Following on from the article earlier this week which looked at price volatility for greasy wool prices, this article compares Merino price volatility to other apparel fibre price series.

An explanation of the method used to define price volatility was given in the article published earlier this week (view article here). Wool prices tend to follow the general cycles and trends of apparel fibre prices (view article here), where occasionally circumstances force a price series to go its own way (think of cotton in 2011). Given these quite strong correlations between fibres, how do price volatilities compare?

Figure 1 shows price volatilities for the average merino micron (Merino), cotton and polyester staple fibre from 1980 to October 2020. There are a couple of points of extreme price volatility, the first of which is Merino at the collapse of the Reserve Price Scheme in the early 1990s and the second which is cotton and polyester staple during the extraordinary cotton boom in 2011. The current level of merino price volatility is high but nowhere near the extreme levels of the past four decades. Overall the Merino price volatility is not significantly different to the volatility seen in cotton and polyester staple fibre prices.

In Figure 2 price volatility for merino is compared to feedstock price series. Feedstocks are the raw materials for manmade apparel fibres (MEG for polyester staple, AN for acrylic and Caprolactum for nylon) so they represent the upper part of the supply chain similar to greasy wool (which is the raw material for wool tops and yarn). The feedstock price series do not cover the full 40 year period, generally beginning in the late 1980s. Interestingly they are more volatile than the merino series. It is not surprising that feedstock prices would be more volatile than their associated manmade fibre prices but it is something of a surprise to see them noticeably more volatile than for merino.

In Figure 3 price volatility is compared for 16 micron combing fleece and a cashmere price series, from the early 1990s onwards. Both price series are sketchy for the early part of the graphic (arguably cashmere quotes are still sketchy). Given this caveat it is clear that the price volatility for 16 micron has trended lower during the past 20 years. In that time the merino clip has changed so that 16 micron has moved from being five microns finer than the average to be now 2.5 to 3 microns finer than the average merino fibre diameter. The cashmere price volatility has not changed greatly, with the 16 micron volatility now on par.

What does it mean?

The wool industry can be somewhat myopic with regards to price level and volatility. This article shows the merino price volatility to be on par with that seen for cotton and polyester staple fibre. Like price trends, cycles and general levels, wool price volatility looks to be similar to that of the main apparel fibres. Somewhat surprisingly the merino price volatility is appreciably lower than that seen for manmade feedstocks. On the finer side the 16 micron price volatility has trended lower for two decades, to now match that of cashmere.

Have any questions or comments?

We love to hear from you!

Key Points

  • The price volatility for the average Merino micron price has been on par with the price volatility of cotton and polyester staple fibre for the past three decades.
  • In contrast price volatility for manmade feedstock prices have been higher than for merino in the past three decades.
  • Price volatility for 16 micron price has tended lower for the past two decades (from high levels) and is now on par with cashmere volatility.M

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: AWC, WI, AWEX, IMF, RBA, Cotlook, PCI Wood Mackenzie, Emerging Textiles, WTiN, ICS , Mecardo.

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Wool

Uruguayan wool clip

Australia produces about three quarters of the world Merino clip and combined with geographical isolation it is easy to overlook wool production in other countries.

Read More »

Don’t have an account with us? Join free.

You can have full premium access to all of our content with a monthly or annual subscription. 

Alternatively, create a free account to access our Insights blog and two free premium article a month!

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.