The difference in price between carding and combing length wool prices historically has been useful in flagging periods of minimal downside risk for combing wool (longer staple length) prices. This article takes a look at the current difference in combing and carding wool prices.
Back in September 2020 Mecardo looked at the difference in price between the 21 MPG and the AWEX Merino Cardings (MC) indicator which is made up of broader micron crutchings and locks prices. For a look at the makeup of AWEX indicators go to this site. The conclusion in September 2020 was that there was little downside risk for the 21 MPG, which proved to be an understatement as the 21 MPG lifted by 300 cents.
The AWEX makeup of the Merino Cardings indicator uses 19 to 21 micron category wool. This is now on the broad side of the average merino micron category, which is not a great problem if there is little in the way of micron premiums and discounts operating. However, in recent years micron premiums and discounts have appeared in cardings prices. Figure 1 compares the AWEX MC (eastern monthly average) with prices for 17 and 21 micron locks and crutching series. It shows that the 21 micron locks and crutching series follows the AWEX MC closely but the 17 micron locks and crutchings series has started to run its own race since 2017, particularly so since 2020.
Figure 2 compares the 20 MPG (rather than the 21 MPG) from the early 1980s onwards to the difference in price (premium in this case) between the 20 MPG and the MC (both drawn from eastern selling centres). Basically, when the gap between the 20 MPG and MC falls to 200-300 cents, the 20 MPG has been near a cyclical low. It is a simple rule of thumb to recall and can be quickly calculated from an AWEX derived market report.
The current gap between the 20 MPG and the MC is 555 cents, not the highest it has been (around 1200-1300 cents in 1988 and 2019), but well above the level which flags minimal downside risk for the 20 MPG.
What about the finer merino micron categories? Figure 3 shows a price series for an eastern 16.5 micron merino fleece with a staple length ranging from 70 to 95 mm, a staple strength of 35 N/ktx and vegetable matter of 0-1% (FNF) and the price gap between this series and the AWEX MC. The combing carding basis does not give as tidy a message as in Figure 2. When the premium has narrowed to 800 cents (2003 to 2010 and 2020) and 350-500 cents (2014 to 2016), admittedly a wide range, has flagged minimal downside for the 16.5 micron fleece price. Currently the combing carding basis for the 16.5 micron fleece series looks to be wide, at levels which have flagged the fleece price to be at or near a cyclical top, since 2004.
What about the fine price gap in 2000 shown in Figure 3? The assumption is the market structure, in terms of fine wool production, was markedly different in 2000. It was a time of enormous prices, for fine wool on the very edge of the merino micron distribution, which has disappeared.
What does it mean?
The combing premiums to carding prices are neutral for 20 micron (flagging neither downside nor upside risk) while these premiums continue to flag downside risk for the 16.5 micron fleece price series looked at in this article.
Key Points
- The 20 micron combing carding basis is neither high nor low – giving no real message about risk for the 20 MPG.
- For the 16.5 micron fleece price series, the combing carding basis continues to flag downside as the basis is wide by the standards of the market since 2004.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: AWEX, ICS
