Australian Merino Production update

Sheep being shorn for wool

While the focus on the greasy wool market tends to be on demand and consequent price levels, the wool quality which tends to drive premiums and discounts operating in the market is something we can measure and monitor. In this article, we look at merino fibre diameter and the overall vegetable matter (VM) in the clip.

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.

Have any questions or comments?

We love to hear from you!

Print This Post

Key Points

  • 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

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Flock of merino sheep close up

The luxury goods complex

Fine wine is a luxury item with, it turns out, some quite good indicator series for the past couple of decades. In this article, we

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.