It is not hard to find doom and gloom commentary about the wool industry, which is fairly typical of the wool and sheep industries swinging between triumphalism and pessimism. Some of the commentary looks to be clickbait rather than considered and then social media acts as an amplifier. With this background in mind, this article takes a look at the latest AWTA core test volume data for Australian wool.
The headline change in volume for AWTA core test volumes in January was a fall of 10.7% (farm bales) with a season-to-date fall of 9.5%. The AWPFC (See here) is forecasting a full-season fall in Australian wool production of 12%, not far off the AWTA data to date. In eastern Australia, the clip is down a more moderate 7.6% for the season to date, while the Western Australian clip is down 18.4% season to date. Given the dry season in large parts of southeastern Australia, a fall of 7.6% is unremarkable. The real change is taking place in Western Australia where a dry season leading to lower fleece weights and an extraordinary level of sheep and lamb sales to abattoirs (see November article here) are combing to downsize the western clip.
Figure 1 shows the percentage change in volume for eastern and Western Australia by micron category for the three months to January. Both regions display a seasonal shift finer in the Merino clip, with sub-18-micron volumes rising. The western clip also shows deep falls in the 19 to 22-micron categories and their crossbred volumes which are a quite small component of the clip.
Figure 2 shows the change in farm bales by micron category for 15 micron and broader wool, split into eastern and Western Australia. This schematic reflects Figure 1, which it should, and directly compares the changes in the two regions in farm bale terms. It shows the outsize influence change in the western clip is having in the 19 to 22 micron categories, with minimal influence on the other categories. Western Australia accounts for a third or more of the changes in 19 to 22-micron wool. This is an outsize effect as the western flock probably accounts for around 13% of the national flock. State sheep numbers are guesswork at present as the industry awaits the ABS to produce state flock estimates for 2023 and beyond. In normal times it would not be a big issue but in times of rapid change in numbers in Western Australia and ongoing change in the breed makeup in Eastern Australia, it is an issue, that perhaps AWI and the MLA should consider.
To put the recent changes in wool volumes in a longer-term context, Figure 3 shows the monthly year-on-year change in AWTA core test volumes broken into eastern and Western Australia from 2018 onwards. Wool volumes (and quality) vary from year to year simply on the back of changes in seasonal conditions. The recent fall in eastern volumes is not unusual, with the recent increased fall in western volumes showing up for the past year.
As the largest producer of merino wool and a country of quite varying seasonal conditions, Australia is the swing producer of merino wool and in recent years also sheep meat exports. What happens here has an impact on the international markets for merino wool, crossbred wool to a lesser extent, and sheep meat.
What does it mean?
While the drop in eastern volume looks to be normal, the drop in western volumes is anything but. The AWPFC forecast of a 12% fall in wool volumes is unfortunately looking to be a reasonable estimate, depending on how much the western flock shrinks. Amongst this change, the industry is flying blind in terms of sheep numbers and also the breed makeup of the flock, which is poor policy on the part of the sheep and wool industries. Oh for the days of the Bureau of Agricultural Economics and their in-depth flock surveys.
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Key Points
- The eastern wool clip is down 7.6% for the season to date, which is not unusual given seasonal conditions during the past year.
- The Western Australian clip is down 18.4% for the season to date with the biggest impact on the 19 to 22 micron categories. Lower fleece weights can account for about one-third of this fall with sheep numbers having to account for the rest.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Statistics of NZ, Beef+Lamb NZ, ICS, Mecardo