Wool drop of 35pc rattles grower confidence
After riding high on the sheep’s back in recent years, WA woolgrowers have been left reeling after the 2019-20 wool market crashed to a five-year low at the final sale of the selling season.
The Eastern Market Indicator closed at 1110c/kg clean at last week’s final sale, a drop of 35 per cent, or 605c/kg, on a year earlier.
National Council of Wool Selling Brokers of Australia executive director Chris Wilcox describes the past year as a “confidence-shattering disappointment”.
Mr Wilcox said the EMI averaged 1448c/kg clean for the season following two previous years in which prices jumped sharply and hit record highs.
The EMI averaged 1739¢/kg in 2017-18 and 1939¢/kg in 2018-19.
“The fall in wool prices since January is not surprising given the negative impact of the COVID-19 pandemic on the global economy and on the wool textile processing industry,” Mr Wilcox said.
Australian Wool Exchange reported 1.47 million bales were offered for the season, worth about $1.97 billion, down 11.7 per cent on 2018-19 when the value of the clip was $3.192 billion.
The 2019-20 wool market started with the smallest offering in AWEX history, just 30,994 bales.
By mid-August the wool industry experienced the highest pass-in rate in a decade at 28.6 per cent, as buyer confidence levels fell on the back of US-China trade tensions.
There was another steep fall in September to 1365c/kg before small rebounds of 170c/kg and 67c/kg to 1609c/kg.
But at the opening sale in October, the benchmark indicator grounded to an abrupt halt, losing 100c to continue a topsy-turvy rollercoaster ride.
In January as the COVID-19 outbreak hit China and started to disrupt global trading, the EMI dropped to 1548c/kg.
This was followed by more falls that by the end of April saw the EMI down to 1292c/kg. More price falls followed with June seeing the smallest national offering of 15,375 bales, almost half of the record low 11 months earlier.
Great Southern woolgrower Bill Sandilands said he did not have high hopes for an imminent price rise.
“Compared to other industries, the merino industry is in a good place, with our dual-purpose sheep not likely to be so impacted on the meat side,” he said.
“It is understandable why wool values have dropped because of the COVID-19 pandemic, which has created a loss of consumers’ discretionary spending.”
The Department of Primary Industries and Regional Development said a large proportion of auctioned wool had been passed-in as a result of reduced demand from processors in Italy and China.
A DPIRD spokesperson said this may lead to stockpiles in Australia, having an impact on future prices.
“The Chinese mills have reopened, but significantly reduced demand in end markets will impact the need for Australian wool,” the DPIRD spokesperson said.
“Negative economic growth is likely to drive down demand as a result of lockdowns, limited spending and low consumer confidence.”
Mr Sandilands’ 100-bale wool offerings all sold last week, but was more than 500c/kg less than last year. But he was still pleased after selling 313 ram lambs to the meat works recently for a farm-best price of $195/head.
“We sold our wool in-line with expectations and are still positive that we are producing a premium quality fibre,” he said.
Techwool Trading representative Russell Fraser said is was a disappointing end to the season because of the COVID-19 crisis.
“The season had a soft start, with a few false rises, before a positive December and early January, before COVID-19 hit,” he said.
“Its been a rollercoaster market — hopefully spring will give us some clarity.”
Fremantle-based Swan Wool Processors managing director Paul Foley said the resilience of the wool trade had been tested by COVID-19.
“Outside China, there are some positive indicators, but mostly the industry is faced with unfinished orders,” he said.
“We are remaining positive and looking forward to next season, whatever it brings.”
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