In 2020, the economic backdrop to the wool market appeared likely to be one of recovery after a standard downturn in greasy wool prices during 2019, only for this scenario to be upset by the appearance of the COVID pandemic. In 2025, it appeared economic growth, with the USA leading the way, might start to improve, thereby helping wool prices to increase, only to have an American administration cause massive economic uncertainty and now likely tipping the USA into recession. This article looks at how merino wool, fine wine, and cashmere prices are handling current events.
Mecardo last looked at fine wine prices in May 2024 (see article here). The fine wine index (LIVX100) used here is drawn from the London International Vinters Exchange (LIV-Ex)(see more here). Apart from facilitating trade in fine wool, LIV-Ex also publishes a range of fine wine price indicators (see indicators here). The indicator series begins in 2001 and is of monthly frequency. As wine is a luxury item, it seemed an interesting idea to compare a fine wine price series to apparel fibres, in this case, merino wool and cashmere.
Figure 1 compares the average merino fleece price (Australian auction) in US dollar terms from 2001 onwards, with the LIV-EX LIVX100 index (an index based on the price of a selected range of 100 fine wines). The fine wine index did not drop in 2020 as industrial commodities such as wool did. However, allowing for different starting points, merino prices and the fine wine index both rose strongly, in a similar pattern, from 2020 through 2022. The wine index then held up longer, into mid-2023, before weakening so that the merino price and fine wine index again had a high positive correlation from 2023 through 2025.
In Figure 2, the year-on-year change in the merino price and the LIVX100 series are compared. Fine wine and merino prices follow similar cycles and trends, presumably responding to similar macroeconomic signals. In mid-2024, the year-on-year fall in the fine wine index stabilised (it was still falling) while the year-on-year fall in the merino price stopped.
Figures 3 and 4 repeat the exercise for cashmere prices, in place of merino prices. While cashmere is not as expensive or rare as vicuna, genuine cashmere is a luxury good, along with fine wine. Figure 3 shows the wine index and cashmere having periods when they are highly positively correlated (2007-2013) and periods when the correlation falls to nothing or even becomes strongly negative (2014-2017).
Figure 4 compares the year-on-year change in cashmere price and the fine wine index. The year-on-year change helps to focus on the rises and falls in the different price series. You can see the two series often having similar episodes of increases and decreases, presumably responding to similar macroeconomic conditions. Year-on-year price increases peaked in 2021, in the recovery from the pandemic shock of 2020. Cashmere prices then fell, year on year, to late 2024 before steadying at no change on year-earlier levels in early 2025, with the wine index still falling. Cashmere and fine wine are luxury good cousins, quite similar in many ways, with some differences.
What does it mean?
There is an argument made that merino wool, due to the much reduced production of the past 30-40 years, should be considered a luxury good rather than an industrial commodity. The comparison here of fine wine, cashmere (both arguably luxury goods), and merino shows strong positive correlations in price levels and quite volatile prices with peaks and troughs, which look suspiciously like responses to macroeconomic cycles. There does not appear to be an easy way to avoid the vagaries of economic fluctuations in the major economies, especially when black swans fly over the horizon on a regular basis.
Key Points
- In terms of year-on-year changes in price, cashmere and merino prices have stabilised in recent months, while the fine wine index is still falling.
- In the bigger picture, prices for fine wine, merino, and cashmere are struggling with weak demand.
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Data sources: LIV-Ex, AWEX, WTiN, RBA, ICS, Mecardo
