Australian Wool – low supply expected to continue

In its February outlook AWI reported that for most of 2024 the Australian wool market was driven by weak global economic conditions, in particular, Europe and China. And there is no surprise that those weak economic conditions remained a key focal point as we rolled into 2025.

For much of January and February the wool market remained in a holding pattern with an occasional firmer trend often emerging as prices adjusted to a weaker Australian dollar. More recently prices have tended upwards in signs the low-price cycle appears to be ending.

Already we have seen some breakthrough moments starting to emerge. In the first week of February, the wool market recorded solid rises in this selling series. The benchmark AWEX Eastern Market Indicator (EMI) added a healthy 15 cents for the day.

On the second day the market generally continued to rise, predominantly in the medium to broad microns. In the south, the 21.0-micron MPG climbed to 1,449 cents. This is its highest point since the 10th May 2023.

The EMI added another eight cents, finishing the series 23 cents higher, closing at 1,215c/kg. This lift was 61 cents higher than the close at the Christmas recess and took the EMI to its highest point since January 10, 2024. It also gave it its fourth consecutive rise in as many selling days.  Finer micron categories have all firmed since the Christmas recess with18 to 20-micron fleeces rising by over 7pc.  In the middle of February, the auction rooms witnessed two success weeks of falls, but by the end of February, the wool market recorded an overall increase. According to industry experts the tighter supply is also starting to see some support in the market with a longer-term outlook that the market will hold these levels or slightly increase. Looking two to three years forward, some are predicting Merino prices should expect a lift in prices by 50-100pc (based on historical cycles). Mecardo reported best outcome for wool prices is when there is synchronised growth in all of the main economies. At this stage only the US bond yields are supportive of higher wool prices. If Europe and China’s economic outlook improves, this will underpin a strong rising price cycle. Remember, nothing stays the same forever – good or bad.  

Source: AWI