There is a vein of thought that market commentary should be positive to encourage the supply chain to buy. If only the world were so simple. Such thinking undervalues the capacity of decision-makers along the supply chain to assess situations and act accordingly. That does not mean the market as a whole will not occasionally overshoot on the downside and the upside. As John Maynard Keynes said of traders, “markets can remain irrational longer than you can remain solvent.”
While price rises during the past couple of weeks have caught general attention, prices have been rising since mid-year. Figure 1 shows the price change since mid-2025 for 15 through 22 microns in cents/kg clean and percentage terms, as well as the closing price for this week. Eastern AWEX MPGs are used for 16.5 microns and broader, while price series structured along MPG lines are used for 15.0 to 16.0 microns. It has been a good time, with 26% to 37% rises, or 400 to 600 cents.
Figure 2 shows the same analysis for crossbred MPGs, 25 through 32 microns. While the rise in cents per kg terms has been smaller, the percentage rise has been appreciably larger, with the 28 MPG up by 64%.
Such a quick rise in value will have pushed greasy prices out of line with top and yarn prices. At some stage, the drive to higher prices will run out of steam, and then the market will test how much of the price rise is sustainable. While all this is going on, the top and yarn markets can get back into alignment with greasy wool prices. We have a market for this very process.
Now, to the potential short-term downside risk. In the absence of a working crystal ball, we can use the recent price rises to help gauge the size of potential price falls as the market works out where it will settle for the time being. A small retracement after such a large rise would be 25%. This means the market gives up a quarter of the rise. Figure 3 shows what this means for the Merino micron categories under this scenario. For example, the 17.5 MPG would fall by 140 cents, which is not that encouraging. However, it amounts to a 6% fall in price after a 35% rise in recent months.
A more likely fall is around one-third, or 33%, which is shown in Figure 4. These two retracement levels have been selected assuming the market keeps most of the rise, with low production and stocks underpinning the new, higher prices. A fall in the auction market of 100 cents will see sky-high passed-in lines, thereby restricting wool flow to the supply chain.