Premiums for RWS-accredited wool have been increasing this season, which is a welcome change after a lacklustre run through 2023 and 2024. This article takes a look at where these premiums are up to.
RWS premiums exploded onto the Australian wool market in the spring of 2021, not long after Cape Wools began publishing RWS premiums in their weekly wool report (see more here). Figure 1 shows the weekly premium for 19.5-micron wool published by Cape Wools from the spring of 2021, along with an estimate of the Australian premium for similar wool. The graph runs through to last week. In 2021-22 the premiums were in the order of AUD300-400 cents, without much regard for wool quality. From mid-2022 to mid-2024 the premiums shrank down to around 30-50 cents and became far more sensitive to wool quality. Since mid-2024 the premiums have begun to increase.
In November, Mecardo looked at premiums for wool accredited to a quality system (QS) and non-mulesed (see article here). One of the issues for this analysis is the overlap between the two main quality schemes (RWS and Authentico) which has been approached by combining wool from three quality schemes (RWS, Authentico, and SustainaWool). Figure 2 looks at premiums since Christmas, for indicator style fleece wool accredited to one of the three quality schemes compared to comparable wool which is CM-NM but not accredited to a quality scheme.
Figure 2 shows the median premium (in clean AUD c/kg) since Christmas plus the calculated range in price effect. For 16.5 microns and broader the price effect is positive, if varied, with the median price around 100 cents per clean kg. For 16 micron and finer the calculated price affected is much greater, with some difficulty in the calculations due to the higher levels of variation in price for these micron categories. The recent median price level is the best it has been since late 2022, using Figure 1 as a guide.
Exporter feedback indicates demand for quality scheme accredited wool (which is non-mulesed) easily outstrips the supply. Figure 3 looks at the weekly supply of RWS-accredited merino wool sold at auction in South Africa, Australia and New Zealand wool sold in Australia. South Africa is the dominant supplier of RWS wool, selling two-thirds of the volume since Christmas.
The question for the supply of RWS wool is what level of premium is required to attract significant new volumes. In June 2022, Mecardo showed how the supply of RWS (and quality scheme accredited CM-NM wool) is skewed to the finer merino categories, which come from the higher rainfall regions (see article here). The broader wool comes from drier regions (cropping and pastoral), and it is these regions, where labour is a big issue with regards to merinos, which pose the greatest challenge to securing more (RWS) wool.
What does it mean?
RWS premiums fell from heady levels from late 2022 to mid-2024, to levels that many Australian farmers would consider insufficient to warrant the extra cost of supplying non-mulesed accredited wool. With demand reported to be well in excess of supply, these premiums are starting to increase again reaching a median level of around 100 cents per clean kg since Christmas.
Wool production in Australia is under extreme pressure (from both seasonal conditions and enterprise selection) so the new premium levels, while welcome, are unlikely to bring substantial new volumes onto the market.
Key Points
- Premiums for quality scheme accredited non-mulesed wool have picked up this season to the levels of late 2022.
- The supply of this wool remains constrained in Australia.
- South Africa has supplied around two-thirds of RWS-accredited merino wool from South Africa, Australia, and New Zealand wool sold in Melbourne sold since Christmas.
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: AWEX, Cape Wools, RBA, ICS, Mecardo
