Has the merino wool market turned?
Australian Wool Innovation’s new Head of Domestic Operations, Scott Carmody, believes the wool market is beginning to “feel right again” despite ongoing global uncertainty. While economic headwinds remain, Carmody points to early signs of improving sentiment among buyers and exporters, particularly after an unusual upward price movement in August.
“The market’s definitely going in the right way, and it’s across all wool types — from the best Merino fleeces right through to cardings and crossbreds,” Carmody said. “The feedback from the trade is that sentiment is changing, and that’s significant.”
After months of subdued performance, the benchmark Eastern Market Indicator (EMI) has lifted to 1,291 cents by early September, recovering from last year’s lows of around 1,130 cents.
Carmody attributes this to tightening supply and a measured resurgence in demand. Exporters, sensing potential shortages, are buying stock earlier than usual.
“People in the industry are looking at supply forecasts and realising we might be shorter than expected,” Carmody said. “That’s prompting some to buy early and hold stock, just in case.”
The September ABARES Agricultural Commodities Report confirms Carmody’s observations, forecasting an 11% drop in total wool export volumes this financial year, down to 386,000 tonnes greasy equivalent. This includes sheep skins, fellmongered, and dead wool etc.
“Recent price rises are a bump, not a breakout,” he said. “It’s not the improvement we need to make superfine and ultrafine wool consistently profitable again. But it could mark the start of a real change in sentiment.”
One of the most notable dynamics is the widening gap between micron categories.
Broader Merino wools around 21-micron are fetching above 1,500 cents clean, delivering solid returns for growers producing heavier fleeces.
By contrast, superfine and ultrafine wool, now making up nearly 40% of Australia’s clip, continue to face tougher conditions, with 17-micron prices below 1,800 cents.
This reflects subdued discretionary spending in premium consumer markets.
The ABARES report highlights slowing demand for high-end garments, particularly in China and Europe, as households curb spending on luxury apparel.
“The working-from-home shift hasn’t helped,” Carmody said.
“Fewer days in the office mean less demand for formal wear, and we’ve effectively taken 40% of potential weekly wool consumption out of the equation.”
China remains the largest buyer and processor of Australian wool, but domestic demand is softening.
According to ABARES, slower population growth, weaker household incomes, and high tariffs on Chinese garment exports to the US are constraining downstream consumption.
Lower sheep numbers — following high slaughter rates in 2024–25 and a gradual shift towards meat-focused breeds — continue to weigh on production.
This tightening supply has buoyed sentiment in auction rooms. “Everyone involved in greasy wool supply is basically short,” Carmody said. “Exporters have overheads to meet, but they’re also trying to secure stock ahead of potential shortages.”
Despite this, ABARES expects global demand for wool to ease slightly in 2025–26 as slower economic growth and synthetic fibre competition pressure downstream markets.
Even so, the balance of restricted supply and stabilising demand is helping support prices, particularly for broader Merino types.
Traditionally, August is a quiet period for wool sales. But this year broke the pattern. For the first time since 2018, exporters were active during the August recess, buying stock and, in some cases, clearing their inventories entirely.
“That was unusual,” Carmody said.
“Within the first week of the recess — when there were no sales — a lot of exporters sold a considerable amount of wool. By the second and third weeks, mills were bidding 10 to 20 cents higher than their booked-out stock.”
This shift suggests buyers are preparing for tighter supply later in the season, even amid weaker global demand.
Still, Carmody tempers expectations.
Even so, Australia’s position remains strong thanks to China’s reliance on Australian raw wool and the industry’s sustainability credentials.
ABARES highlights Australia’s wool traceability systems as a competitive advantage, enabling exporters to meet rising global expectations for transparency and environmental accountability, especially in premium European markets.
This positioning may help offset some of the demand headwinds by keeping Australian wool front-of-mind for manufacturers chasing certified, sustainable fibre sources.
While there are reasons for cautious optimism, Carmody is careful not to overstate the case.
ABARES forecasts a modest 1% fall in the EMI for 2025–26, but local auction prices have risen steadily since September last year, providing a degree of resilience.
The market is navigating three key forces: tighter Australian supply, patchy global demand, and continued competition from synthetics.
Carmody emphasises that while prices have improved, sustained growth depends on broader economic recovery.
“To get wool consistently back to $15 a kilo and beyond, we need global economies in much better shape,” he says. “That’s the reality.”
For now, buyers are active, exporters are positioning early, and broader Merino categories are holding firm. While challenges remain, the combination of tightening supply and emerging buyer confidence offers growers reasons for measured optimism heading into the final months of 2025.
Source: AWI