In mid-June Mecardo looked at the change in the main merino AWTA category volumes (read here). As we begin the 2023-24 season proper, with auctions recommencing after the three-week mid-year recess, it is worth looking at recent changes in the merino fibre diameter distribution. For this purpose, we are using auction data from the May to July period.
The average merino micron was 18.6 in the three months to July, versus 18.9 micron a year earlier. A drop of 0.3 micron across the Australian merino clip is a substantial change, both in terms of shifting the distribution and also implying a fall in the clean fleece weight. The term “implying” is used as we do not have any direct measure of clean fleece weights. Instead, an estimate of clean fleece weight can be arrived at by using AWTA volumes and flock size estimates. In recent decades annual changes in the merino fibre diameter and estimated clean fleece weight point to a 20% change in the clean fleece weight for a one-micron change in the national merino micron. Using this relationship in the current market, a drop in the merino fibre diameter of 0.3 micron implies a fall in the clean fleece weight in the order of 6%.
Figure 1 shows the merino fibre diameter for the three months to July and for the same period a year earlier (lines) as well as the percentage change by micron category (bars) between the two time periods. As usual, the further a micron category is from the average (18.6-18.9 micron), the greater the change in volume. The move finer is resulting in lower 19 micron and broader volumes, with 17 micron and finer volumes increasing. This trend is almost certainly set to continue.
Another wool quality that has been an issue in the past year has been vegetable matter (VM), especially when combined with long staple and broader Merino micron categories. Figure 2 shows the monthly VM levels for eastern Australian and Western Australian adult merino fleece wool, along with a rolling five-year median monthly level for the national wool clip. The rolling median is overlaid on the schematic as a guide to what the supply chain expects during the season. Within season there is a substantial seasonal pattern in VM levels, peaking in the middle of the calendar year and reaching a low late in the calendar year.
The eastern VM remains at very high levels, for adult merino fleece wool. The western VM level has also picked up in 2023. Keep in mind that VM levels vary between micron categories as the February 2023 article showed (read here). In summary, VM remains a challenge for the supply chain if they are trying to reach a 1% VM consignment average. However, the seasonal pattern in VM offers relief sometime in the next couple of months from these high levels.
What does it mean?
Supply pressure will continue, and likely intensify, on Merino micron premiums and discounts. Overall, the volume of the Merino (and crossbred) clip will fall this season in response to drier seasonal conditions, VM levels remain at high levels, but relief is in sight as the seasonal pattern will start to pull them lower in the coming months.
- The move finer in the Merino fibre diameter means less broad Merino, more fine Merino and a lower clean fleece weight overall.
- VM levels remain at very high levels for adult merino fleece, although the seasonal pattern should start to alleviate this issue by September.
Click on figure to expand
Click on figure to expand
Data sources: AWEX, ICS, Mecardo