The volatility of Australian wool prices in the past few months has been at the highest level in any time in the past 20 or 30 years. Price volatility can be assessed by looking at standard deviation of the weekly change in prices, annualised. The volatility of the Eastern Market Indicator has leapt in the past few months after a period of relatively low volatility between 2016 and 2018. Volatility of the EMI is currently at the highest level in at least the past 20 years. The extreme volatility of the EMI is being driven by extremely high volatility of prices for Merino wool between 19 and 23 microns, and for Crossbred wool. As well, prices for Crossbred wool have been very volatile in the past two years, with some clear peaks and troughs in volatility over this two-year period, reflecting the very seasonal nature of demand for this wool in recent years.
In contrast, the volatility of superfine wool prices is elevated but not to the extreme extent for broader Merino wool prices. It is hard to imagine this volatility abating in the next few months, given that there is no clear direction in the demand fundamentals and supply at auction is constrained.
Further detail including graphs showing the volatility in the EMI, superfine, medium and broad Merino wool prices and for Crossbred wool prices are provided in this week’s edition of the NCWSBA Weekly Newsletter, available to NCWSBA members.