In the last four to six weeks, the biggest buyer of Australian wool has been absent from the market.
Australian Council of Wool Exporters and Processors president Matt Hand said significantly reduced buying activity from China was the reason the Australian wool market had fallen so dramatically in recent weeks.
“And because we’re so dependent on such a dominant buyer, their absence is really going to be felt,” Mr Hand said.
The Eastern Market Indicator (EMI) fell another 78 cents a kilogram last week, to close at 1776c/kg.
This fall brang the running total of losses recorded in the last four weeks to 247c/kg.
The EMI is now 340c/kg down from its record-breaking peak of 2116c/kg, which was achieved in August.
Mr Hand attributed China’s absence to price resistance.
“They experienced a drop in demand when wool prices got to where they did, and brands and consumers displayed resistance,” he said.
He said there would have been other factors that contributed to China’s backing off, for example its share market, which had fallen in recent weeks.
He said the price falls were “historic”, but not overly worrying when you see what they were coming down from.
“They’ve fallen from such a high peak, so are coming down to levels that probably aren’t that bad, and may be more sustainable moving forward,” he said.
But selling resistance has indicated woolgrowers did not believe current levels were sustainable.
In the week just gone, 20.9pc of bales were passed-in, and in the last four weeks, that passed-in rate has not fallen below 16.7pc.
Last week, an additional 8.4pc of wool was withdrawn prior to the sales.
Mr Hand said if the most prominent buyer of Australian wool was absent when he was selling wool, he would also be passing it in.
“When they do re-enter the market, they should be doing so when there’s some stability, but price growth too,” he said.
He preempted that this growth may come back within the next two to three weeks.
“These Chinese mills have invested a lot in machinery, so it’s not practical to let that machinery run dry,” he said.
“I would say it isn’t likely they’ll stay out of the market much longer.”
Having recently returned from a trip to India, he said there was also price resistance there.
“When there are price levels like this, they are naturally going to feel the repercussions, so they are also hesitant, but probably a little more active,” he said.
Last week’s offering consisted of 32,189 bales, which was about 3600 bales less than the week prior.
It brings the running season total to just below 587,000 bales, which is almost 105,000 bales down year-on-year.
The Southern Market Indicator fell 76c/kg, to close week 19 at 1754c/kg, with the biggest price falls seen at the finer end of the market.