Wool struggles to find mojo

OCTOBER 23, 2026: THE Australian wool market again struggled to find its mojo this week and drifted a bit further down. It is not in free-fall by any stretch of the imagination, just marking time until demand comes back, which will hopefully be within the next month.  Most people in the trade expect conditions to improve soon but also acknowledge that things at a retail level are a bit grim at present.  The warm weather in the northern hemisphere is certainly not helping, although that is slowly changing and Beijing is looking at temperatures in the mid-teens all week, with Shanghai now in the low twenties for the next 10 days people should be reaching for a new woollen sweater shortly.

Given the lack of urgency in the trade at present buyers remain selective in their buying and the price disparity between ‘good’ wools and their ‘poorer’ cousins continues in the auction room.  Whilst it is positive that growers are being rewarded for producing high quality wools, it is understandably disappointing for those growers who have endured a tough season to receive a discount for the high mid break or excessive vm in their clip.  Overall the market retreated by 18 cents on the EMI in local currency terms, but in USD the move was less significant with only a 9 cent drop.  European buyers, most of whom have other things on their mind saw a decline in price of 11 cents and this was enough to keep them firmly on the fence as they look elsewhere for direction.  Chinese buyers saw a 1% or nearly 1 yuan per kilo decrease in prices which added to their angst somewhat.

Chinese traders are experiencing some cashflow issues as the wheels are turning more slowly and they are struggling to maintain a confident outlook.  Retail sales in China actually lifted – from a very low base – in September to improve 1.1% compared to the previous year and manufacturing activity is also still going gangbusters – for those in export industries, but the housing market is still in the doldrums.  So it is understandable that retailers are not topping up their inventory as normal until they have a clearer picture of the season’s activities, thus wholesalers have excess inventory and are ordering less from the garment makers who slow down their yarn uptake which leaves the spinners short of cash and so they delay their uptake of wooltops etc etc.

So, back in the auction rooms in Australia and South Africa buyers are selective about the wools they purchase and what quantities.  The larger topmakers have to ‘feed the beast’ which is the machinery they own, so they sell almost at any price they can to keep the order book full, but the smaller commission combing players are able to sit on the sidelines and wait until conditions improve.  They are reluctant to take a risk, particularly at this stage of the financial year, and risk undoing all the good work of the previous 10 months, so for those who do not own machinery it is much easier to sit and wait.  For the big 5 topmakershowever machines must be fed, and workers kept busy so some sales are being made at negative margins just to maintain the order book, and hence the selective buying and the negative market tone.

Things will change quickly once demand improves, but we are not going to see a supply driven spike as we did last year given that Australia could only muster 25,000 bales this week and it was not enough to kick the market along.  Still, we are currently looking at prices 25% higher than the same time last year, with many growers producing quite a bit more wool per head than during last year’s challenging conditions.  There are some facing a difficult season this year, as there always are in Australia, but in general the season has been pretty kind so far to most and the wool cheque is the icing on the cake after selling meat and/or grain.

It is fairly easy to become despondent about the global economic picture at present with Europe almost swirling down the plug-hole with France at its epicentre.  The Le-Spread or difference between French and German Bonds is approaching all-time highs as the Franco economic woes go from bad to worse and its citizens demand more cash from already constrained government coffers.  The Russia Ukraine Special Military Operation continues to weigh on every Euro citizen’s mind as borders are tested.  Across the pond the ‘Nightmare on Wall Street’ pundits wrote some new headlines overnight with some fairly hefty price adjustments across the tech sector.  Countering the doom and gloom merchants is the voice of reason which suggests while there might be a lack of capital at present, this might push out the AI/tech cycle rather than cause a crash, which is a much healthier outcome provided people can have a little patience.

Patience is a scarce commodity in this current age of instant gratification, and a similar one for the textile industry at present.  For years the textile industry has been moving towards a shorter supply chain, lower stock holdings to keep the bean counters happy, and demanding instant feedback from consumers.  Now as consumers hesitate the retailers throw their hands in the air and run around like headless chicken rather than taking a deep breath and look at the big picture and form a long term plan.  Yes, people will always need to buy clothes, and merino wool ticks so many boxes for the educated consumer that taking time to listen to the customer, passing on the relevant information will result in sales, just not immediately.  We are still in the JASON period where retail activity and production are generally at their low point.  After the kerfuffle of the mid-term elections in the States is out of the road, and hopefully President Macron gets control of the masses we can proceed with more clarity towards some healthy Christmas shopping.

Damien Whiteley, Elders District Wool Manager