Australian wool has dropped to its lowest price in more than a decade on the world market, leaving producers nervous about this year’s clip.
- The EMI dropped 32 cents to A$12.24 a kilo for wool
- In US dollar terms this is the lowest in 12 years
- China’s harsh COVID lock down rules and soaring energy costs are behind the slump
This week the Eastern Market Indicator (EMI), the east coast wool price gauge, dropped 32 cents to $A12.24 a kilo, making it the lowest price in six years in Australian dollar terms.
But in US dollar terms the EMI has plummeted to its lowest since 2010.
And the pass-in rate — wool offered for sale that wasn’t sold — jumped from 9 per cent to 17 per cent.
Wool brokers and analysts told the ABC this week’s wool market was a “bloodbath” and our biggest buyer China had “gone missing” from sales.
China lockdowns, Ukraine, inflation take toll
Marty Moses, from wool broker Moses and Son, said there there had been a “long list of negatives” affecting the wool market for a while, including global inflation and high energy prices.
“If you think about pressures coming on household’s discretionary spend, people aren’t going to go out spending money on luxury items, which is what wool is, essentially,” Mr Moses said.
But China’s lack of interest is what caused the market to sink into decade-low territory, partly fuelled by a lack of economic activity due to China’s long COVID lockdowns and, more recently, riots and protests.
“China is still active in some sectors (but) they’re buying selectively to keep mills running,” Mr Moses said.
“The trading exporters were very quiet this week and operating largely for European and Indian orders, orders outside of China, because the Chinese are just so quiet.
“There’s no confidence there at the moment.”
Even super fine wools, which reached record highs in the past 12 months, experienced “a massive drop” Mr Moses said.
Last year, wool sales raked in about $3.6 billion in export revenue and China was by far our largest customer, taking about 82 per cent of the clip, India 4 per cent and Italy and the Czech Republic about 3 per cent.
Floods create supply issues
A local issue is the impact of New South Wales and Victorian flooding on wool supply.
“New South Wales is flood affected and so receivables have been below par for a month or two now, as people had shorn (their sheep) and then couldn’t move the wool off-farm, or have been water locked,” Mr Mosley said.
He said near him in Temora, New South Wales, there was “water lying everywhere, and (producers) can’t get sheep to shearing sheds”.
“There are helicopters out west moving sheep out of flood zones (with) rivers swelling … so there’s been a whole crisis management situation going on, and that has slowed down (supply),” he said.
Christian Gorman farms about 50 kilometres north of Euston in the Sunraysia region of New South Wales and had trouble trucking wool to market a few weeks ago, but he’s glad they managed to sell when they did.
“I’ve spoken to friends at Menindee (in far west New South Wales) and they can’t get sheep shorn and are in a whole lot of trouble,” he said.
Mr Gorman is questioning whether it is worth running his 20-23 micron wool Merino sheep, estimating contractor costs to shear and crutch take about half their wool income.
“I’d love to buy some more sheep in, but why would I buy Merinos?” he said.
“Wool might soon become a by-product of growing Merinos.”
Wool broker Marty Moses says if spring wool from flooded farms makes its way to the sales, the market will dip further.
“We’re going to get volumes into a market where it really probably can’t handle it and that’s alarming,” he said.
He says if “China doesn’t come back into the market” and the number of bales jumps by 10,000 to between 45,000-to-50,000 bales, it will have an impact.
“Then the markets in serious risk of falling even further.”
Source : ABC News (AU)