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Tuesday, March 14, 2017

Plenty of change in wool supply

By Andrew Woods  |  Source: AWEX, AWTA

Key points

  • Merino combing and carding sales volumes show a general decrease in the main fine wool categories and substantial increases in the broader micron categories.
  • Grower sub-16 micron stocks accumulated during the 2012-2016 period look to be still coming onto the market, hence the ample supply.
  • Crossbred volumes are more complex, with some increase in 24-26 micron volumes and a general fall in 27 micron and broader volumes.

2017-03-14 Wool Fig 1

2017-03-14 Wool Fig 2

2017-03-14 Wool Fig 3

2017-03-14 Wool Fig 4

The latest AWTA data shows February wool volumes in total up by 5%, which fits with the combined expectations of little change in sheep numbers and an increase in fleece weights due to improved seasonal conditions. The benign change of 5% however masks more volatile changes in supply which the supply chain has to grapple with. This article looks at the underlying changes.

AWTA data groups wool together from all breeds and different staple lengths. To break supply data up by breed, staple length and micron auction sales data from AWEX is used in this article.

Figure 1 shows the year on year change for merino combing wool (46 mm in length and longer), broken up by micron category. Change is shown for February, the three months to February and for the season to date (July to February) compared to the same period a year earlier. The big fine wool categories (17 and 18 micron) are basically unchanged for the season and slightly lower in recent months. 15 micron and finer volumes are up for the season. Given the run of years where prices for these categories was depressed, it is not surprising that grower stocks are still coming onto the market and boosting supply. 20 micron through to 25 micron merino volumes have picked up markedly during the past three months, with the effect greater as fibre diameter increases.

Figure 2 repeats the exercise for merino carding wool (45 mm and shorter) which follows a similar pattern to Figure 1 although the 18 and 19 micron categories have enjoyed solid increases, compared to the slight falls for the combing length wools in these categories.

Figure 3 looks at the year on year change in crossbred combing length wool broken up by micron category. The pattern for crossbred wool is mixed. 24 to 26 micron volumes are up while 28 micron and broader volumes are generally lower than year earlier levels. Figure 4 looks at the change in crossbred carding volumes. It is even more varied markedly lower volumes at the very fine end, unchanged in the 23 and 24 micron categories and lower volumes for the 26 through to 31 micron categories.

The analysis shows that the boost in the broad merino micron categories is due to increases in merino volumes and not due at all to increases in fine crossbred volumes. The sustained drop we have seen in crossbred prices has happened despite relatively weak supply numbers from Australia. Such variable changes in supply between different micron categories shows the difficulty the supply chain has when planning greasy wool purchases 12-24 months forward.

What does this mean?

While the headlines tend to focus on the change in total volume for wool production, change sin supply can vary greatly between breeds, lengths of wool and micron categories. When considering why prices have moved the first piece of data to look at is supply specific to the wool price under consideration. Given the complexity of supply changes shown in this article, imagine planning greasy purchases 12-24 months forward as the supply chain does.

Northern MPG
Northern MPG

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Southern MPG
Southern MPG

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Western MPG
Western MPG

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