buyer sentiment.

“Typically, a quieter time of year, the national offering dropped to 28,508 bales, the second smallest sale of the current season,” AWEX said.

Brokers offered 28,508 bales, 11,787 fewer than last week, but 14.1 percent were passed in and the AWEX Eastern Market Indicator fell 19 cents to 1191c/kg clean.

AWEX said difficult seasonal conditions continue to affect large areas across the country.

“Ongoing dry weather and a lack of rainfall have contributed to dusty growing environments, which in turn are reducing fleece yields and negatively impacting wool style and quality.

“AWEX classifies wool into seven style categories, ranging from 1 (choice) to 7 (inferior).”

AWEX said most Australian wool is usually graded within style categories 3 and 5.

“However, over the past 4 to 6 weeks, there has been a clear increase in the number of sale lots assessed as style 6 and 7.

“This decline in style quality has been particularly noticeable in the southern and western selling centres.”

AWEX said in the southern region, only 1pc of fleece offerings were classified as style 6 or 7 in the final sale of 2024.

“That figure has now grown to 15pc.

In the Western region, the proportion has risen sharply from 2pc in December to 23pc this week.”

AWEX said traders are finding it increasingly difficult to integrate these lower style wools into existing orders, which is placing further downward pressure on the market. AWEX Micron Price Guides (MPGs) that are calculated using only wool of style 5 and above, showed mixed results.

“Movements ranged from a 43-cent fall for 17.5-micron MPG in the south to a 15-cent gain for 18 micron MPG in the west.

“The western market also saw firm demand for 19.0-micron and finer wools, offering some much-needed stability.”

Supply is dropping alarmingly – AWI

Australian Wool Information trade consultant Scott Carmody said the past month of wool markets have largely been guided by the spot exchange rates as that appears to be the only certainty amongst many unknowns.

“When getting paid in AUD, the last thing wool growers probably want to hear is the markets “holding on well though in USD”, but that is the reality.

“The reality the users of Australian wool must hear though is that growers are facing ever rising costs, alternative enterprise competition for land use may be more lucrative and supply is dropping alarmingly,” he said.

“Better prices and rain are the only panaceas now.”

Mr Carmody said Merino types fell away by a general 15-20 cents this week, but prices variances within that are great according to quality.

“Better wools are fetching as much as 50 cents more for similar micron and vegetable matter (vm) readings for sale lots drought-affected that are exhibiting such tested qualities as lower yields, lower strength and thence lower calculated CVH percentages.

“Crossbred wool and cardings drifted just slightly and outperformed the forex adjustment,” he said.

33,000 bales are being offered next week, with the WA centre at Fremantle selling just one day, Tuesday.

Sources – AWEX, AWI.