Most merino and crossbred wool prices are struggling along at low levels, with the exception of the sub-16 micron categories. This article investigates merino price levels, RWS share of sales and changes in volumes by micron category.
Table 1 shows
the inflation-adjusted (deflated) ten-year price deciles for eastern Australian
indicator-type fleece wools by micron (14 to 22). It also shows the average
price and the current (last week) price and rank. The lots used in this part of
the analysis included all quality scheme accreditation, so the current price
includes RWS/Authentico lots.
In reference
to the quality scheme accredited wools, Table 1 has at the bottom the current week’s
average price for non-RWS and RWS lots. For that week, the RWS lots sold at
premiums (with the exception of 15-micron). Due to a lack of historical data,
it is not practical to extract five and ten-year percentiles for quality scheme-accredited
wool.
The 10-year
price ranks in Table 1 show 15 micron to be at its 35th percentile
and 14 micron at its 73rd, while the broader micron categories are
all in their bottom deciles. The ranks confirm that sub-16 micron prices are
doing better in this market than their broader cousins.
Despite the
anomaly of the 15-micron category in Table 1, RWS lots are generally selling at
premiums to the non-RWS lots. This is a trend that has improved noticeably this
season both in Australia and South Africa. So how much RWS-accredited wool is
there in Australia, keeping in mind South Africa is the dominant supplier of RWS-accredited
merino wool?
Figure 1
shows the micron distribution for merino wool sales at auction in the 2023-24
season, broken into non-RWS and RWS, along with the percentage of RWS wool for
each half-micron. The proportion of RWS accreditation starts at 50% for 13.5
micron, falls to 32% for 14.5, 20% for 15.5, 12% for 16.5, 7% for 17.5 and 6%
for 18.5 micron. By 21 microns it is down to 1%. So for most micron categories,
RWS wool is still only a small part of the offering, which is reflected in the
small difference between the all current week price shown in Table 1 and the
non-RWS current week price.
In Figure 2
the year-on-year (to the third week of October) change in volume for merino
wool by half-micron categories is shown. Broad merino sales are down by around
40%, with sales from Western Australia, the eastern pastoral and non-pastoral
regions all contributing to the fall. Sales for the finer side of the merino
distribution are generally down by 15%, give or take. It is only below 14.5
micron that sales volumes have increased by a relatively modest 16-19%.
The supply
volatility of wool on the edges of the micron distribution tends to be high, as
the average micron swings finer and broader in response to seasonal conditions.
This is certainly happening in Western Australia where the average merino fibre
diameter is running at a low 18.2 micron, but the western production is not
great enough to make a big influence on the finer micron categories (although
WA is the leading supplier of 12 and 13 micron wool to auction sales this
season – most of this wool is normally sold outside of auction).
In the east
the supply of fine merino wool has not mirrored the drop in broad merino wool,
and this factor seems to be helping fine-micron premiums hold at current levels
and is helping the sub 16-micron categories trade at respectable price levels.
What does it mean?
Normally we would expect comparable (but opposite) changes in supply for wool on the ends of the merino micron distribution, as the average fibre diameter changes in response to seasonal conditions. This season (and year) this has not occurred with big falls in broad merino volumes, modest falls in fine merino and modest rises and the very fine micron categories.
The market has been spared the normal downward pressure of big increases in supply, which in turn looks to be helping prices for the sub-16 micron categories. The greater proportion of quality scheme accreditation for the very fine micron categories may also be helping the market.
Have any questions or comments?
Key Points
- Merino prices 16 micron and broader are trading in their bottom deciles when looked at in deflated Australian dollar ten-year percentiles.
- Below 16-micron price levels are much better, with the percentile rank increasing as fibre diameter falls.
- The supply of very fine merino has risen by only a modest amount this season (given the size of the fall in broad merino wool) and this factor is helping prices for these categories.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: AWEX, Cape Wools, ICS, Mecardo