Feedback indicates demand in the greasy wool market is skewed to Merino knitwear types, with much reduced demand for worsted (longer) Merino wool as Chinese exports of this category remain limited by the effect of COVID-19 on key markets. With this in mind this article takes a look at the current effect of staple strength on the price of Merino fleece.

The effect of staple strength on price (staple strength premiums and discounts) varies. At times there are substantial premiums and discounts for staple strength in Merino fleece prices. In the current market however, the discounts for low staple strength, even for fine Merino fleece, are minimal at worst with correspondingly low premiums for high staple strength.

In Figure 1 the average prices for September 2020 (clean Australian cents per kg) are shown for 15.5 micron Merino fleece which is 80 mm long for a range of staple strengths. Prices for 15.5 micron locks and crutchings are included as a measure of the lower price levels that are being paid for this micron category. The outstanding feature of the graph is the relatively flat price for fleece regardless of staple strength. There is a small amount of variation in the price, which given the volatility of the market, is understandable but there is no clear trend as would normally be expected with price falling as staple strength falls.

Figure 2 repeats the exercise for 17.5 micron. If anything the fleece prices are more even across the different staple strengths. Figure 3 shows a similar analysis for 19.5 micron (90 mm length fleece) with a similar picture presented. Finally Figure 4 repeats the analysis for 21 micron. High staple strength broad Merino types have received good support but there is usually little in the way of premiums.

Normally fine Merino fleece prices are sensitive to staple strength levels, but as this article shows, staple strength is barely registering in prices being paid for Merino fleece this month which is quite extraordinary. The supply of low strength wool will increase in the coming months as part of the normal seasonal pattern which may cause discounts for low staple strength to start to show up.

In the meantime, it seems the demand for wool for the knitwear sector is strong enough relative to demand from the worsted sector to neutralise the effect of staple strength in the pricing of wool.

What does it mean?

For fine Merino wool this is a very kind market in regards to discounts for low staple strength. If you have fleece wool tested with a staple strength around 20 N/ktx (there is plenty coming out of NSW), think hard before holding it as the discount could easily widen by 5% to 8%.

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Key Points

  • Fleece staple strength premiums and discounts are minimal to near zero across Merino micron categories.
  • While this is not unusual for broad Merino wool it is unusual for fine Merino wool.
  • The seasonal pattern in staple strength points to the supply of low strength wool increasing through to Christmas, which might cause the premiums and discounts to increase.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources:  ICS, AWEX

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