Australia’s wool fortunes rest on Chinese buyer demand for the fibre

For wool prices to improve, there needs to be a lift in consumer confidence in the nation that imports 70 per cent of our fibre.

The outlook for wool over the next few months remains uncertain despite two successive weeks of price increases instilling some confidence in the sheep industry.

The Eastern Market Indicator has settled at 1179c/kg, an increase of 17c/kg in the past week.

Gains came on top of an earlier price rise of 36c/kg the previous week.

But what will happen in the next few months remains uncertain, with few brokers ready to predict where prices may track.

Elders Wangaratta wool representative Rex Bennett said the fortunes of wool prices over the next few months hung on what happened in Australia’s biggest wool market – China – and how much was sold to their local consumers.

“China takes roughly 70 per cent of our wool, and in turn, half of that is used domestically within China,” Mr Bennett said.

“For the prices to improve dramatically, there would need to be a lift in consumer confidence within China.”

Eamon Timms from Fox and Lillie wool brokers Laverton. Picture: Zoe Phillips

One factor that could add to the mix was if the predicted El Nino eventuated, which would push microns down and put more pressure on prices in the finer categories.

With plenty of uncertainty around prices, Fox and Lillie wool brokerage manager Eamon Timms said the auction results last week were a welcome sign.

The sales were the last before a three-week recess, with selling to resume on August 7.

Sheep and wool producers have experienced some concerning market trends for both meat and wool, with the lamb indicator experiencing lows in June.

“It was good to see the market step up again before the break,” Mr Timms said.

Purchasers were aiming to fill shipments and supply orders before the break. The demand worked in favour of vendors, and there wasn’t as much wool to enter the market as initially anticipated.

In the past week, 43,697 bales were sold, and there was a pass-in rate of 7.6 per cent.

“There was good buying activity from all players, and we saw widespread competition,” Mr Timms said.

Buyers place their bids during the Melbourne wool auctions. Picture: Zoe Phillips

And it extended to a broader buying base. A few weeks ago, any wool with vegetable matter was severely discounted.

Mr Timms said even wool in the 20-micron grades and with vegetable matter had improved in demand.

“We also saw strong demand for any wool that was 15.7 micron and finer,” he said.

“It probably improved by 300c/kg compared to the week before.

“This is the good step up that the wool industry has needed, and we are seeing better trading opportunities,” he said.

At the Melbourne auction sales, 21-micron wool saw the biggest price jump improving 72c/kg to an average of 1381c/kg clean.

Wool in the 20-micron category experienced a price rise of 51c/kg to an average of 1426c/kg, and 19-micron wool increased by 12c/kg.

The increases were not as strong in Sydney, with 20-micron wool improving by 19c/kg to an average of 1378c/kg and 19-micron fleece increasing by 24c/kg to an average 1486c/kg.

At the Fremantle auctions, 21-micron wool increased by 41c/kg to an average of 1362c/kg.