Better wool finding market favour

 May 22, 2026: FAVORABLE currency movements meant that the AWEX EMI closed 4 cents higher for the week, whilst in USD the market was reported as being 21 USC easier but no one in the trade is taking that to mean anything but a quality driven adjustment. In Euro terms the market was virtually unchanged with just a 6 cent downwards movement, although the typical European wools are still getting dearer each week as supply of them diminishes.

Aussie exporters and Chinese early stage processors are being forced to get more creative to offset price resistance from quite a proportion of their client base, depending on the final use of wools. High CVD (micron) and high CVH (tensile strength) blends are now present in many offer sheets, but Australian growers need to maintain their best in shed preparation standards as the exporters and topmakers still require the correct quality inputs for their strict recipes and they can only use blends for certain clients. Thankfully during the Elders grower tour of China over the past couple of weeks virtually no quality concerns about Australian wool have been raised by mills in China so the standard of preparation in Aussie shearing sheds is holding its high level, and with it, the price premium over other origin wools.

The Chinese sheep farms this group visited in Inner Mongolia this week saw some interesting farming operations for both sheep and beef. Australian genetics form the backbone of the breeding centres, which then distribute sires to surrounding farms but growing conditions are definitely harsher than we experience in Australia adding to the challenge of producing a high quality merino fibre. Shearing has not yet started in China but next month as the weather warms up the mostly blade shearing will get under way providing mills in China with another source of product in July and August.

Headwinds for the wool market seem to be everywhere at present with the situation in the Middle East still far from being resolved. Inflation concerns as a result of increased oil prices is dampening consumer spending in many important markets for wool. The European economy had just started to recover after years of mediocre growth. The oil price surge brought about by President Putin’s foray into Ukraine applied a severe handbrake to manufacturing across Europe, and flow on effects to consumer activity were not particularly helpful for those trying to sell high quality, high priced merino garments. The most recent forecast released by the European Central Bank points to a period of stagflation with GDP growth downgraded to 1.1%, whilst inflation is surging to 3.1% as a result of President Trump’s endeavours in the Middle East.

Other markets are a little further removed from these two trouble spots and so performing a little better. The USA economy continues to be positive if just a little wobbly and cracks could shortly appear as the summer holiday driving season approaches when gasoline prices will become a larger issue. China with its huge oil reserves and alternative supply chain from Russia has been able to shield itself more so than many other nations but the economy there was in a deflationary mode prior to the Middle East conflict anyway. Data released this week for April shows that things are not getting much better from a macro perspective. Retail sales for April rose just 0.2% year-on-year, the worst reading since December 2022. Its industrial production increase actually fell to a three year low and export growth has tapered off in recent months as customer economies slow down.

Offsetting these headwinds is the still declining supply situation for wool which will become more acute in the short term. There are only two sales remaining in South Africa this season, South America is virtually cleaned out until spring shearing begins again in October and supplies from Australia are following their usual seasonal decline. So the major early stageprocessors in China and India are nervously watching their stock levels, balancing their sales and purchases, and making sure that they do not get into a short position.

So as the trade nervously awaits an improvement in the geopolitical situation and perhaps a better long term forecast for the Autumn-Winter 26/27 retail season the market will continue to trade sideways as it has for the past three weeks, but it will only take one significant Chinese uniform order, or a larger processor needing to recover a short position for this market to bounce significantly. The next month or six weeks will be an interesting time for everyone involved in the wool industry, and although most analysts predict a slower global growth will weigh on prices next season we are unlikely to see a major retracement as has been the norm for the past 30 or 40 years given the restricted supply and the changing mix of garments now being produced and sold