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Thursday, September 24, 2015

Staple strength premiums not encouraging special focus

By Andrew Woods  |  Source: AWEX

Key points

  • Five year median premiums for 40-49 and 50-59 N/ktx strength wool show similar patterns.
  • Premiums for 19 micron and broader wool are low.
  • Premiums for 18 micron and finer increase, but continue to be relatively modest (in the 2% to 5% range).
  • Current market higher staple strength premiums match the 5 year median levels.


2015-09-24  5 Year Median Prem For 40-49 Nktx Fleece FIG 1

2015-09-24 5 Year Median Premiums For 50-59 Nktx Fleece FIG2

2015-09-24 . Current Weekly Premiums For 40-49 Nktx Fleece FIG 3

 

In June Mecardo looked at staple strength premiums and discounts for the past year (How is staple strength valued?) and some long term trends for the price effect of staple strength. This article looks at median premiums for high staple strength for the past 5 years in more depth and compares them to premiums in the current market.

Figure 1 shows median 40 to 49 N/ktx premiums for a range of micron categories running from 16.5 through to 22 micron (in half micron units) for the past five years. For each half micron category premiums are shown for a range of staple lengths ranging from 71-75 mm to 106-115 mm.

While the individual numbers jump about the story remains as mentioned in June with premiums at low levels for medium and broad merino (19 micron and broader). The premiums increase for 18 micron and finer micron categories, but still remain at fairly small levels in the range of 2% to 4%.

The data used in this analysis does not include designated spinners types as in theory they belong to a separate style of wool. In practice the typing of such wool is not that effective, which is shown by the difficulty in seeing a consistent difference in price between spinners and top maker styles.

Figure 2 shows a similar analysis to Figure 1 for fleece wool with a staple strength of 50-59 N/ktx. The premiums for the finer micron categories are slightly higher, but continue to be modest in size. For anyone mulling over genetic indices this data is worth considering as it tells you what the market has paid for high staple strength during the past five years. The inclusion of staple strength in a genetic index will come at the cost of some other characteristic (such as fibre diameter or clean fleece weight), so there is opportunity cost to having staple strength in a genetic index. The question that needs to be asked (for all factors that have opportunity cost) is whether the benefits outweigh the cost. In the case of staple strength the small benefit does not provide for a very big opportunity cost.

Where is the current market in terms of staple strength premiums? Figure 3 shows similar analysis to Figure 1 but for sales data from last week. Premiums are effectively non-existent for 19 micron and broader merino fleece and are around median levels for 18 micron and finer. Current premiums are nothing exceptional.

What does this mean?

Staple strength premiums continue at modest levels, with little in the way of premiums for 19 micron and broader merino wool. The small premiums for high staple strength offer limited gains from including staple strength in genetic indices. These small premiums need to be considered against the opportunity costs of including staple strength in breeding objectives.

Northern MPG
Northern MPG

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Southern MPG
Southern MPG

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Western MPG
Western MPG

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Go to Wool data

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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