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Tuesday, February 07, 2017

Some volumes up, some volumes down.

By Andrew Woods  |  Source: AWEX, AWTA

Key points

  • Overall AWTA volumes were up by 9% in January and up by 11% for the three months to January.
  • Auction data for merino combing wool shows a continued swing to the broader half of the merino distribution with 21 micron auction volumes up by 34% for the past three months, which matches AWTA data.
  • Crossbred combing sales data shows all micron categories to have fallen except for the 24-26 micron range, where volumes up by 10% for the past three months.

2017-02-06 Wool Fig 1

2017-02-06 Wool Fig 2

The latest AWTA core test volume data showed overall volumes in January to be up by 9% and for the three months to January up by 11%. Within these overall totals lie a range of changes when the data is viewed by breed and fibre diameter. This article takes a more detailed look at the changes in volume in recent months.

To approximately paraphrase yet again the old Castrol oil advertisement, “wools ain’t wools”.  When the headline volume numbers are published for wool production they often mask quite varying changes between different micron categories, which is an issue for the supply chain which is relying on greasy wool supplies of their preferred specifications.

Instead of using AWTA volume data, which is excellent in terms of timeliness and reliability, we will use auction sales data to look at change sin merino combing and crossbred combing (combing wool having a staple length greater than 50 mm) from the past three months. Auction data allows a break up by breed, and by staple length.

Figure 1 shows the year on year change in merino combing volumes by micron for the three months to January. Superimposed across Figure 1 is the micron distribution for merino combing wool during the three months to January.

The micron distribution allows a quick check on which categories are important in term of volume. Categories with small volumes at the fine and coarse edge of the distribution can have quote volatile changes in volume due to small moves is sales volume. This shows up in Figure 1 with 14 micron volumes up by 60% which is a big increase. The distribution curve shows the 14 micron volumes to make up only a small proportion of merino combing wool (actually only 0.22% for this period) so the impressive increase needs to be kept in perspective.

The main message from Figure 1 is the continued shift in volume change towards the broader mainstream categories, from 17-19 to 20-22 micron. This is as expected, although the increase in 21 micron volumes of 35% is greater than anticipated at this time.

Figure 2 shows a similar analysis for crossbred combing wool. Fine crossbred combing volumes are falling so they are not helping boost the merino volumes for these categories. 24-26 micron volumes are the exception for crossbred combing volumes, having increased by around 10% during the past three months. The main 27 plus micron categories have fallen by 10-20%, although some caution needs to be taken here as there have been some sizeable tenders of crossbred wool in recent months which are not captured by the auction data.

What does this mean?

Increased supplies of 20-22 micron wool, mainly merino, will continue to put downward pressure on prices for these categories. At the least it will help widen the gap between fine and broad merino prices. Crossbred volumes are generally lower (AWTA and auction data) and this will help crossbred prices steady despite continued reports of weak demand. The exception might be the 24-26 micron categories where supply remains above year earlier levels.

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