Wool Market Update (September 2020)

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

Since late February the wool market has seen a huge decline in prices, with the EMI falling by over 720 c/kg clean or almost 46%. This large decline in the wool price is due primarily to the reduction in demand for woollen products due to the economic downturn caused by COVID-19. Some growers have decided to delay selling their wool, in the hope of capturing a price increase.

Recently, the pass in rate at auction has reached 25% of the clip, with still more growers choosing to delay selling all together. This will hopefully create a slight floor in the wool price; however this may increase the duration of lower prices, as the wool stockpiled will need to be sold. The current decile wool prices by micron can be seen in the following graph published by Profarmer:

With the EMI currently sitting at 858/kg clean, this should result in net average returns to clients with 19 micron Merino clips, of around $6.15/kg greasy assuming a yield of 65%. This would produce a return of $37/head net for sheep cutting 6.0 kg/head greasy.

This price of $6.15/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 need to remain focused on minimising costs, to ensure that wool remains profitable at these low prices.