AS Australian wool prices experience a sharp fall in recent weeks, wool exports take a tumble on the back of the nation’s supply drought.
Wool prices continued to slide despite a sharp drop in the Australian dollar against the US$ to the lowest level in more than two years.
Marking a fall of 75 cents a kilogram in the past fortnight, the Eastern Market Indicator (EMI) finished the recent trading week at 1992c/kg.
The largest declines were recorded for 18.5 micron and finer wool, with price falls of up to 100 cents for 16.5m wool.
The Northern Market Indicator had the most dramatic fall of 24 cents, resting at 2050c/kg, while the Southern Market Indicator fell 19c, to close at 1956c/kg.
The Western Market Indicator was only 9 cents lower at 2132 c/kg.
Australia’s production pressures has given competing nation’s a competitive leg-up, resulting a sharp jump in export volumes from New Zealand, Uruguay and Argentina, as Australia experiences a three per cent year-on-year fall.
This is according to the latest export data for the major wool producing and exporting countries for the 2018 calendar year, which revealed New Zealand exports spiked 17pc on the same period in 2017, Uruguay 18pc and Argentina 17pc, while South Africa also rose 6pc.
National Council for Wool Selling Brokers of Australia chief executive Chris Wilcox said the export fall was due entirely to lower supplies rather than weaker demand.
“The volume of wool exports from Australia this year to date is the lowest since 2014,” Mr Wilcox said.
In total, he said wool exports by the five major wool exporting countries was 5pc higher in 2018 than in 2017.
“This increase is due to strong lifts in purchases by China, the Czech Republic and India,” Mr Wilcox said.
“There has also been a small lift in purchases by Germany, Egypt, Taiwan, Japan, Korea, Taiwan and Malaysia.”
The nation’s ability to recover wool exports in the short-term is doubtful with Meat & Livestock Australia reporting a sharp increase in sheep slaughter for 2018.
The reviewed forecast includes a further 1.5 million more sheep slaughtered this year to 9.3m total - the highest slaughter level since 2014.
Mr Wilcox said the forecast reflected the extremely dry seasonal conditions in New South Wales, as well as parts of Victoria and South Australia.
“At 9.3m head, this is 23pc higher than in 2017 and comes despite record prices for both lambs and for wool,” he said.
At the same time, MLA predicts live sheep exports from Australia will drop by 39pc to 1.15 million head.
Market analysts attribute this fall to sanctions imposed on some live sheep exporters by the Australian Government.
This week, Australian Wool Testing Authority (AWTA) backed-up the supply concerns, reporting nearly a 20pc plunge in the weight of wool tested in September compared with September 2017.
There were significant falls in wool tested in NSW, Western Australia, South Australia and Queensland, with a decline in tests in Tasmania and a very small decline in Victoria.
For the first three months this season, the weight of national wool tested was down by 11.3pc.
Mr Wilcox said production in September was severely affected by the prolonged poor seasonal conditions.
AWTA wool testing data also highlighted a shift in the wool tested in different micron categories, which included a massive 39pc drop in 21 and 24 micron as a result of prolonged drought conditions.
Marking the driest September, drought has triggered the production shift, particularly evident in wool grown in the pastoral areas of SA and NSW, and the central west region of NSW.
The 29 micron and broader wool category recorded a 28pc in the weight of wool tested, while 25 to 28 micron wool experienced a 13pc decline in the weight of wool tested.