Decline in broad wool volumes out of Eastern pastoral regions

Farmer surrounded by Merino sheep with house in background

The greasy wool market in Australia and South Africa is well-serviced for price reporting via AWEX and Cape Wools. Supply, which is an important driver of relative prices within the greasy wool market, is less well reported. This article takes a look at sales volume by micron for merino and crossbred in Australia during the June quarter.

Exporters at auction sales are masters of adjusting relative wool prices on the fly as supply fluctuates, a characteristic of the market deriving from its extensive agriculture nature. In this context supply is the volume of different wool characteristics such as vegetable fault, staple strength and the different micron categories, as well as total volume. As the volume of these characteristics changes, the relative prices (premiums and discounts) adjust. As such, an understanding of changes in supply helps to understand price movements in the market.

In this article, the focus is on year-on-year changes in micron categories for the June quarter, across merino and crossbred wool. Figure 1 shows the micron distribution for merino wool between 15 and 23 micron for the June quarter in 2023 (line) along with the year-on-year change seen in the June quarter for 2024 (bars). 20 micron volumes were effectively unchanged in the June quarter this year, with broader micron volumes falling heavily (between 20% and 40%) and the finer micron volumes increasing by around a modest 10%.

The decrease in broad merino and increase in fine merino volumes help explain the continued downward pressure on micron price differences. However, fine merino micron premiums have held up relatively well, not collapsing back to the extreme lows seen in 2012-2016 and 2019. All things being equal a steep fall in broad merino volumes would expect to be matched by a steep rise in fine merino volumes, which has not occurred in 2024. The relatively small increase currently seen in fine merino volumes helps to explain why fine merino premiums are holding up.

Figure 2 breaks up the year-on-year change in merino volumes for the June quarter into four regions; Western Australia, eastern higher rainfall/table lands, eastern cropping zone and eastern pastoral zone. The reason for the big fall in broad merino volumes and only a relatively small fall in fine merino volumes becomes clear, as the fall in broad merino volumes has come mainly out of the eastern pastoral regions. Most regions have contributed to more fine wool (including Western Australia) with the exception of eastern cropping for some micron categories, reflecting the very dry times seen in South Australian and Victorian crop regions.

To round out this look at volume, Figure 3 shows the June quarter 2023 crossbred micron distribution from 23 to 36 micron for Australian auction sales, along with the year-on-year change for the June 2024 quarter. For the key micron categories volume was down 20%, which helps explain why the 28 MPG managed to rise from May into June, with a stronger Australian dollar masking some of the strength in the local market.

What does it mean?

The 21 MPG has been doing very little for the best part of three and half years, in US dollar terms. The fall in supply during the June quarter points to limited downside risk for the broad merino prices. On the other side of the merino distribution, volumes are up only a modest 10% so fine merino premiums are managing to hold well above the depressed levels of 2019 and 2012-2016. For crossbred wool, a general fall in sales volume in the June quarter has helped allow prices to drift higher, off their depressed low levels.

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Key Points

  • In the June quarter broad merino volumes fell heavily, with the fall coming from eastern pastoral regions.
  • Fine merino volumes increased in most regions, by only a modest 10%.
  • Crossbred volumes were nearly all down, with the main micron category volumes falling by 20%.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: AWEX, ICS, Mecardo

Have any questions or comments?

We love to hear from you!
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