A Mecardo reader asked for wool production projections in 2028, all things being equal. That last phrase is problematic, as all things are not stable in the world even before considering seasonal conditions. In the spirit of accepting a challenge this article looks at some recent trends in the Australian merino production and uses them as a guide for volumes in the coming seasons.
Merino wool sales at auction have accounted for around 78% of volume (clean terms) during the past five seasons. The non-merino 22% of auction sales are not addressed in this article, which looks at merino volumes. Auction volumes in turn only account for around 85% of annual Australian Wool Testing Authority (AWTA) volumes (clean terms). So to arrive at Australian shorn wool production (AWTA volumes) from the total merino auction volumes projected in this article you need to add 50%.
In this article we look forward three years, across three springs, so the assumption for seasonal conditions will be median but still possible in an El Nino year as discussed in the early March Mecardo article. Sheep meat prices have being under pinned by lower supply in the main trading countries during the past thirty years, discussed in an April 2024 Mecardo article. This implies sheep meat prices will remain attractive.
For this article, to look forward to 2029, we are going to extend recent trends in merino auction volumes based on mules and pain relief status. Figure 1 shows the auction volumes (in clean mkg) for merino wool sold at auction which had no declaration or was declared mulesed (see the AWEX website for details). A trend line has been added to the graph which is currently falling by around 5 million kilograms (mkg) clean (42,000 farm bales) per season.
Figure 2 shows the volume for merino AA (Analgesic &/or anaesthetic) formerly known as PR (Pain Relief). The volume rose steadily from 2008-2009, through to 2023-24 (with the dip in volumes for the pandemic in 2019-2020). Since 2023-24 the volume has fallen slightly. For this article the assumption is this volume will be steady in the next two years, the naïve forecast.
Finally in Figure 3 the volume of merino CM-NM (ceased mulesed and non-mulesed) is shown. It increased steadily from 2008-09, then jumped in 2020-21 about the time RWS premiums began to be published in South Africa and rose to high levels (Mecardo last looked at this two weeks ago). Since 2020-21 the volume of CM-NM merino wool sold at auction has trended higher by 640,000 clean kg per season (around 5,500 farm bales). This is the trend used to project forward two years in this article.
Figure 4 puts the three merino components together, along with the projections using the assumptions outlined above, out to 2028-29. To summarise the projections assume the volume of non-declared/mulesed merino wool continues to shrink by 42,000 farm bales per season, the volume of AA merino wool is steady and the volume of CM-NM merino wool continues to grow by 5,500 farm bales per season. These assumptions produce a model where the merino volume continues to shrink by 3-4% per season, so the volume falls from an estimated merino auction volume of 121.5 in 2025-26, to 113.4 m kg in 2027-28 and 1096.6 mkg clean in 2028-29.
To convert these projections to the full Australian production multiply by 1.5 so the 2027-28 volume is 170 mkg clean (1.45 million farm bales) and in 2028-29 164.3 mkg clean (1.4 million farm bales).
What does it mean?
Given the turmoil in geopolitics, the external macro –economic backdrop to the greasy wool market has a good chance of changing, we just do not know how. The frequency of droughts in the major sheep regions has jumped in recent decades, so there is a wildcard on the production side. For the purpose of this article we assume the environment the greasy wool market operates in is unchanged. Given that assumption, it seems likely that the existing trends in merino production will continue, until some particular factor changes. A continuation of existing trends would see the Australian merino production decline by 3-4% per season.
Key Points
- The declining trend in non-declared/mulesed merino wool has been steady for the past 18 years (allowing for a blip around the pandemic season of 2019-2020, currently running at 42,000 farm bales per season.
- The volume of CM-NM merino wool has been increasing in recent seasons at a steady 5,500 farm bales per season.
- The volume of AA merino wool has fallen slightly in the past two seasons, after trending up for 16 years (the pandemic excepted).
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
