Supply and price in apparel fibres

The challenge when looking at commodity prices is to identify and then disentangle quantifiable effects, such as a trend in supply or changes in other correlated commodities. This article takes a look at the relationship between changes in apparel fibre prices and supply during the past decade.

Commentary on the wool market is often made without reference to changes in the supply of wool (something the grains market would not do) and also to changes in correlated markets, which are primarily the other apparel fibre markets. This is of importance as some of these correlated markets dwarf the wool market and therefore will have some influence over the general cycles, trends and price levels seen in the raw wool markets.

Figure 1 looks at the change in supply and price for a range of apparel fibres across the past decade (smoothed by three years). The change in supply is shown along the horizontal axis and the change in (US dollar) price is shown along the vertical axis. The size of the circles reflects the relative supply for each fibre, the bigger the circle the greater the volume. Cotton and polyester staple are the largest fibres considered here by a long way, followed by the cellulosics. The smaller fibres by volume are acrylic, coarse wool, crossbred, merino and nylon staple fibre. As a general rule, the fibres which have seen increased volumes during the past decade have also seen falls in price. Coarse crossbred wool is major exception, where the price has collapsed despite a small fall in supply. The position of merino fits, in that price has risen as supply has fallen.

In Figure 2 a trend line has been fitted to the change in supply and price data for the apparel fibres. While there is variation about the trend line, it does illustrate the point that change in supply is a major factor on price in the longer run. The falling supply of merino wool compared to the rising supply of cotton has increased the price ratio of merino to cotton as shown by Mecardo last year. In this case supply was working in two ways – putting downward pressure on cotton price and upward pressure on the merino price.

As Figure 2 stands, the change in supply over the decade explains nearly half of the change in price. Remove the coarse wool outlier, and change in supply explains nearly 90% of change in price level.

What does it mean?

No claim about wool prices should be made without first allowing for the longer term changes in supply and then the movements of correlated fibre prices. It is a messy process. It is far easier to ignore supply and the other apparel fibres when discussing wool prices, and also potentially quite misleading. The merino market in recent decades has bought higher prices and higher price ratios to the major apparel fibres through lower supply.

Have any questions or comments?

We love to hear from you!

Print This Post

Key Points

  • When looking at change in price over the longer term, change in supply is an important factor to take into consideration accounting for up to 90% of the trend change in price.
  • Supply becomes even more important when there are different trends in place for the various fibres, which impacts on the relative prices of the fibres (the price ratios).

Click on figure to expand

Click on figure to expand

Data sources: Fibre Year, Emerging Textiles, RBA, AWEX, 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 bales
Wool

Solid market, strong demand

Following the positive finish last week, from the outset the market attracted animated bidding with prices for the merino types lifting 50 to 90 cents,

Read More »
Wool
Wool

12-13 micron wool

A fine 12 micron lot of wool from the New England made a splash this week by selling for $150 per greasy kg ($212 per

Read More »
Percentiles with a background image of hay bales
Cattle

Percentiles – October 2021

Mecardo’s Percentiles update for October 2021. Click below to view the latest report Grains Oilseeds Sheep and lambs Cattle Wool Dairy Fuel Percentiles are an important

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.