Global demand for wool continues to falter

Wool market suffers severe losses as global demand continues to diminish

Coronavirus
As the wool market declines dramatically, pass-in rates increase with sellers opting not to meet the market. Photo Ally Jaffrey.

As the wool market declines dramatically, pass-in rates increase with sellers opting not to meet the market. Photo Ally Jaffrey.

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Wool market suffers severe losses as COVID-19 continues to negatively impact global demand.

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The Australian wool market made a dramatic return this week when auctions opened up on Tuesday, but not in the way those in the industry had hoped.

Unfortunately what everyone feared may happen when sales resumed after the three-week recess has occurred with the AWEX Eastern Market Indicator (EMI) dropping by a severe 128 cents to close at 1006c/kg clean.

That's 670c cheaper than this time last year and the highest weekly fall in the EMI since April when it lost 155c.

However, when viewed in percentage terms, the fall was 11.3pc - the highest weekly fall since 1991 when the floor price was abolished and the EMI fell by 31.1pc.

According to industry experts the reason is COVID-19 continuing to negatively impact on global demand for all textiles. In other words, buyers simply don't have enough orders to fill.

Nutrien north-east wool manager, David Hart, said there has been a total collapse in consumer confidence and retail sales.

"China is effectively the only market that is able to accept wool imports at the moment and seemingly have an economy that is functioning in some kind of normal way," Mr Hart said.

"They have appeared to be on top of the virus sooner than the rest of the world. But, because there is a lack of competition, for China the market is drifting lower and lower."

Mr Hart said the fact remains if it wasn't for China the industry may not be seeing a bale of wool sold at all.

"Whilst we don't like being dependent on one country, at the moment, in the short-term, thank goodness that one country is at least buying wool at any level," he said.

"But in the meantime our growers are taking a bit of a battering price wise, and there doesn't seem to be any good news around to indicate that the situation is going to change sooner rather than later."

Growers are taking a bit of a battering price wise, and there doesn't seem to be any good news around to indicate that the situation is going to change sooner rather than later - David Hart

AWEX senior market analyst Lionel Plunkett said when the eastern market opened trade on Tuesday, it was immediately apparent that large price reductions were on the cards.

"The individual micron price guides (MPGs) in the east fell by 110 to 173 cents with all types and descriptions affected," Mr Plunkett said.

"On the back of these losses the AWEX EMI fell by 101c, the largest daily fall in the EMI since August last year.

"The EMI lost 8.9pc for the day, making it the largest daily percentage fall in the EMI since 2003."

According to market reports, although the national offering increased by 7502 bales to 42,734 after the three-week annual recess, grower resistance to the three-digit price reductions across the Merino MPGs saw the national pass- in rate jump up from 23.9pc in week two to 30.1pc in week three.

Sydney's pass-in rate was 24.2pc with 959 bales withdrawn and Melbourne recorded a 25.7pc pass-in with 1834 bales withdrawn.

In Fremantle more than half of their offering was passed in with significant price falls.

Some MPGs fell more than 160c resulting in 65.6pc of lots passed in on Tuesday.

Next week all three selling centres will again operate with 33,413 bales currently on offer.

The story Global demand for wool continues to falter first appeared on Farm Online.

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