By Andrew Woods | Source: AWEX, ICS
In a time of the season when the weekly volume of wool offered is small, the problem exporters has of putting consignments together is being compounded by the level of vegetable fault (VM) in the eastern Australian clip. This article takes a look at prices for fine merino combing fleece with higher VM and the discounts applicable.
In February 2014 Mecardo looked at the seasonal pattern in the supply of VM and the price discounts for VM. The supply tends to peak in the middle of the calendar year with consequently discounts peaking at this time. Figure 1 shows three price series for 17.5 micron combing fleece wool from 1995 onwards. The three series are split between VM levels. It shows the three series follow each other fairly closely, with the gap between the series varying with time. The current (May average) price level is close to the 2011 and 2000-2001 peaks.
Figure 2 uses data from Figure 1, from 2003 onwards. It shows the discount in clean cents per kg terms for 2.6-4% and 4.1-7% VM levels compared to a base VM level of 0-2.5%. The discounts vary with the discount for 4.1-7% ranging from nearly 300 cents to below 50 cents. The current (May 2017) levels are wide by the standard of the past 13 years, especially for the higher 4.1-7% VM level.
Table 1 shows the May 2017 price levels for a range of fibre diameters (16.5 to 19.5 micron) and VM levels (0-2.5%, 2.6-4% and 4.1-7%). The 10 year percentile rank is also given for the prices shown. As Figure 1 showed for the 17.5 micron category, the price series for the different VM levels tend to track each other. The price rankings show this to be true as they are similar for the different VM levels within each micron category. The rankings are uniformly high, all above the 95th percentile for the past decade which takes in not only the depressed period of fine wool premiums during 2013-2015, but also the high prices of 2011 and the relatively good prices of 2007-2008.
Table 2 shows the May 2017 average discount of 2.6-4% and 4.1-7% VM levels by micron category, and their 10 year percentile rank. The percentile ranks show the discounts to be at or near their most negative levels, which means at or near their widest levels. This reflects the higher supply of VM coming through the clip at present. Despite the large discounts for VM, the price percentiles in Table 1 show prices for the higher VM price series to be trading at high levels, as are the low VM series.
The old saying “that a rising tide lifts all boats” certainly applies to high VM fine merino wool at present. Prices for the main 17-18 micron combing fleece series of varying VM levels are trading near the peak levels of 2011 and 2000-2001. Despite large discounts for high VM, prices for those higher VM wool types are trading at comparable price percentiles to the low VM levels.
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