In May,Mecardo looked at crossbred wool, noting how record volumes continued to put downward pressure on price, although the supply chain was absorbing the high levels of supply. As the crossbred market comes up to its peak part of the season in terms of supply, we update our take on crossbred volumes and prices.
Australia is not the only wool producer that has an interest
in crossbred wool, which like merino covers a wide range of wool fibres having
a wide range of uses. The Uruguayan wool clip has a positive correlation with
the Australian 28 MPG although this has weakened somewhat in recent years.
Figure 1 (borrowed from the IWTO 2024 market information publication (read more here) compares
Uruguayan prices for greasy and scoured wool with the eastern Australian 28 MPG
in US dollar terms. The correlation is a strong one.
When Mecardo looked at the crossbred clip in May (read
more here), sales volume for the season was heading to a record level
thereby putting plenty of downward pressure on price. The full season volume
finished up at 44,113 clean tonnes of crossbred wool sold at Australian
auctions, around 16% above the decade average. The gross value of crossbred
wool sold at auction last season was stable compared to the previous season, at
US$119 million.
Greasy crossbred stock built up in 2019, as crossbred wool
prices fell from high levels (shown in Figure 1 by the fall in gross sales
value) and then in the depths of the low market following the pandemic in 2020
into 2021, seem finally to have been cleared in Australia at least.
Figure 2 compares the gross value of crossbred wool sold at
auction for the July to October period of each season from the mid-1990s
onwards (bars) and the volume for the same period (line). Volume this season
has turned down sharply (it is running 23% lower) and seems to be heading back
towards the decade median volume. The gross sales value of crossbred wool for
the first four months is down by 8%, which has helped push the average price
for the season to date by 20% (in US dollar terms).
Figure 3 compares the gross sales value and price for the
July to October period. Price remains low (a function of limited spending by
the supply chain and plenty of wool for sale) but at least it has picked up. Riemann
has a forward bid for 28 micron in April next year at a small premium (read
more here), possibly reflecting the likelihood that falling supply will
help to push crossbred prices up from their extremely low levels.
What does it mean?
Supply chain expenditure on crossbred wool remains at low levels, compared to the 2010-2019 period. The supply chain tends to be a creature of habit as far as the gross spend per season on crossbred wool (until it changes its mind as it did around 2010 and again around 2019) so prices seem unlikely to return to high levels of 2013-2018.
However, lower volume appears likely to underpin firmer prices, especially given the supply chain has been happy to absorb high volumes in recent seasons, which might deliver some further increases in price beyond the 20% seen in US dollar terms this season to date.
Key Points
- The crossbred sales volume for July to October is down 23% on the same period a year ago.
- Volume looks to be falling back down to around its decade average.
- While the gross sales value is down 8% for the season, the bigger fall in volume is helping push prices up.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: IWTO, AWEX, RBA, ICS, Mecardo
