Weekly auction volumes of wool offered are often bandied around as a measure of whether supply is set to outstrip or fall short of demand, with the implication that prices will fall or rise as a consequence. This article takes a brief look at weekly sales volumes from a couple of perspectives.
AWEX (see more here) reports sales volumes regularly in weekly sales reports and on their website. As an institution, AWEX ensures Australian wool auctions are transparent, something the rest of the greasy wool industry relies upon (along with Cape Wools (see more here), reporting of South African sales.
The wool supply chain operates on the assumption that enough wool will be presented for sale to satisfy demand, hence the lack of forward contracts from the buy side of the industry. That assumption is looking less like a sure bet. Figure 1 shows the average weekly volume of wool offered at auction in Australia for the five seasons from 2019–20 to 2023–24 (bars), and the weekly volume offered this season to date. The five-year average is used as an approximation of the volume the supply chain will be expecting. Note that the gaps in offerings vary, as the recesses for mid-year, Christmas, and Easter move about from season to season.
Figure 1 shows the seasonal variation in total wool volumes offered for sale. These volumes tend to reach their peak in summer and their low point in winter. So, what constitutes a large or small offering compared to the same week/month in recent seasons depends very much on the time of the year. Figure 1 also shows offer volumes this season tracking well below the five-year average since Christmas.
Within the total offering, there is a wide range of wool qualities, remembering “wools ain’t wools”. A 13 micron lot is certainly not the same as a 36 micron lot from New Zealand or a 40-50 micron lot from North Africa (see more here)
Figure 2 shows the proportion which eastern merino wool sold at auction that made up of total sales by sale week for the five seasons to 2023-24 and for the current season. The proportion drops to around 60% around Christmas and rises to around 70% in the middle of the calendar year. There are a couple of weeks where the eastern proportion spikes higher when Fremantle is not selling.
Figure 3 repeats the process for Western Australian merino wool. In the five seasons to 2023-24, it generally averaged 15-20%. This season, the supply of western merino wool has regularly dipped down into the 10-15% range, as it has in recent weeks.
Finally, Figure 4 shows the proportion of Australian wool sales made up by eastern non-merino wool (five-season average and current season), which reaches a peak in summer and a low in the middle of the year through to the early spring. With the fall in western merino volumes in particular this season, the proportion of crossbred wool has picked up, even with non-merino volumes pushed lower by the drought in South Australia and Victoria.
What does it mean?
The total volume of wool being offered for sale each week varies greatly during the season, so what constitutes an excess or shortage of wool (compared to previous seasons) changes. In addition, the makeup of wool offered and sold varies greatly, simply between merino and non-merino. When other factors important to the value of wool (fibre diameter, staple length, staple strength, vegetable matter, and the movement in Melbourne yield) the volume of supply becomes far more complex.
Key Points
- Wool volumes offered and sold exhibit strong seasonal patterns.
- Total weekly volumes have been tracking well below their five-year averages since Christmas.
- The proportion of merino and non-merino wool sold at auction varies greatly during the season.
- Western Australian merino proportions of wool sold are tracking well compared to the five-year average.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: AWEX, ICS, Mecardo
