Did we get a hint at the crossbred wool decline?

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Crossbred wool production in Australia now accounts for around 22% of the national wool clip (based on clean volumes sold at auction). It has been some years since Mecardo looked at crossbred prices in other countries and compared them to Australian prices. Given the increase in the proportion of the clip that crossbred wool accounts for and the continued low prices, this article takes a look at crossbred prices in other regions.

In past articles, Mecardo has shown how international crossbred prices are positively correlated, which is no surprise given the common supply chain wool from a range of production regions flows into. Each region will have some circumstances and trends peculiar to that region which will account for some variation in correlations to prices from other regions. As an example, the New Zealand flock continues to shrink (read more here) which as the big broad crossbred wool exporter will have an effect on the market over time.

For this article, Mecardo uses some basic indicators (the UK average price and a couple of segment indicators from New Zealand) rather than specific micron-based quotes. These basic indicators are lined up against average auction prices for specific micron categories from the Australian auction market. The Australian price series runs to the current season (to date) while the UK and New Zealand series only run to the 2022-23 season.

Figure 1 shows the UK average price (average for the season) in clean terms compared to the average Australian 38-micron price in US dollar terms. The volumes available for the Australian price series are small but the two price series follow each other and are strongly positively correlated. The UK wool price has languished since 2020 when crossbred prices failed to bounce back after the COVID-induced drop in price following the cyclical downturn in wool prices generally in 2019, as has the Australian series.

In Figure 2 a New Zealand medium (23.1 to 31.5 micron) indicator is compared to the Australian 28-micron average price, all in US dollar terms. The two series follow each other in terms of the main trends, with a variation of up to 100 cents per kg clean from year to year. The big lift in prices around 2011, was maintained through to early 2019, after which price crash back to pre-2011 levels shows up in both series.

Finally, in Figure 3 a coarse New Zealand (31.6 to 35 micron) series is compared to an average 34 micron price series from Australia. Again, the two series follow the same big-picture moves. Notice how the broader crossbred prices fell from the post-2011 elevated levels in 2016-17, some two years before the finer microns fell.  In 2002-23 the New Zealand price in US dollar terms was at its lowest in three decades as was the Australian series.

Some commentary about crossbred demand in the past year has pointed to preferential demand for Australian and New Zealand wool. Figure 1 indicates that the UK price has followed the Australian price closely with no neglect in demand showing up.

What does it mean?

For crossbred wool regions where market reporting is limited there is clear scope to use price reporting from other regions as a guide to pricing, due to the strong positive correlations between international crossbred prices. In hindsight, the broader crossbred prices were flashing a warning signal to the finer crossbred prices in 2017 through 2019.

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Key Points

  • International crossbred prices continue to show strong positive correlations.
  • The broader crossbred prices fell from the post-2011 elevated price levels two seasons before the finer 28-micron prices did.
  • The UK average price aligns closely with Australian 38-micron prices.
  • Crossbred prices in the UK and New Zealand have suffered depressed prices in recent years like Australian prices.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: BWMB, IWTO, Beef+Lamb NZ, AWEX, RBA, ICS, Mecardo

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