Struggling Aussie wool market drifts lower

October 30, 2026: Again the Australian wool market struggled and it drifted lower but the currency movements meant that buyers overseas saw a lesser movement than growers in Australia. 

In local currency terms the AWEX EMI closed down by 62 cents, however in US Dollars the decrease was only 40 cents which sounds a lot more palatable. In Euro terms the market was only 25 Euro cents cheaper but the decline of the value of the regional currency is making life difficult for European processors and traders. Chinese buyers saw a relatively large 3.3% decline in wool prices in RMB terms as they continued to largely sit on the sidelines and wait for some sort of economic recovery to give them enough confidence to launch into the new season.

China which has been the driver for the wool market in recent years is pushing the proverbial uphill at present and faces challenges on many fronts. The stock market in China has been supported in the past by the Central government via a collective of State Owned Companies who when instructed dip into the market and purchase shares, but the tech-heavy ChiNext index has now fallen by 40% in the last four months. The equities market is the second largest store of wealth for Chinese citizens after the property market which has also turned sour, and so the Chinese consumer is now seeing their wealth eroded yet again which obviously affects their propensity to spend on discretionary items such as clothing.

For the wool market it is the classic ‘chicken and egg scenario’ with businesses wanting to see firm orders in place before they place new orders, yet the market continues to drift down hurting confidence and making people reluctant to buy given the declining prices. Some of the early stage processors in China with a large stock position behind them are able to keep the ball moving by averaging prices across their whole stock position, but the majority ofhand-to-mouth traders are constrained by the low number of orders and consistently lower prices. Not that the whole market is falling as indicated by the EMI indicator, but most people do just look at that number for ease of reference. The best wools, typically called ‘European spec’ are actually holding in price, if not increasing, but the simple mathematics of averages mean that the weight of numbers of poorer wools drags down the headline indicators and add to the pessimism.

Cash flow is also becoming an issue in the trade, as it always does during a protracted down market. The topmakers of the world have traditionally been forced to be the bankers for the global trade providing credit terms up to 150 days from delivery. Whilst growers receive their funds within 10 days of fall of hammer, and before title to the goods is handed over, the exporter/topmaker is funding the goods until they reach their destination and are then processed. Even when the goods are sold the customer, usually a spinner asks for credit terms to finance their operation and any delay in on selling the yarn results in later payment again for the wooltops, so it may take up to eight months for the topmaker to recoup the cash to buy further greasy wool. As the wheels turn slower in a market such as we have at present, these cashflow issues hurt the smaller operators much more than the larger firms, exacerbating the gap between those who can turn a profit and those who must sit on the sidelines.

There are some players further along the pipeline who have bitten the bullet this week however and purchased their requirements for the next season. In some cases they have been watching the market and waiting for an opportunity over the past two or three months, lamenting the fact that prices for raw materials have risen far in excess of the selling price of their yarn. With the decline in the market over the past six weeks prices have now reached a point where the price resistance has become negligible or they decided that they could not gamble any longer. So, perhaps we will see the market steady at this point and with grower’s reluctance to sell at or below current levels we may be ‘at the bottom’.

We still need an improvement in demand to initiate an improvement in prices, and a lot of that is confidence dependent. With the global backdrop still uncertain that may still be another week or two away. Next week sees a horse race in Melbourne, some Mid-Term elections in the USA as well as elections across the ditch in New Zealand. And of course a few Central Banks are set to make interest rate decisions in coming days as the global quest to rein in the inflation dragon continues. Even though oil flows from the Middle East have supposedly returned to pre-war levels the nervousness about what lies ahead is keeping the global market price well above the US $100 figure and consequent pain-at-the-pump for motorists everywhere.

Retail activity remains the key to the fortunes of the wool market and it is proving to be a tough assignment in just about every country apart from the world’s largest retail market in the USA. Some are starting to offer Black Friday sales opportunities even though that event doesn’t actually land until 27th November. Ahead of that in China we will see a plethora of promotions for Singles Day (November 11th). So perhaps these events in the lead up to Christmas will in totality be enough to initiate some new orders and fire up the wool market. Certainly the booking of a few futures contracts on the Riemann Exchange this week indicates that some exporters think we are at or close to a turning point. Next week will be an interesting market, with a directional change imminent but perhaps still a week or two away.

Damien Whiteley, Elders District Wool Manager