Quite reflective of the gloomy global economic conditions at present, prices again struggled to hold value at this week’s Australian wool auctions. Very strong auction purchasing from the Chinese top makers helped enormously but that support was unable to prevent further losses despite the forex (foreign exchange) rates assisting greatly by trading  2% to the theoretical benefit to local sellers on a week to week basis. 

US dollar (USD) pricing continues to highlight the demand story by being 3% lower for the week as opposed to the 1.1% lower in AUD pricing. This provides a huge price advantage for the overseas manufacturers and traders, making wool of all types an extremely attractive value proposition for them. That was evidenced by the stronger buying interest at yesterday’s auctions and the higher closing price basis  most types concluded selling at, particularly in Fremantle where all wools closed 10 to 20ac higher than Tuesday. 

Demand for wool is being hit by globally weaker consumer spending. This is most felt in the Chinese domestic market as that country buys approximately 80% of Australia's wool and is thought to consume at least half of that import domestically. Of course, the other half relies on exports to nations that are struggling with retail sales presently until the Northern hemisphere winter sales provide volume sales. China's economy is deeply integrated with the world economy. The past decade has seen mainly the exports from China lead global growth, so a natural reliance from most industry stems from that nation. Wool is no exception.

Following the whimper that was the China post covid lockdown recovery, the strongest potential for wool price recovery seen for months is that China has now embarked on stimulus packages. Their first move, unlike many other nations around the world which are raising their interest rates, China is opting for interest rate cuts in an effort to bolster its faltering economy. 

The 2022/23 season concluded this week with just 782 more bales sold this year compared to last season. The EMI finished about 20% lower and recorded seasonal averages of 1295ac and 870usc. The WMI averaged 1434ac.

43,000  bales is rostered to sell next week at the opening sale of the 2023/24 wool selling season.