Wool prices have begun to recover but there are still big market challenges facing wool growers
As COVID restrictions start to ease in the northern hemisphere, Australian wool growers are hoping this will translate to increased demand for woollen clothing as the northern winter arrives at the end of the year.
Already, the first quarter of 2021 has seen wool price indicators climbing back to a level last seen a year ago, before prices fell around 50% between January–September 2020. With the benchmark Eastern Market Indicator having hit a low of around 850 cents last September, prices have now risen solidly again, to reach around 1,300 cents in April 2021.
Undeniably, the momentum of buyers will increase, as mills and manufacturers look to provide for growing demand as economies pick up and consumers have more freedom.
For some wool exporters, the challenge of accessing available shipping freight space has continued to create issues, which may impact the market in coming months. If importers, not just in China, but in markets such as Europe and India, become increasingly uncertain that their wool purchases will reach them, it may cause some softening in the market until greater certainty of delivery is achieved.
Importantly, it has also been noted by market observers that the recent high wool auction prices have also been partly maintained by many growers withdrawing their supply from sale. This could be driven by a range of factors, including the hope by producers that prices will continue to rise.
In addition, many producers will be running mixed farming operations and may find themselves in such a good financial position from the sale of their sheep and cattle this year that they can afford to hold onto their wool clip for longer than normal.