Mecardo Analysis - AWTA Merino volumes slide again
- By: "Farm Tender" News
- Ag Tech News
- Feb 05, 2019
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By Andrew Woods | Source: AWTA, AWEX.
January AWTA core test volumes showed a continuation of recent trends in greasy wool supplies in Australia. Using the excellent AWTA Analytics page, this article looks at the January data and then breaks the data up by state.
Figure 1 shows the volumes of greasy wool tested by the AWTA in January (line) across a range of fibre diameters from less than 13 micron to greater than 30 micron for the Australian wool clip. Overlaid on the graph is the year on year change in volume for each micron category shown.
The standout change in Figure 1 is the rise in volume for 16 micron and finer wool, up by 100% for 16 micron to 400% for 14 micron. The volume series in Figure 1 helps place these changes in perspective, as they are for relatively small volume categories, although the 16 micron category was bigger than the individual 22-24 micron categories in January.
Visual displays can be misleading and in Figure 1 it is the 14% drop in the 19 micron category which is the big change in volume, as this means the overall Merino volume has fallen by a substantial amount in January. The 19 through 22 micron categories (nearly all Merino) continued to fall in January, although at a more moderate rate. Note also the 27 micron and broader category volumes were all lower, matching up with the markedly finer fibre diameter of the crossbred clip.
The AWTA Analytics page (View here) provides up to date (and historical) supply data for the Australian wool clip. Keep in mind the current month data is compared to the same full month a year, so the current month comparison is only valid at the end of the month.
Figure 2 shows the micron price curve (13.5 to 24.0 micron) for January 2019 and a year earlier in January 2018, with the base set to the 19.5 micron category price. The price curves are based average prices for sound, combing fleece without subjective fault. The change in the curve between early 2018 and 2019 is as would be expected for the changes in supply that we have seen. Fine micron premiums have dropped significantly while the discounts for broad Merino wool (out to 22 micron) have shrunk.
Figure 3 shows the actual micron price curves used to develop Figure 2. The story told in Figure 3 is for little change in the 18 micron price. Prices for the micron categories finer than 18.0 micron have fallen while prices for micron categories broader than 18.0 micron have risen. This fits with the changes in relative supply of the different micron categories during the past year.
Key points
* The latest AWTA core test data showed a continuation of recent trends, although the drop in broad Merino volumes is starting to moderate.
* The change in volume seen during the past year matches up with the changes in micron price curves for the same period.
* Fine micron premiums/prices have fallen while broad Merino discounts have shrunk (prices have risen).
What does this mean?
The continued increase in sub-17 micron wool will continue to put downward pressure on fine micron premiums. The reverse applies to broad Merino discounts, although a moderation in the year on year fall in supply will start to ease some of the pressure supporting broad Merino prices. The question then centres on whether the low volume of broad Merino wool will be enough to hold prices up, even if the supply is not falling by as much as it did during 2018.
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