Wool sheep moving through yards

Broad crossbred prices are reported to have picked up since early September in New Zealand so it seems like a good time to revisit prices for the broad edge of Australian wool production.

Mecardo looked at broad crossbred prices recently (view article here). This article updates the graphs shown then. Unfortunately the published New Zealand quotes for broad crossbred wool have returned to the dark ages, with micron quotes replaced with general indications of price movement. New Zealand wool reports, such as they are now, are published by PGG Wrightson (NZ wool sales & results). This reduction in market transparency for broad crossbred wool producers comes at a time of reports of heavy Chinese buying and rising prices.

The first graphic in Figure 1 compares 33 micron price series from mid-2017 to last week, with the New Zealand series stopping in early September. The Australian series reached a low in late September, but jumped by 40% since then (from a depressed base level).

The second graphic compares an Australian 35 micron fleece price series and a 36 micron New Zealand full wool series which ends in early September, both in Australian dollar terms. Again, the Australian series bounces off late September lows but only by a modest 27%.

In Figure 3 the 34 micron price ratio to 28 micron is shown from 2008 to last week.  The price ratio continues in its depressed level, between 0.3 and 0.4. The 34 micron price continues to find support when it falls to a mere 30% of the 28 micron price.

Finally in Figure 4 the 34 micron price ratio to a polyester staple fibre price series is shown from 1995 to October 2020. The ratio in September fell to around 1.25 which has been rock bottom during the past 25 years.

What does it mean?

Like the finer crossbred and Merino markets, broad crossbred prices have picked up from lows reached in September. Broad crossbred prices remain at very depressed levels in relation to finer crossbred and polyester staple prices. This makes sense as reports of ample stocks of other origin wool in China have been circulating for 12-18 months, which the weak New Zealand market has corroborated. There does not look to be much downside for broad crossbred prices. The real question is when will prices start to lift.

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Key Points

  • Broad micron prices have lifted from cyclical lows reached in late September.
  • New Zealand wool quotes are not detailed enough to allow a specific comparison as has been possible in earlier articles.
  • In terms of basis the broad crossbred prices remain at depressed levels in relation to the main Australian crossbred micron category (28 micron) and in relation to polyester staple fibre prices.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources:  AWEX, RBA, PGG Wrightson, PCI Wood Mackenzie, Emerging Textiles,  ICS, Mecardo.

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