The latest AWTA core test volume data shows a continued fall in Australian wool production, which is not surprising given the tough seasonal conditions across many regions. This article takes a look at the latest numbers.
AWTA core
test volumes provide the best view on Australian wool production, as volume and
quality (in terms of fibre diameter and vegetable matter) information is
provided. This information is available on the excellent analytics web page
provided by the AWTA (see more here). Auction data provides more detail
with regard to wool quality, but as a rule, only 85% of wool production passes
through the auction system, so the AWTA data is a better measure of production.
Figure 1
shows the percentage year-on-year change in AWTA volumes for the three months
to April, micron category, for eastern and Western Australia. Basically, only
the sub-17 micron categories in eastern Australia have had an increase in
production in recent months. The story is one of a broad decline in production
for both merino and crossbred production.
Figure 2
shows the year-on-year change in farm bales for the same categories as shown in
Figure 1, broken into eastern and Western Australia. The 20 micron category has
suffered the largest drop in supply, continuing the shrinkage in broader merino
volumes, which has been going on for the past three decades. Seasonal
conditions are still helping to push the merino clip finer, with a small
increase in the sub-17 micron production. Note also that crossbred wool
production is falling, which fits with the very dry conditions in Victoria and
South Australia.
To put the
overall changes in wool supply into some perspective (both time and seasonal
conditions) Figure 3 shows the monthly year on year change in total AWTA
volumes tested (farm bales) broken into eastern and Western Australia, with a
combined (weighted across all Australian wool producing regions) rolling 12
month rainfall rank overlaid. The schematic begins in 2018 and runs to April
2025. The drought of 2018-2019 is associated with falling production. In 2020,
rainfall improved, with production responding. By 2022, the big post-drought
surge in wool production will have finished. By 2024, the rainfall rank has
fallen to lowish levels again, with wool production once more falling year on
year. These conditions persist, so wool production remains under pressure, with
this pressure intensified by strong sheep meat prices outperforming weak wool
prices.
Changes in
wool production arise from changes in the number of sheep shorn, the structure
of the flock (mainly breeds – now including non-wool sheep), and average fleece
weights. In clean terms, the eastern AWTA volumes for the three months to April
were down 14.2%. A slightly lower merino micron implies that 3.6% of this fall
is due to lower fleece weights, which means wool sheep numbers were down by
around 10.6%. A similar calculation for Western Australia points to a drop in
sheep numbers of 19%.
What does it mean?
What are wool prices doing in response to the lower supply? The answer at this stage is nothing, as wool is an industrial commodity dependent on demand driving price. Demand is in turn dependent on the economic fortunes of the major economies of the world.
In the longer run, the lower supply will boost the price ratio for wool compared to the major fibres such as cotton and polyester staple. It is also nearly impossible to disentangle the effect of sentiment and seasonal conditions on sheep numbers. Only after we have a good spring in many regions under our belt will the industry be able to assess sheep numbers and wool production. Until then, sheep numbers and wool production remain under pressure because it is dry.
Key Points
- Wool production in Australia was down for all categories bar sub-17 micron in the three months to April.
- The broader part of merino production in Australia (broader than 18.5 micron) continues to suffer the greatest decline.
- Using the AWTA volumes as a guide to changing sheep numbers, it appears the eastern flock is down by around 10-11% and the western flock by around 19%.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: AWEX, Silo, ICS, Mecardo
