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Thursday, February 23, 2017

Trend for unskirted wool has steadied

By Andrew Woods  |  Source: AWEX, ICS

Key points

  • Unskirted wool accounted for 1.9% of merino wool sold at auction during the past 12 months, slightly up on the 1.6% for the year earlier.
  • Three quarters of unskirted wool sold was crossbred wool.
  • The rising trend in the proportion of wool sold as unskirted looks to have steadied during the past year.

2017-02-23 Wool Fig 1

2017-02-23 Wool Fig 2

2017-02-23 Wool Fig 3

A year ago Mecardo looked at the supply of unskirted wool by breed, and at the rising trend in the supply of unskirted wool. This rising trend has been a source of concern for brokers, exporters and early stage processors. This article updates the data and refreshes the view of unskirted wool volumes.

Fleece wool which is prepared and offered for sale without skirting (unskirted) falls outside of the AWEX Code of Practice. It is allocated a D (non-conforming) certificate and generally has fribs shown in the AWEX ID (denoted by U1 or U2 or U3). Wool sold with a D certificate accounted for 13% of total auction sales during the past year. Within the D certificate wool, unskirted wools made up 36-38% of the volume during the past two years.

Non-conforming wool encompasses all sorts of poorly prepared wool, not only unskirted fleece wool. As such non-conforming wool carries a higher risk for processors of providing unwelcome surprises. Consequently, on average, these lots are discounted. The appetite for processing risk varies according to the strength of the market with the tolerance of risk increasing when prices are running up and it is a scramble to secure wool. At times like this, discounts shrink to negligible levels. In a weak market where the risk of claims on consignments is considerably higher exporters will increase discounts for the more risky lots of wool such as those with D (or B and Q) certifcates.

Figure 1 shows the proportion of wool sold as unskirted by breed. The proportion of the national clip accounted for by each breed is shown in the labels of the horizontal axis. Merino wool accounted for 80.9% if auction sales during the past 12 months. Only 1.9% of merino wool sold at auction was identified as non-conforming with fribs. Some 30% of crossbred wool sold was unskirted, however crossbred wool only accounted for 17.6% of totals sales during the past 12 months.

Figure 2 simply looks as the breed breakup of non-skirted wool sales during the past 12 months. Some three quarters non-skirted wool is crossbred and 21.8% was merino. For the 12 months to February the supply of merino unskirted wool is up slightly (up from 1.6% to 1.9%) and crossbred volumes are down slightly (down from 32.7% to 30%).

Finally Figure 3 shows the monthly proportion of sales from 2012 onwards attributable to crossbred (left hand axis) and merino (right hand axis). Figures 3 provides a feel for the trend in the supply of unskirted wool, which looks to have steadied in both crossbred and merino during the past year.

What does this mean?

Poorly prepared crossbred loots have suffered large discounts during the past year as the crossbred market has fallen. This may help account for the drop in proportion of crossbred wool sold as unskirted. It looks as though the rising trend in the proportion of unskirted wool sold at auction is steadying, but the data is volatile and the trend may re-emerge. At some stage merino prices will ease (it is a commodity) and the pressure to save costs will tempt farmers to present unskirted wool for sale.

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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