Australian wool prices are unlikely to recover for the remainder of 2020 as sporadic increases in offerings won't be matched by increased demand, according to the Rural Banks commodities insights paper released this week.
The commodities insight painted a sobering picture of the impact of the coronavirus crisis for woolgrowers on international demand for wool.
Tony Williams, Rural Bank's Regional Manager Agribusiness NSW, said although prices rebounded for three consecutive weeks in September, the market is likely to experience weaker demand in the next month as buyers have satisfied near term commitments.
"Buyers are looking to firm up business before securing additional volumes," Mr Williams said.
"Further increases in prices will depend on consumer confidence returning as economies such as Europe and the United States recover from Covid-19 outbreaks."
However, Mr Williams said any improvements in prices will likely be stifled by a rise in supply as producers seek to offload on-farm storages of wool carried over from last season.
"The 2020/21 wool season continued to be defined by volatile supply and intermittent demand last month," Mr Williams said.
"Prices rallied for three consecutive weeks in September, a welcome sign for sellers with large volumes still on hand, before the market went backwards in the face of a large increase in offering."
Chinese demand continues to underpin Australian wool prices, as the Chinese economy continues to recover from Covid-19 at a faster rate than its European and American counterparts.
The Eastern Market Indicator (EMI) is currently 34pc lower year-on-year.
On a more positive note, all micron grades regained some of the losses from August, with increases of around 57 to 232 cents per kilogram in September with finer microns fairing better than the broader types.
Mr Williams said the recent drought is still having its effect on the market.
"The number of bales on offer in September 2020 was 27pc below the five-year average in September, a reminder that destocking during the recent drought years is still impacting on wool production," he said.