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Tuesday, June 23, 2015

What is the value of staple length?

By Andrew Woods, ICS  |  Source: AWEX, ICS

Key points

  • Premiums and discounts for staple length remain small for merino fleece.
  • The trend for smaller discounts for short staple merino fleece is still in place.
  • Premiums and discounts for staple length in crossbred fleece, while small, look to be more in line with historical levels.

2015-06-23 Staple Length Discounts FIG 1

2015-06-23 Staple Length Discounts FIG 2

Mecardo last looked at staple length effects on wool prices in August and December 2013 (see links below). This article provides discount/premium tables for merino and crossbred fleece wool in the current market and takes a quick longer term look at the discount for shorter staple wool (both merino and crossbred).

Table 1 shows a discount and premium table for merino fleece ranging in fibre diameter from 17 through 25 micron and staple length from 60 to 130 mm. The base length for 17 to 19 micron wool is 80 mm and for the broader categories it is 90 mm. The table is a smoothed representation of the current market.

Why a “smoothed representation”? At this time of the year, the selection of wool sold is limited. A small selection limits the calculation of premiums and discounts due to a lack of wool.  In addition to gaps in quotes, the limited selection reduces the ability of averaging prices to reveal underlying premiums and discounts.

The thing that stands out from table 1 is the minimal difference in price for 70 through 100 mm length, with small discounts for 110-120 mm length wool. Discounts for 60 mm are generally in the range of 4-5%, on par with the mild 130 mm length discount.

Figure 1 shows the discount for 60 mm 19 micron flee Aug '13)ce to the 90 mm 19 micron fleece from 1995 onwards. The large discounts of the 1999-2001 period stand out, as does the trend towards smaller discounts since then. This trend looks to be a structural change in the market, matching the anecdotal feedback that talks about the development of knitwear demand for wool.

Table 2 shows a similar table for crossbred fleece, ranging from 22 through to 32 micron. Discounts only start to cut in when the length falls to around 70 mm, and this table probably over does the discount for this length (in relation to current discounts) . By the time the length falls to 60 mm, the wool is going into the woollen systems rather than the worsted system and the discount opens up. Price differences for full length crossbred are only small between 90 and 120 mm, which is fairly normal.

Figure 2 shows the price discounts for 60 mm to 90 mm long 28 micron crossbred fleece from 1999 onwards. Like the merino market, discounts in 1999-2001 were much larger than today. The discount shrank until the middle of the past decade. Since then it appears to have stabilised, albeit with some cyclical swings. The current strong demand for crossbred fleece may also be masking strength in the crossbred carding market.

Read previous articles on staple length:

What does this mean?

The tables presented in this article provide a view on the effect of staple length on both merino and crossbred fleece wool in the current market. The small discounts mentioned in 2013 for short staple length continue to hold in the merino market. This a result of a combination of structural change from the past decade and cyclical demand, as evidenced by the recent 300¢ rise in the merino cardings indicator. For crossbred fleece, the effect of staple length looks to be closer to normal historical levels. Given the extremely strong market for crossbred fleece, this makes some sense.

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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