Supply Squeeze Helps Drive Australian Wool Market Higher in February and March
The Australian wool market carried a steadier tone through February, before strengthening further in the opening weeks of March as buyers responded to tightening supply and renewed competition for better-style wool. While the market has shown intermittent volatility in recent months, the broader trend through February was one of consolidation and gradual improvement.
The AWEX Eastern Market Indicator (EMI) sat around 1,693c/kg clean in mid-February, already more than 40 per cent higher than the same time last year, highlighting the stronger underlying position compared with early 2025. February trading was characterised by a mix of small corrections and recoveries from sale to sale, but overall support remained evident across the Merino fleece sector. In late February, prices lifted across both selling days in all three selling centres, with most micron categories recording gains as the market recovered from a brief setback the previous week.
For the trade, the February pattern reinforced a key theme that has been building across the season: the wool market is increasingly being shaped by tighter supply rather than purely demand-driven signals. Australia’s national wool clip continues to contract, and the reduced volume of wool flowing through testing and auction channels is now clearly influencing competition at sale. Fewer bales available means buyers increasingly have to compete for the types they need, particularly in the finer Merino categories that dominate Australia’s production. The impact of that tightening supply has become more visible in the early weeks of March.
Auction results in the opening March sales series extended the positive momentum seen late in February, with the market recording stronger competition across a number of Merino micron categories. Finer microns in particular have attracted solid buyer interest, reflecting continued demand from processors focused on higher-quality apparel fibres. Early-March auction results also highlighted the role of market confidence.
As prices began to lift through February, grower pass-in rates remained relatively controlled, suggesting sellers were willing to meet the market while still holding confidence in the broader price trend. That combination — moderate offering volumes and active buying interest — has helped underpin the recent lift. From a broader analytical perspective, several structural factors continue to support the current market tone.
Firstly, supply remains historically tight. Reduced sheep numbers following the recent run of dry seasons across parts of Australia have constrained the national clip, and this reduced production is now working its way through the supply chain. Supply squeeze helps drive wool market higher.
Secondly, demand for fine Merino wool remains comparatively resilient within the global textile fibre market. Wool continues to occupy a premium segment in apparel manufacturing, particularly in high performance and natural fibre clothing categories. Currency movements also continue to influence week-to-week results. Exchange rate shifts between the Australian dollar and US dollar can amplify or soften price movements at auction, meaning short-term fluctuations do not always reflect underlying demand. For woolgrowers, the key takeaway from February and early March is that the market lift is being supported by tangible fundamentals rather than short-term sentiment alone.
Lower production, disciplined selling volumes and ongoing demand for fine apparel fibres have combined to create a firmer market platform than has been seen in several seasons. That does not remove volatility. Auction markets remain sensitive to global economic conditions, currency movements and short-term buying strategies. However, the signals emerging from the February trading period — and reinforced in the opening weeks of March — suggest the wool market has entered a phase where supply dynamics are once again playing a stronger role in price formation. For growers watching the market closely, that shift may prove one of the more important developments of the current season.
Source: AWI