RWS-accredited wool volumes continue to grow in the major greasy wool exporting countries, accounting for slightly over half of South African production, one-third of Uruguayan production, one-fifth of Argentine production, and some 13% of New Zealand production. This article investigates RWS premiums and volumes in merino wool sold at auction in Australia in 2023.
The first aspect of RWS accredited wool
which most farmers want to understand is the price effect, or more pointedly
what premiums are being paid. With the introduction of quality systems with
appreciable price effects, into the greasy market in recent years the
complexity and difficulty of establishing what premiums, if any, are being paid
has risen. The significant crossover of quality system accreditation, with many
lots accredited to not only RWS but also Authentico and SustainaWool further
muddies the picture.
In May (read
here), Mecardo looked at RWS premiums and how they varied with underlying
wool quality. In this article, premiums are calculated for “indicator type”
fleece wool which ignores low staple strength and higher vegetable fault wool
but combines higher staple strength wool with “middling” strength wool. The
point is that these estimates of premiums are a rough guide only. In Figure 1
the median RWS premium (to comparable non-mulesed wool) by half a micron from
16.0 to 21.5 micron for weekly data during the 2023 calendar year to last week.
The bars for each half-micron category show the 90th (high) and 10th
(low) percentile of the premium calculated. They provide a perspective on the
variation in the price effect for RWS accreditation, which is quite wide. The
median premiums have been between 20 and 40 cents per clean kg across the
micron range in 2023, with significant variation around this level.
RWS premiums have experienced a lot of
change in recent years. They burst onto the scene in the spring of 2020 at the
same time that Cape Wools began to publish weekly premiums recorded in the
South African merino market (read here).
Figure 2 shows calendar year averages for half-micron categories, using the
same methodology as in Figure 1, for 2020 through 2023. Premiums in 2020 were
very modest compared to the levels reached in 2021 and 2022. In 2023 the
premiums have returned to levels comparable with 2020.
What about supply? In 2023 some 6.7% of the
Australian merino clip sold at auction has been accredited to RWS (clean
basis), which is up from 5% in 2022. This is well below the other major
southern hemisphere greasy wool exporters. The proportion in the Australian
clip varies greatly between micron categories. Figure 3 shows the proportion of
the Merino clip sold at auction which was accredited to RWS (and often to other
quality schemes as well) by calendar year by half a micron from 2020 through
2023 (bar the last week of sales). As a rule, the proportion accredited to RWS
wool rises as the fibre diameter becomes narrower (around 40% now for 13.5
-14.0 micron versus 3% for 21 micron).
What does it mean?
There was always a question as to whether the supply chain would continue to pay the large premiums seen in 2021 and 2022 for RWS-accredited wool. It appears the answer has arrived, and it is a negative one. Whether this has happened because supply has increased, demand is weak in Europe reflecting economic conditions or the supply chain decided it did not want/need to pay large premiums is unclear at this stage. The answer is likely to be a mix of all these factors.
Key Points
- RWS premiums in 2023 have fallen from the high levels of 2021 and 2022.
- The range of price effect about median levels for premiums means it is still hit and miss for individual sale lots when it comes to receiving a premium.
- The Australian proportion of RWS-accredited merino wool has lifted in recent years but remains very low in the broader half of the micron distribution.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Textile Exchange, AWEX, ICS, Cape Wool, Mecardo
