Australian wool production continues to decline

In its October monthly market report AWI (Australian Wool Innovation) looks at the decline in supply of wool at auctions –  a trend since April this year. Volumes offered for the season to date is down 22.7pct year-on-year, equating to about three-weeks of supply. Reduced offerings have been more prevalent in Western Australia, trailing last season by 30.2pc. In eastern Australian states, the decline is 21.2pc.

According to the Australian Wool Production Forecasting Committee, dry conditions in last 12 months have slowed wool growth and prompted some destocking by sheep producers. More recently in September, reports of wet weather interrupting shearing meant the month saw a record low number of bales offered.

The magnitude of the decline in offerings to auctions around the country outdoes the forecast reduction in 2024/25 wool production suggesting woolgrowers are holding back bales from auctions in hope of future price improvements. But the number one factor impacting wool prices is the slow-moving demand for new woollen garments and apparel products globally.

According to data from China customs, 2023 apparel exports for the nation were down 7.8pc year on year, with significant decreases experienced to high value markets such as the European Union (down 19.5pc YoY), the US  (-12pc YoY) and Japan (-13pc YoY). These are large and important end use markets for Australian wool and this significant reduction in activity has had a prolonged negative impact on wool prices.

On a more optimistic note, expectations for improved order intake over the second half of 2024 are  trending upwards. With prices steady and the prediction of a potential price shift on the horizon, producers are likely to continue to focus on cost and margin control, to ride out this period of low returns.

Source: AWI