Wool Market Update (November 2019)

The following graph shows the AWEX Eastern Market indicator (EMI) in cents per kilogram clean, from 2009 to date.

The extremes in volatility in the wool market have eased since the beginning of September with the EMI generally trading between 1500-1600 c/kg clean. The high number of lots passed in, has somewhat stabilised the market, with a large increase in lots not being sold when prices fall, thus limiting supply, forcing buyers to maintain prices to secure adequate quantities of wool. The price outlook continues to be very uncertain with no indication in the market of either a higher or lower trend.

With the EMI currently sitting at 1,574c/kg clean, this should result in net average returns to many clients with Merino clips, of around $9.44/kg greasy. This would produce a return of $56.50/head net for sheep cutting 6.0 kg/head greasy.

This price of $9.44/kg net compares with the average budgeted Break Even Price for clients in 2019 of $7.10/kg and that for the top 20% of $4.92/kg, providing a significant profit margin. However, this margin has contracted significantly in the last 12 months. Wool growers will need to remain focused on minimising costs to ensure that wool remains profitable at long-term average prices, particularly if drought conditions continue.