Wool prices drop, but China's Delta outbreak only partially to blame

Absent Chinese buyers affect wool market


Wool prices continue to weaken as China Delta outbreak influences the market.


China's recent Delta outbreak has had an influence on the Australian wool market as the Eastern Market Indicator (EMI) lost more ground this week, dipping 37 cents to finish at 1335 cents per kilogram, clean.

But experts say COVID is not the only factor affecting the market.

The national offering dropped to 34,425 bales (down 14,758 bales on last week), as the week prior's market falls disheartened many sellers.

And it was Fremantle felt the full brunt of the withdrawals.

With only 4088 bales on offer 58.2 per cent of the offering was passed in, leaving only 1707 bales sold.

According to AWEX this was the lowest weekly sold figure since AWEX records began (1997/98).

The price reductions were mainly felt on the first day of selling.

The individual Merino fleece Micron Price Guides (MPGs) dropped by 20 to 102c for the day and the EMI lost 40c for the day.

The large falls prompted many sellers to withdraw their wool, pushing the second day offering well below expected quantities.

This, combined with a high passed in rate reduced supply, prompting an increased buyer demand on the wool that remained and as a result, the market steadied.

The movements in the MPGs in Sydney and Melbourne ranged between -10 and +20c with the EMI finishing the day 3c higher.


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Although the latest COVID Delta outbreak in China is influencing the Australian wool prices, industry experts have said it is not the only factor.

Industry analysts have reported the economic outlook in Asia has deteriorated in the short-term as the Delta variant sweeps through populations around the globe.

The latest outbreak in China appears to be widespread and will impact the economy.

How long this will persist is uncertain, but supply and trade supply chains have certainly been disrupted.

Yet National Council Wool Selling Brokers Australia executive director Paul Dean said to what extent the current weakness relates to the latest outbreaks of COVID in China or just the market digesting the higher amount of wool purchased in the first three weeks of sales this financial year is unknown.

"Based on the three auction sales so far for the 2021-22 season, 120,000 bales of wool have been sold to the trade, around 300,000 bales more than at the same point in the previous two seasons," Mr Dean said.

Next week is a non-sale week for Fremantle as traditionally there is not a lot of shearing occurring in the West at this time of year.

This fact, combined with the fall in prices in this series, has pushed the national offering lower. Just over 32,300 bales are currently on offer, with only Sydney and Melbourne in operation.

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