Wool Market Update (November 2020)

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

Since the last News Bulletin in September, the wool market has seen a significant correction in prices, with the EMI rising by 331 c/kg clean to 1,189 c/kg clean. Although the weekly EMI has been rising, there has been significant levels of volatility within and between auctions throughout each week, with movements of up to 100 c/kg being seen.

There is no real fundamental reason for this volatility, other than buyers being unwilling to buy excess stock to hold as inventory, because the volatility of the market could lead them to holding over-priced wool. This start-stop buying, leads to further volatility.

The current 10 year decile wool prices by micron and 12 month price change can be seen in the below graphs published by Profarmer.

With the EMI currently sitting at 1,189/kg clean, this should result in net average returns to clients with 19 micron Merino clips, of around $9.00/kg greasy assuming a yield of 65%. This would produce a return of $54/head net for sheep cutting 6.0 kg/head greasy, an increase of $17/head since the September low.

This price of $9.00/kg net compares with the average budgeted Break Even Price for clients in 2020 of $5.58/kg and that for the top 20% of $3.39/kg. Wool growers will still need to remain focused on minimising costs, to ensure that wool remains profitable at these volatile prices.