Wool auctions surged to hit $624 million

It is a jump of $227m more than the corresponding sale of the last season at $397m, according to Australian Wool Exchange, with 102,775 more bales offered this season.

"It was definitely a sign of growers holding onto wool and waiting for better prices," Australian Council of Wool Exporters and Processors executive director Peter Morgan said.

"The extra volume this season is also a reflection of the wonderful conditions in NSW and Victoria that has increased fleece weights, which we are now seeing come onto the market after being held back for the last two years."

The Eastern Market Indicator eased 16 cents a kilogram to finish at 1323c/kg last week, influenced by the hot-and-cold interest from China as processors battled ongoing electricity rationing.

Despite the current power issues in China, ACWEP president Josh Lamb said China had sustained Australia's wool market through the most tumultuous period since the Global Financial Crisis.

"Last year, Italy, Europe, India and Korea all closed processing and ceased buying greasy wool from Australia overnight - whereas China traded right through," Mr Lamb, Endeavour Wool Exports, said.

"China were in the auctions everyday, which saved the market further pain last year.

"In the last few months they've been superseded by early processing countries like Italy, Czech Republic and India, but we are starting to see it ramp up again in China."

The latest Australian Bureau of Statistics export data shows a 91pc increase in the weight of wool exported in July-August, and a jump of 181pc in value.

China took 84pc of the nation's wool with 22.1 million tonnes of greasy wool in August, compared to 10mt in August 2020.

Italian-bound greasy wool orders totalled 1.3mt in August, compared to just 200,000t for the corresponding month last year, while India purchased 1.3mt of greasy wool compared to 436,000t for the same period.

With livestock and grain prices experiencing a high, Mr Lamb said some growers were holding onto wool to manage income.

"All these markets are off the charts at the moment and wool is the only commodity a producer can sit on," he said.

"When we see a drop in the market, pass-in rates react because many growers don't need to sell at the moment."

The abundant season experienced across eastern Australia had widened the price gap between 18 micron and 20 micron by more than 700c/kg, as the national clip broadens.

The average fibre diameter in the first three months of the current season was 20.5 micron, 0.3 micron greater than in the same period last year and 0.5 micron greater than two years ago.

"Demand out of Europe is as good as it has been for quite some time, which will drive the fine micron market," Mr Lamb said.

"The gaps will continue to open as the season goes on."

National Council of Wool Selling Brokers of Australia executive director Paul Deane said the currency was another significant factor which could affect the fortunes of woolgrowers in the coming months.

With talks the US Federal Reserve would start to reduce its vast economic stimulus measures in December, Mr Deane said the stronger Australian dollar could be a headwind for higher prices.

However he said the wool market had been "fairly directionless in US dollar terms", trading within a 3pc range over the last two months.

"Through this spring period, there will be a reasonable amount of supply coming onto the market which may make it hard for prices to rally too much," he said.

"What we are really seeing is a pick up in the wool yield coming through at the moment, with strong fleece weights, higher wool production and higher sheep numbers."