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Thursday, October 08, 2015

What premiums for non-mulesed wool?

By Andrew Woods, ICS  |  Source: AWEX, ICS

Key points

  • Price premiums for non-mulesed wool pick up from around 19-20 micron and increase as fibre diameter becomes finer.
  • For 17-18 micron high strength fleece wool, the premium has been around 1.5% in 2015, and around 2% for 16 micron.
  • Such premiums are consistent with past analysis.
  • Premiums for declared “pain relief” appear for the finer micron categories, but are varied.

2015-10-08 Non Mulesed Premium FIG 1

2015-10-08 Non Mulesed Premium FIG 2

Mecardo previously looked at the proportion of wool declared as having not been mulesed, as ceased mulesing and as having pain relief in June (2015). Specifically, we examined the regional supply of this wool along with some generic price effects. This article updates the proportion of wool declared and looks into the price effect for declared wool in more detail.

There are three levels of non-mulesed status provided for in the National Wool Declaration (NWD). These are; not mulesed (wool from sheep not mulesed), ceased mulesing (wool from a property where no lamb has been mulesed during the past 12 months and are not intended to be mulesed in the future) and pain relief (wool from sheep that were treated with a recognised pain relief product at mulesing). Figure 1 shows the monthly proportion of wool sold at auction according to the three status levels recorded in the NWD.

A range of wool brokers have been looking to source wool from sheep that are not mulesed in 2015. It is hard to assess volumes on hearsay, but it does look as if interest in non-mulesed wool is picking up.

The difficulty with this process (shown by figure 1) is that only some 10% of the clip qualifies as being not mulesed or having ceased mulesing. This restricts supply in a clip that is already small, especially when broken into constituent parts across 44 selling weeks of the season. This may explain why enquiry is being made to source wool outside of the auction system, in an effort to aggregate useful volumes of this wool that still meet the usual requirements of processors in terms of specifications.

What price effect is shown at auction? As mentioned in earlier articles, looking for a small price effect in the wool market is not an easy task as it is often masked by larger, more immediate effects. With this caveat in mind, figure 2 shows some price effects calculated by Independent Commodity Services P/L for high staple strength merino fleece wool with no subjective faults.

Keep in mind any such analysis has an error factor. A good analogy is that when we look at these price effects the focus  is less clear so that the results are a little “blurry”. Hence, when in figure 2 the ceased mulesing and pain relief show a negative result, consider that as part of the error in the analysis and treat the result as zero or no effect.

Figure 2 shows the calculated price effect for wool declared as not mulesed, ceased mulesed and as having pain relief during 2015 for 16 through 20 micron. The effect for 20 micron wool is small to non-existent. However, it increases as the fibre diameter decreases, with non-mulsed wool registering a premium of 1.5% for 17 and 18 micron wool and around 2% for 16 micron wool. This is on par with earlier analysis articles that showed premiums of around 1-1.5% for 19 micron wool.

Wool declared as ceased mulesing also registers some premiums, albeit smaller for the 19 micron and finer categories. Where it is declared that lambs were administered pain relief at mulesing, a slight premium also exists for this wool, but as expected the results jump around. Where pain relief sits with the supply chain in terms of perception about non-mulesed wool is not clear – there is plenty of non-mulesed wool available out of New Zealand, South Africa and South America).

What does this mean?

Out of auction enquiry for non-mulesed wool is being reported by a range of wool brokers. Due to the limited volume of non-mulesed wool available at auction it makes sense to aggregate such wool outside of auction for specific consignments. The price effect at auction looks to be around 1.5% for 17-18 micron fleece, which is consistent with past analysis. The premium increases for 16 micron wool and falls away for 19 and 20 micron wool.

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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