The Australian wool market has continued its decline with fine wool indicators taking the full brunt of the ongoing weakening global economy.
Furthermore, inflation and the high cost of energy in key markets continues to influence economic activity and therefore demand for wool.
The fall has been dramatic, with the the benchmark Eastern Markets Indicator dropping 219 cents over an 11 week period.
Last week it lost 24c to close at 1255c per kilogram, clean.
However, 17-micron wools have lost close to 400c since June, signalling the down turn in China's domestic market and European energy issues is relentlessly taking its toll.
Industry experts said it is difficult to distinguish between the effect of the normal spring doldrums and the weakening economic backdrop.
Independent Commodity Services analyst Andrew Woods said both the spring flush and weakening economic backdrop are bearing down on the greasy wool market.
"A deteriorating economic backdrop to the market is likely to remain the key issue for prices in the coming quarters," Mr Woods said.
"However, there are grades of economic weakness and it is not clear yet how much demand will shrink."
He said the the economic challenges of the biggest consumer of Australian wool, China, are unsettling.
"China is a vast, complex place but the economic challenges it faces in the next few years are daunting," he said.
"Perhaps the weakness in the domestic Chinese economy is showing up in the depressed crossbred prices, which have not recovered from a drop in prices at the beginning of the pandemic in 2020."
Nutrien Ag Solutions NSW south east wool broker David Hart said the fall in the finer wools feels dramatic because they are coming off a much higher base.
"It all adds up to the finer wools taking a bigger hit, but when you look at their relative levels they are still in a better place than the broader wools," Mr Hart said.
"The 19-micron and broader are typically 200 to 300c below their five-year average, whereas the 17-micron and finer have probably just reached down to touch their five-year average.
"Nevertheless, there is inherent volatility the finer you go in the wool market at the moment."
Yet he said as dramatic as the fall has been, there has been plenty of times in the last 20 or 30 years that fine wools have been in a worse position than they are now.
"Finer than 18-micron, they have been up around that 80 to 90 percentile and probably defying gravity to a certain degree," Mr Hart said.
"The rises and falls, as a percentage, may be similar to broader wools, but in shear dollars and cents, the numbers are larger.
"If you're coming off 2500c clean price and it falls 10pc, that's a 200c drop, whereas if you were coming off a 1500c, a 10pc fall is only 150c."
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After a natural seasonal lift in volume, Mr Hart said buyers are in a position that they have brought what they need for their immediate needs, but the wool is still coming.
He said traditionally, a certain amount of fine and superfine wool is often held back until February for the autumn sales, but that is currently not happening.
"The large Chinese top-makers that have the capacity to take on stock, they are doing that - they are buying a lot of that wool at reasonable prices because they represent very good value," Mr Hart said.
"However, the smaller traders and exporters aren't able to carry that amount of stock so they see problems ahead in the autumn.
"From February onwards, where they would normally be in the market to restock and rely on that grower-held wool to be on the market, they see that then not being available.
"They can't buy it now for that period, they just don't have the capacity to do it."
He said ironically, that could mean the industry may see a shortage of fine wool come next autumn.
And he said producers, if in a position to do so, could make a decision to hold wool.
"If they can financially do that and have got the nerve to do it, then maybe that is an option," he said.
"But that is still six months away and even if the market does recover in autumn, we might be coming off an even lower base.
"It might need to recover by 300c or more just to get back to where we are now."
