In mid-January, Mecardo looked at the supply of over-length wool in the Australian merino clip, with a consequent effect on discounts for over-long wool. Premiums for best quality merino fleece have been reported as good in recent markets.
What constitutes the best quality in a lot of wool depends on the requirements (and skill) of the mill an exporter is buying for. Beauty is in the eye of the beholder. However, in general terms, best quality fleece is defined as wool that is not too short nor too long (70-95 mm greasy staple length), staple strength is high (40+ N/ktx), vegetable matter is low (0-1%) and there are no subjective faults such as water stain. There are some other objective measurements (such as the coefficients of variation of length and diameter) and increasingly a quality system accreditation which is required for promotion to the upper grades.
Staple strength in the Australian wool clip currently is at good levels, especially given the part of the season we are in when staple strength tends to be close to its low point for the year. Figure 1 shows the average staple strength for the Australian clip for the past decade.
The measurement that is combined with staple strength is the point of break in the middle (POBM). Figure 2 shows the monthly proportion of wool that was staple measured and had a POBM above 75% (high) during the past decade. It varies widely and tends to reach its maximum when staple strength reaches its minimum, which is typically the months surrounding the Christmas recess. It is currently neither high nor low, which for this time of the season is a good result.
Vegetable fault (VM) is one characteristic that is higher than normal. Figure 3 shows the average Australian VM level for the past decade. It normally reaches a low around the Christmas recess, which it has done this season but at a fairly high level for the time of the year. A high starting level promises even higher levels of VM as we move through the middle of 2023.
So, where does that leave the supply of good quality merino fleece wool? The various characteristics mentioned above filter out wool from the best categories, with staple length adding an extra substantial filter this year along with some persistent levels of water stain, cott, and unscourable colour.
In Figure 4, the proportion of good merino fleece (as defined above) to all merino wool sold in the micron range from 16 to 22 microns monthly for the past decade is shown. There is quite a seasonal pattern (driven by VM) with some big variations ranging from highs in the 10-11% range down to lows of 4%. Since mid-2020 the proportion of good merino fleece has been tracking at low levels. The seasonal pattern tends to see lows in the June quarter, so there is not likely to be any sizeable increase in the proportion of good merino fleece this season. This will keep the pressure on the buy side of the market to pay premiums for well-specified merino fleece wool.
What does it mean?
Merino wool is an agricultural commodity, meaning its quality varies with seasonal conditions. A complicating factor is that wool reflects the seasonal conditions present when it was growing on the sheep’s back, meaning in the past 6 to 12 months. Conditions in recent years have reduced the proportion of best-quality merino fleece sold at Australian auctions, and seasonal patterns indicate this proportion will remain low until the next season. This will help support premiums for better quality merino fleece.
Key Points
- The supply of good merino fleece wool is currently at low levels.
- The seasonal pattern of supply for good merino fleece wool means the supply will remain low through to next season.
- In turn, this means premiums for good merino fleece are likely to be supported due to low supply.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: AWEX, ICS, Mecardo
