The fine end of the Merino market has been split between strong 15-micron and finer prices, and relatively weak 16–17-micron prices. This weakness in the 16–17-micron range has been softened by recent price rises. Given the varied nature of fine micron premiums, it seems timely to take a closer look at them.
Figure 1 shows the median price in inflation-adjusted (deflated) Australian dollar terms for the 2010–2025 seasons from 14.5 to 21.5 microns, for indicator-style Merino fleece sold at auction (bars). The current season median price (to mid-October) is shown as a line. For the 18.5-micron and finer categories, the current season price is below the 15-year median, whereas for 20.5 and 21.5 microns, the current season price is very close to the 15-year median. This reflects the marked drop in the supply of broader Merino wool in Australia, which is helping to push prices for these categories higher compared to the general apparel fibre markets.
Table 1 looks at the one-micron premiums for the 14.5 to 20.5-micron categories during the 2010–2025 period. It shows the maximum, minimum, and quartiles (based on the annual data), as well as the current season premium. For example, the current season premium for 15.5-micron compared to the 16.5-micron category is 16%, with the 15-year median being 14.3%. There is quite a range in the 15.5-micron premium, extending from a low of 2.2% (in 2017) to a maximum of 24.7% (in 2024). Micron premiums and discounts are quite variable, so it pays to view them across a long time frame.
Figure 2 takes data from Table 1 and presents it schematically. The 15-year median price is shown, with the maximum and minimum extent of the premium denoted by bars. The current season premium is shown by a line. The relative strength of the 14.5- and 15.5-micron premiums is indicated by the current season being above their respective 15-year median levels, with the 16.5-micron premium noticeably weak.
Micron premiums for 16.5–19.5 microns are running near their 15-year lower quartile this season, at low levels. The 20.5-micron premium is running at its lowest level. The relative change in volume for 16–18 microns versus 20–22 microns during the past year shows a large surplus of fine Merino wool and a shortage of broad Merino wool. This is a seasonally induced surplus, but the supply chain is not particularly interested in why there is a surplus or shortage across varying categories of wool. The outcome is a flat pricing structure for 20–23-micron Merino fleece, small premiums from 16–20 microns, and enough demand to lift micron premiums for 15-micron and finer wool.
Figure 2 shows that the 14.5-micron premium is above its median (better than you would expect across the next 15 years), the 15.5-micron is about average, and the 16.5-micron and broader premiums are below what we can expect over the next 15 years.
Merino wool production has one major advantage — growers can set breeding indices to improve wool quality over time, primarily by reducing fibre diameter, and thereby improve per-hectare returns, albeit with year-to-year volatility in those returns.
What does it mean?
Merino wool production offers growers a way of steadily improving the quality of wool sold, something not generally available to commodity producers. While current micron premiums range from excellent to poor, this simply reflects the variable nature of these premiums. Longer terms median (or average) levels better show what premiums are likely to present themselves in the future.
Key Points
- Fine merino micron premiums are quite volatile.
- Longer term analysis is used to show what level of premiums can be reasonably expected in the future.
- Currently 16 micron and broad premiums are running at low levels
- 15 micron and finer premiums are tracking at median to high levels
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: AWEX, ICS, Mecardo
