The Australian wool market recorded a solid opening first sale for 2022 last week.
With the strong gains, and taking stock at the half-way point in the 2021-22 auction selling season, Australian wool prices finished only modestly below where values closed on June 30 2021.
A weaker currency has contributed to supporting prices.
The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) closed last week - the first sale of the 2022 calendar year - 2.4 per cent lower in local currency terms and 5.5pc lower in US Dollars, compared with the last week of June 2021.
For fleece wool, medium Merino prices - of 21-micron - performed better than fine and superfine prices.
Crossbred wool prices in Australia continued to underperform, with 28-micron prices falling by 14pc since the start of the 2021-22 season for producers.
The underperformance for crossbred wool or coarser wool types - mostly "interiors wool" measuring greater than 28-micron - is not expected to change materially in 2022.
While demand for interior wools has benefited globally from consumers spending on and within the house from the "work-from-home" movement, it appears not to have been enough to offset the losses in the commercial interior textile market.
The commercial market for interiors textiles, such as demand from interior refurbishments in cruise ships and movie cinemas around the world, is likely to remain weak.
Many of these types of companies are yet to gain an understanding of how consumer behaviour has changed as a result of COVID.
Further, as is occurring in parts of Europe, there still remains a risk in government health regulations curbing customer movements and sales again in 2022 as the COVID Omicron variant spreads.
This will hinder companies spending on capital items and interior refurbishments until profits are restored.
Normality - if such a thing exists - in some of these industries, and the resultant improvement in market demand for interior wools, is still in the distance and may not occur until 2023.
For Australian wool supply, the results from the latest round of state and national wool production forecasting meetings were released in mid-December 2021.
The latest forecast for Australian shorn wool production for 2021-22 is 318 million kilograms greasy, which is up 8pc year-on-year.
The latest forecast for 2021-22 is about a 3pc increase in production. The August 2021 meeting had forecast a 5.2pc year-on-year increase.
The major reason behind the national increase with the latest forecast is an increase in shorn wool production in Western Australia.
The August 2021 WA shorn wool production 2021-22 forecast was 57mkg, and the latest forecast is 5mkg higher at 62.3mkg.
The other notable change by state is in Queensland, with state production increased to 8.7mkg from the previous forecast of 7mkg.
December 2021 wool test data from the Australian Wool Testing Authority (AWTA) was 4pc lower by weight compared with December 2020 and 8pc below the December average (of the past seven years) in Australia.
This is now the third consecutive month when the amount of tested wool has tracked below the longer term average.
Because the seasonal pattern in wool testing was so abnormal in 2020-21, the comparison to the seven-year average makes it easier to see how fresh wool supply is tracking.
On an annual basis, the longer term average for AWTA data equates to 336mkg greasy for the full season - or 6pc above the amount of wool AWTA tested in 2020-21.
The latest 2021-22 Australian wool production forecast is for an 8pc year-on-year increase.
While only 50pc of the season is complete, the wool test data trend may point to an early risk that the extent of the forecast increase in 2021-22 Australian wool production may not be reached.
In the past quarter, the amount of wool tested by AWTA has tracked below the longer term average by -8pc to -14pc.
On the flipside, if 2021-22 wool production does eventuate as forecast - with an 8pc increase year-on-year - and all production is harvested, delivered and tested, then autumn 2022 wool receivals and test volumes may be similar to the fast pace of autumn 2021.
