The following graph shows the AWEX Eastern Market indicator (EMI) in cents per kilogram clean, from August 2009 to date.
During mid to late 2018 wool prices reached record levels, however since late September, there has been a significant correction with prices falling away approximately 340 c/kg clean or around 16%. This fall, whilst predicted by market commentators was greater than expected and is thought to be the result of a combination of factors, the primary cause being decreased demand from China. Market commentary suggest that an increase in pass-in rates and low stocks of raw material on hand in China, should lead to a recovery in price, but when and by how much is obviously unknown. The extent of the recovery may depend on the consumers’ willingness to pay more for the end product, as these elevated prices are passed on down the supply chain.
Even considering the recent fall, wool prices are still at historical highs and wool remains very profitable for most growers.
Currently the AWEX EMI is at 1,776 c/kg clean. This should result in net average returns to many clients with Merino clips, of around $11.55/kg greasy, resulting in returns of $70/head net for sheep cutting 6.0 kg/head greasy.
This price of $11.55/kg net compares with the average budgeted Break Even Price for clients in 2018 of $6.55/kg and that for the top 20% of $4.87/kg, providing a significant profit margin, even allowing for the cost of drought feeding.