Wool Market Update (July 2023)

The following graph shows the AWEX Eastern Market indicator (EMI) in cents per kilogram clean, from 2014 to date.

The AWEX EMI has fallen dramatically since the previous newsletter in May 2023, with the current price at 1,162c/kg clean, being a reduction of 140c/kg or 11% since May. All micron grades have decreased, particularly fine wools, but the percentage decrease has been similar across all microns.

The falling market has been caused by continuing deterioration in the global economy, affecting demand for luxury/discretionary items that merino wool produces. In addition to this, an appreciating AUD has reduced growers’ terms of trade. A low pass in rate reflects growers meeting the current market.

The cause of the low pass in rate is a combination of the end of financial year and the negative outlook for the wool price in the medium term, prompting growers to sell on the current market. The 36c/kg jump in the EMI during the last sale, is due to an unexpectedly smaller offering, which put pressure on exporters to fill shipping quotas prior to the winter recess.

Assuming a yield of 65%, the current price should result in net average returns for 19 micron wool, of around $9.61/kg greasy. This would produce a return of $57.68/head net for sheep cutting 6.0 kg/head greasy.

This price of $9.61/kg net compares with the average budgeted Break Even Price for clients in 2023 of $7.69/kg and that for the top 20% of $3.47/kg, still providing a significant profit margin for low cost producers.