Wool Market Update (October 2021)

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

Since the last newsletter in June, the wool market has seen less volatility than experienced in the last 18 months, other than for a steep fall during the winter break. There is no single factor influencing the market currently. COVID-19 related disruptions have eased somewhat with better economic conditions predicted in North America and Europe, stimulating greater purchases from European processors.  

The falling AUD has also helped reduce the impact on the domestic price, from negative market influences. One factor weighing on the market, is electricity shortages for Chinese processors limiting their capacity. This highlights the challenges of relying on one country to purchase the majority of Australia’s wool production. Supply chain and shipping logistics also continue to be an impediment to increasing prices. 

The current decile and year on year price changes by micron can be seen in the following graphs, indicating that current prices are historically still good, particularly for the finer microns.

With the EMI currently sitting at 1337/kg clean, this should result in net average returns to clients with 19 micron Merino clips, of around $10.65/kg greasy assuming a yield of 65%. This would produce a return of $64/head net for sheep cutting 6.0 kg/head greasy. 

This price of $10.65/kg net compares with the average budgeted Break Even Price for clients in 2021 of $5.59/kg and that for the top 20% of $3.06/kg. This will provide a good return for most growers. However the difference between average growers and the top 20%, demonstrates that those who remain focused on minimising costs which don’t impact directly on production, can achieve significantly higher returns.