The COVID-19 pandemic and associated global restrictions on movement have brought demand for all products and commodities to a screeching halt.
One cause of the drop in demand is a collapse in consumer confidence in most of the major wool consuming countries and regions in April due to the COVID-19 pandemic lockdown.
Consumer confidence has fallen 'off a cliff' in the US, Europe, Japan and South Korea.
These plunges, combined with social lockdowns, will no doubt be causing a collapse in retail sales.
As a result, clothing retailers are reigning in orders for the autumn-winter season in the Northern Hemisphere, causing a backlog of product in the global textile industry - from garment makers back to raw fibre supply - and a resultant fall in both demand for and prices of all textile fibres.
This has dominated the Australian wool market in the past month and caused Australian wool prices to fall to the lowest level in five years in A$ terms. Prices fell to the lowest level in a decade in US$ terms.
It was a relief to see a small improvement in prices in the week ending May 15.
Wool prices have fallen sharply in the past few months, particularly in US$ terms.
For example, the Eastern Market Indicator (EMI) is down by 30 per cent since January and the 18-micron price guide has fallen by 27 per cent.
Prices for other fibres have also seen sharp falls in the past few months, particularly the prices of man-made fibres.
The oil-based synthetic fibres, such as polyester and acrylic, have fallen by 13 and 21 per cent respectively, although they were already on a steep decline by January as oil prices were slumping.
The price for the cellulose-based viscose has fallen by 10 per cent and cotton prices are down 16 per cent.
Chinese cashmere prices have only fallen by 4 per cent, although reports from Mongolia are that the price of Mongolian cashmere has fallen sharply.
There have been no sales of either New Zealand or British wool in the past six weeks, so the latest price available for these countries is for March.
Between January and March, the NZ broad wool price was down by 15 per cent and the British Wool Marketing Board market indicator down by 26 per cent. This decline was from already very low price levels.
With demand drying up and prices falling, volumes of wool being offered at auction in Australia have fallen sharply - with just 25,000 bales or even less being offered each week.
Stocks of wool are building in wool brokers' and wool handlers' warehouses.
Even so, wool supply in the coming 2020-21 season will be constrained.
According to the forecast from the Australian Wool Production Forecasting Committee (AWPFC) released on May 1, shorn wool production in Australia will decline by 1.6 per cent to 276 million kilograms (greasy), despite the extensive rainfall across eastern and south eastern Australia in recent months.
While wool cuts over the 2020-21 season will improve, the AWPFC expects that lower sheep shorn numbers will push production lower.
The decline in 2020-21 comes after a predicted 6.3 per cent fall in the current 2019-20 season.
The predicted fall in shorn wool production in Australia in 2020-21 will mean that the supply of Merino wool will remain very tight and will help support prices once demand from mills around the world starts to pick-up.
NOTE: This extract is taken from the Weekly Newsletter from the National Council of Wool Selling Brokers of Australia between April 25 and May 15. Full articles are available to NCWSBA members. Further details at www.woolbrokers.org.
