In November Mecardo looked at crossbred wool volumes, price and gross sale value which showed an increased volume of wool sold at auction accompanied by a lower price. This article refreshes the data to see how the crossbred market is travelling.
Earlier Mecardo articles in July 2022 (read
here) and June 2021 (read here)
noted the stickiness of the annual gross sales value for crossbred wool in the
Australian auction market, and presumably in the wider international greasy
crossbred market. That stickiness in gross sales value continues.
Figure 1 shows the annual (by wool selling season) value of
crossbred wool sold at auction in Australia (bars) which refers to the right-hand
scale. The line superimposed on the graph shows the annual volume in clean
terms of this wool sold at auction (referring to the left-hand axis). The
current season has been increased pro rata to approximate a full season (May
and June volumes have been estimated).
Since 2020-21 the supply chain has been comfortable in
spending around US$120 million per year, with some small variation around this
average. Meanwhile, the volume sold has ranged from 32,000 to 46,000 clean
metric tonnes, with the average price ranging from US358 cents to US257 cents
per clean kg. In the four seasons to now, the negative correlation between
price and volume has been a very high 0.86.
In 2019-20 prices fell heavily, with farmers holding wool
back from sale, and then in 2020-21 as COVID damaged demand the volumes of
crossbred wool sold at auction also fell. In the past couple of seasons, it
appears the stocks built during those two seasons have been flowing back onto
the market with the sales volume for this season (estimated) well above any
level seen in recent decades.
Figure 2 compares the same gross sale value used in Figure 1
with the annual average crossbred price, in US dollar terms. While the gross
sales value has been steady during the past four seasons the price has continued
to slip, pushed lower by the rising volume shown in Figure 1.
What does it mean?
The sales volume for crossbred wool at auction this season (and possibly also for last season) has very likely been boosted by wool held over from the 2019-2021 period. This would help explain the high volume sold. As such supply is not expected to continue rising, with a reasonable prospect of easing in the coming season. However, the supply chain only wants to spend US120 million (give or take US$10 million) per season, so the scope for a marked lift in price appears minimal. Change to what the supply chain spends does happen (see 2010-2011 and 2019), if infrequently.
Key Points
- Crossbred sales volumes are up again this season (by 8%) for the fourth season running.
- The compound effect of consecutive rises in volume has lifted full-season volumes to record levels.
- As a consequence the average crossbred price remains under downward pressure.
- The one positive out of this is that the supply is absorbing the increased supply.
Click on figure to expand
Click on figure to expand
Data sources: AWEX, RBA, ICS, Mecardo
