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Thursday, June 25, 2015

How is staple strength valued in the current wool market?

By Andrew Woods, ICS  |  Source: WI, AWEX, ICS

Key points

  • Staple strength premiums and discounts continue to trade at minor levels, especially compared to 15 years ago.
  • Premiums for high staple strength do increase when the fibre diameter falls below 19 micron.
  • Staple strength premiums and discounts are greatest for 70-90 mm long wool.
  • The shrinkage in discounts for low staple strength in fleece prices is mirrored by the reduction in discounts for merino pieces since the late 1990s.

2015-06-25 Staple Strength FIG 1

2015-06-25 Staple Strength FIG 2

Mecardo looked at staple strength premiums and discounts in August 2014 (read article below). This article looks at median staple strength premiums and discounts for the past year by staple length, and takes a brief look at how these discounts have changed during the past two decades.

Figure 1 shows median discounts and premiums for staple strength in merino fleece during the past year for short, full length and long staple lengths. Staple strength ranges from below 20 N/ktx through to 50 plus N/ktx.

Discounts for low staple strength continue to be relatively small, less than 10% for staple strengths below 20 N/ktx. At the other end of the staple strength scale, median premiums for high staple strength remain at relatively low levels. The median measure does mask some variation in high staple strength premiums, with premiums for 40 plus N/ktx in the order of 3-4% for 18 micron and finer wool.

One of the interesting things shown by igure 1 is that the effect of staple strength is greater, both for high and low strength levels, for the 70 to 90 mm staple length wool. High staple strength premiums barely exist for the 91-110 mm length wool and are appreciably smaller for shorter length wool.

This reflects the willingness of exporters and mills to pay more for high staple strength 70-90 mm length wool, which Italian interests constantly tell the market. These mills are not interested in the longer length wool, and so will not pay a premium for long wool with high staple strength.

The small discounts for low staple strength are partly explained by figure 2. Figure 2 shows the monthly discounts for low staple strength (20-24 N/ktx) merino fleece and a merino pieces series, both discounted to a standard 80 mm long merino fleece price. The series runs from 1992 through to last month.

As with most wool price series there is some “noise” in the data, with the discounts jumping around the long term narrowing trend evident since the late 1990s. The two series match up well, noting that the pieces discount is 5% larger than the low strength fleece discount. For the past 15 years, the market has consistently lowered the value of staple strength, something that should be considered when setting up genetic breeding indices.

Read previous articleStaple strength premiums pick up (published 27 August 2014)

What does this mean?

The impact of staple strength on merino fleece prices remains a minor factor, with the greatest effect seen on 70-90 mm long merino fleece. Premiums and discounts for shorter and longer merino fleece are less. More interestingly, the effect of staple strength on price has shrunk consistently during the past 15 years. This appears to be a structural change that matches up with the increase we hear of in the demand for knitwear. The lower value attributed by the market to staple strength should be considered when building staple strength into genetic breeding indices.

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 


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