Nutrien Ag Solutions wool quality check and wool bales.

Earlier this week we looked at merino micron premiums and discounts to a base of 19 micron. This week we look at fine merino (18.5 micron and finer) prices via 10 year price percentiles, and look at where last weeks prices ranked. October sales data provided wool with a wide range of fibre diameter, down to 13.5 micron.

The price series used in this article are merino combing fleece which includes a wide range of staple length (50mm and longer), so the micron categories which match AWEX MPGs (16.5 through 18.5 micron) will show price levels slightly lower than the AWEX MPGs but not substantially so. The advantage of using merino combing fleece is that it provides usable data for the sub-16 micron categories, which can be a problem for series which try to narrow specifications too much.

One other point to note is that RWS lots have been excluded from the analysis which knocks out a lot of volume at the very fine end of the micron distribution. RWS wool will be covered in the next article.

Table 1 shows the 10 year price percentiles for 13.5 through 18.5 micron merino combing fleece. In addition the 10 year average price is shown as well as the average price from last week and it’s percentile rank. As the percentile rank shows prices remain very strong at the fine edge of the merino micron distribution, with ranks in the 70% to 90% range. The ranks fall away as the micron broadens with 18.5 micron trading at a lowish 31%, and it will be lower after this week’s sales again.

Figure 1 plots the Australian dollar 10 year ranks, as shown in Table 1 and also plots the US dollar rankings for the same series. 15 micron and finer rankings in US dollar terms remain high. The rankings in US dollar terms are middling for 15.5 to 16.5 micron and then fall right away down to 7% for 18.5 micron.

Prices for commodities generally have been under downward pressure in recent months, especially industrial commodities such as apparel fibres. In times of economic downturns this is a familiar pattern.

What does it mean?

The old saw that “wools ain’t wools” holds again with prices on the very fine edge of the merino distribution continuing to outperform, while prices for the bulk of the merino market are pulled lower by weaker demand. It does highlight the peril of monitoring the wool market via the Eastern Market Indicator (EMI) for wool which is quite different from the bulk of the market.

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Key Points

  • Sub-15 micron price rankings remain high by the standards of the past decade.
  • The effect of the floating Australian dollar can be seen in 16 micron and broader rankings where the Australian dollar percentile ranking is appreciably higher than the US dollar ranking.
  • Wool prices are generally being pulled lower by weaker economic growth in the major world economies.

Click on figure to expand

Click on figure to expand

Data sources: AWEX, ICS

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