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Aussie wool tallies EMI highs

Strong demand from China is the driving force behind the current good fortunes of one of Australia’s most iconic primary products - Merino wool.

The new year started off with a bang for Australian woolgrowers, with the market gathering momentum in the first selling weeks back after the Christmas recess despite large offerings and a relatively strong Australian dollar (AUD).

Fine wools (sub 19 micron) are experiencing a long overdue spike in price, increasing an impressive 50-90c in the first two weeks of the year.

The Eastern Market Indicator (EMI) closed at the end of the second week at 1434 cents, which many are calling record territory. Whilst the buzz around the market is certainly a great start the year, it is important to note that while in AUD terms last week’s EMI outdid the previous high of 1426c, in real terms these prices do not match those reached in 2011, when the AUD was around parity.

The demand continues to be dominated by China, who have for a number of years been purchasing nearly 80% of Australia’s clip, followed by India and Italy.

The dramatic flock reduction which started in 1990, saw Australia’s sheep population drop from 170 million head to a projected 71 million for June 2017. The downward trend for sheep numbers appears to have at least plateaued as this is a 1.4% increase from 2016. The plateau is attributed mainly to producers retaining ewes to start flock rebuilding on the back of generally more favourable seasonal conditions and good prices for both wool and sheepmeat.

The Australian Wool Production Forecasting Committee forecasts that shorn wool production will reach 332 mkg in 2026/17, which is a predicted 2.2% increase from the previous year.

The current level of optimism being felt by woolgrowers across the country hasn’t been experienced for a very long time … it is a great way to start the new year.
Jo Hall, CEO of WoolProducers Australia

Some industry analysts are now saying that supply and demand are around equilibrium, with demand being marginally stronger, which is a favourable environment for any woolgrower to find themselves in.

Nonetheless, the one constant of the Australian wool market is its volatility, and while the first sale day of this week has seen a 21c drop in the EMI, there is a lot of optimism being felt by woolgrowers across the country which hasn’t been experienced for a very long time, which is a great way to start the new year.

Jo Hall is the CEO of WoolProducers Australia - jhall@woolproducers.com.au

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