Wool Market Update (April 2021)

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

2020 saw a massive fall in the wool price, with the price falling 751 c/kg or 53% between January and September. Since then however, the market has corrected with the market regaining 442 c/kg, with the EMI currently sitting at 1,300 c/kg clean.

Wool traders are currently experiencing significant issues exporting wool as shipping is impacted by COVID-19 restrictions and the recent blockage of the Suez Canal. Fewer ships are docking at Australian ports, turn around times have been extended, fewer shipping containers are available and the time wool is in transit has increased. All these factors increase the costs and risk for traders, which has significantly dampened their ability to pay higher prices.

The current 10 year Decile wool prices by micron and 12 month price change can be seen in the following graphs published by Profarmer. As the graphs below show, there is currently a significant premium for fine and superfine wool, with year on year prices increasing for microns below 20 while those above have seen significant price decreases.

With the EMI currently sitting at 1,300 c/kg clean, this should result in net average returns to clients with 19 micron Merino clips, of around $10.30/kg greasy assuming a yield of 65%. This would produce a return of $61.80/head net for sheep cutting 6.0 kg/head greasy.

This price of $10.30/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. These figures provide a significant profit margin  for wool growers, however wool growers will still need to remain focused on minimising costs, to ensure that wool remains profitable at these volatile prices.