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Tuesday, August 28, 2018

A review of merino wool quality

By Andrew Woods  |  Source: AWEX, ICS

Key points

  • Fibre diameter is well below year earlier levels in eastern markets and Western Australia (by 0.5 micron overall).
  • Staple strength is at relatively high levels by the standards of the past decade in both the east and in Western Australia.
  • Vegetable fault remains stubbornly high in eastern Australia but is relatively low in Western Australia.

2018-08-28 Wool Fig 1

2018-08-28 Wool Fig 2

2018-08-28 Wool Fig 3

Wool production reporting tends to dwell on total volumes and total flock numbers. Processors, however, are more particular about the greasy wool they want as they are particular about the processed wool they are intended to produce. This article takes a look at some key wool qualities in the current market.

Historically fibre diameter is the key wool quality in terms of price, although this does vary. Currently there is little difference in price between 19 through 22 micron while there are large micron premiums for wool finer than 19 micron. The combination of (the ever shifting) supply and demand push the effect of fibre diameter on price up and down. Figure 1 looks at the change in the average merino fleece fibre diameter from 2006 onwards. Since late 2017 the western merino micron has been a long way below year earlier levels. In the east the merino fleece micron has dropped markedly since March. This means the merino clip is overall is 0.5 micron finer than year earlier levels. This is a big shift in micron and will result in more merino wool finer than 19 micron (subject to drought and its effect on sheep numbers) and less merino wool broader than 19 micron.

One wool specification which is travelling very well at present is staple strength. Figure 2 shows the average staple strength of measured combing wool in eastern and Western Australia from 2006 onwards. In the east the average strength in August is running above 37 N/ktx which is a high average. In the west, staple strength is running at 34 N/ktx which is high by the standards of the past 12 years. For processors staple strength in the Australian clip at present is not really an issue. When combined with strong demand and solid carding prices, this helps explain why discounts for low staple strength remain at minimal levels.

The final wool quality looked at is vegetable fault. Despite drought through big swathes of NSW into Queensland and dryish conditions in many other southern regions during the past year, vegetable fault (VM) remains stubbornly high in eastern Australia.  The average VM level in eastern Australian persists around 3%, well above the 2.5% level which would be considered more normal at this time of the year. This makes things that bit harder for exporters to meet mill consignment VM specifications. In Western Australia the situation reflects the dry conditions of the past year with VM levels lower than would be considered normal at this time of the year.

What does this mean?

The drop in fibre diameter means the supply of fine wool will continue to be higher than a year earlier (subject to sheep numbers) while the supply of broad merino wool will continue to be lower. These supply factors will put downward pressure on fine wool premiums and help maintain the small price differences between the 19 and 22-23 micron merino categories. Staple strength is not an issue in the current market, so discounts are likely to remain at minimal levels. VM remains high in eastern Australia, pressuring discounts for the higher VM categories to widen especially when the market is correcting and exporters are being choosey about the lots purchased.

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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