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Monday, August 15, 2016

AWTA volumes

By Andrew Woods  |  Source: AWEX, ICS

Key points

  • AWTA core test volumes (farm bales) were down by 10% in July and 16% for the three months to July.
  • Western Australia was the only state to shrug off the general trend, with July volumes up by 13%.
  • There were more rainy days (in the order of 30%) in the three months to July across all regions, hindering shearing and the delivery of wool to store.
  • It will take some months to see how much the fall in winter volumes was due to logistic issues and how much was due to lower production.

2016-08-15 Wool Article

2016-08-15 Wool Article2

2016-08-15 Wool Article3

The latest AWTA core test volumes were lower than year earlier levels in July, which is not that surprising given the wet weather of June and July. This article takes a state based look at the latest AWTA volumes.

The AWTA provides an excellent detailed breakup of monthly and season to date wool production by state in their Key Test Data report. The state in this instance is determined by the place of sampling. If wool is shipped to interstate from the farm before testing (for example sending wool from Booligal in the Riverina to stores at Lara at Geelong) it will be registered in the AWTA data as Victorian.

Figure 1 shows the year on year change for AWTA volumes (in farm bales) for July and the three months to July, by state.  Volume is down on year earlier levels for all the eastern states for both periods, with Western Australian volume in July running against the general trend, rising by 13%. There were a third more rainy days across all regions in May to July 2016 compared to the year earlier period so we will need to wait for some months to sort out how much of the fall in volume is due to logistical issues and how much is a genuine drop in production.

To give the state based changes some perspective we need to know how much wool is credited to each state. Figure 2 provides a state based breakup of the AWTA Key Test data for the 12 months to July. In this analysis NSW and Victoria are the two big states in terms of production, with Western Australia the third largest followed by South Australia. Tasmania and Queensland are the two smallest production regions.

As shown in the centralise wool sales article when the interstate transfers of wool from farm to store are adjusted for, NSW is the dominant state in terms of production. Figure 2 uses auction data (farm bales) for the 12 months to July 2016 in calculating state based production. Wool grown in NSW accounts for 40% of sales. The Victorian share of the clip falls back to 20%, on par with Western Australia. South Australia is not far behind at 16% as it reclaims wool shipped to and tested in Victoria. Queensland and Tasmania account for about 2% of sales each.

What does this mean?

The supply chain has been watching the lower production coming through to auction, with exporters well aware of the impact of wet weather. Restricted production of merino wool in Australia, therefore the world as Australia is the dominant producer of merino wool, continues to help support wool prices. This is seen in the higher rolling 5 year price ranks for merino combing wool in relation to other major apparel fibres.

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