After last week’s article on low staple strength, a question was asked about high staple strength supply and premiums, the corollary to low staple strength. We look at this in the article below.
The range or distribution of staple strength, while not strictly a bell shape or normal, is close enough to assume that as staple strength moves we will see opposite changes in supply for strong and weaker wool. Figure 1 shows the distribution of staple strength for all wool sold at auction in Australia in the first two weeks of November, and the change in volume by 5 N/ktx increment on November 2024 (assuming no change in the total volume sold). Note that staple strength is skewed to the lower strengths.
That latter assumption helps us to see how swings in the average staple strength have an uneven effect on different levels of staple strength in the clip. The assumption underplays the complexity of the market as exporters and mills cater to these changes, as well as changes in total volume, changes in the point of break in the staple, and other qualities. That complexity is important, as while sometimes staple strength will be top of mind regarding pricing, at other times it will be overshadowed, with perhaps the best recent example being COVID in 2020 and 2021, when staple length and the midpoint break were more regular, mundane influences.
The average staple strength for November to date is 2.1 N/ktx lower than November 2024. While this is not a big change in staple strength, it has been accompanied by a drop in 36 to 50 N/ktx volumes in the order of 20% and an increase in the supply of 16 to 25 N/ktx wool of 40 to 50%.
Figure 2 looks at the proportions of high and low staple strength wool sold at auctions from 2000 onwards (combing wool by default). Seasonal patterns provide plenty of normal variation within years. Generally the proportion of high tensile strength combing wool varies between 30% and 45%, while the lower tensile strength wool ranges between 10% and 15%. Occasionally, the staple strength levels deviate from normal, as in 2005 to 2009, 2018 to 2019, and recently.
So, does supply push high tensile strength premiums around? The answer is “sometimes”. As mentioned above, the level of mid-point break is important to consider with staple strength (see more here). In the past year, RWS accreditation has become a more important factor in pricing than staple strength, although this is likely to fluctuate. Figure 3 compares the premium for 40 N/ktx 18.5 micron fleece wool to 24 N/ktx strength fleece wool from 2010 to this month (monthly average prices) with the monthly average staple strength for 80 mm long 18 to 19 micron fleece. When supply is working, staple strength should be high or low while the premium is low or high — a negative correlation. This correlation occurs sometimes (2011 to 2014, 2023 to 2024) and at other times it does not (2017, 2019).
A final point to make is that different micron categories can have varying staple strength levels (and other characteristics), linked back to the geographic regions they come from.
What does it mean?
The falling staple strength highlighted last week will lead to less high strength wool and more low-strength wool. This should lead to higher premiums for high staple strength wool. How large the premiums become will depend on other factors in the greasy wool market.
Key Points
- Change in the average fibre diameter tells us there are changes happening for high and low staple strength supply.
- Change in staple strength, hence change in the supply of low and high staple strength wool volumes, is often, but not always, negatively correlated to changes in high staple strength premiums.
- Wool prices are determined by a range of factors and sometimes staple strength can be overshadowed by other influences on price.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: AWEX, Mecardo, ICS
