Wool Market Update (May 2023)
The following graph shows the AWEX Eastern Market indicator (EMI) in cents per kilogram clean, from 2014 to date.
The current wool market has been relatively stable since the highs and lows seen between 2018 and 2021. The current EMI is sitting at 1,302c/kg clean, a change of only 13c/kg year on year. The current outlook on wool prices mirrors the last 18 months, with very few factors having any significant influence on the market. One factor of note is VM contamination, as there is significantly higher levels of contamination compared to 12 months ago. Low VM lots are reportedly experiencing higher demand and premium prices.
Current movements in the wool price are largely due to fluctuations in the AUD/USD exchange rate. Looking further forward, the main factors that are expected to have a significant impact on wool prices include domestic seasonal conditions affecting production, or a global economic downturn, impacting the demand for high end garments.
Wool supply is forecast to increase during the 2023/24 season, due to increased sheep numbers, while wool cut per head is expected to remain stable. Sheep numbers are expected to increase by 1.7%, with wool cut stabilising after the 2.2% increase in the 2022/23 season. The positive seasonal conditions throughout Australia have also led to a forecast increase in staple length and yield, compared to the previous season.
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 has been a significant correction year on year in the premium for fine and superfine wool experienced during 2022, with current decile prices relatively even across the 17-21 micron range.
An EMI currently of 1,302 c/kg clean, should result in net average returns to clients with 19 micron Merino clips, of around $10.73/kg greasy, assuming a yield of
65%. This would produce a return of $64.38/head net for sheep cutting 6.0 kg/head greasy.
This price of $10.73/kg net, should well exceed the average budgeted Break Even Price for clients, providing a good profit margin for wool growers.
