Mecardo Analysis - AWTA volumes slip again in October
- By: "Farm Tender" News
- Ag Tech News
- Nov 06, 2018
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By Andrew Woods | Source: AWTA, ICS.
With sheep sales continuing at a contractionary level, the supply chain continues to watch Australian greasy wool supply information closely. The best supply data comes from the AWTA which this article looks at.
The full effect of drought on wool quality and supply normally manifests itself in the calendar year after the failed spring, which is the effective definition of drought in southern Australia. In September AWTA core test volumes fell unexpectedly by a large 19%. Such a large fall, so early in the season, was discomforting, to say the least. In October total volume (farm bales) fell again, but by a more sedate 6%.
As usual, the real story about supply volatility lies in the individual micron categories. Figure 1 shows the year on year change in volume by micron category for the past month and past three months. The three-month data helps smooth out timing issues such as holidays and weather interruptions. In a drought year, wet weather interruptions are low so shearing tends to be brought forward.
Broad Merino volumes continue to be under considerable downward pressure, with volumes down by 20-50%. Keep in mind that the supply of these categories fell sharply early in 2018 and have stayed well below year-earlier levels since. On the flip side, the dry conditions in eastern Australia are showing up in the increased supply of sub-19 micron wool. The finer the micron category, the greater the increase in supply, with less than 16 micron volumes over double year-earlier levels.
Fine crossbred volumes picked up in October while the main Australian crossbred category volumes were also well below year-earlier levels.
In Figure 2, the year-on-year change in volumes is shown along with the micron distribution of wool in the Australian clip for the past three months. The micron distribution curve helps put the changes in volume by micron in perspective. The core Merino 19 micron category volume is effectively unchanged. It is the micron categories on the edge of the breed distribution which has the greatest supply volatility.
Key points
* The overall volume of wool tested by the AWTA fell by 6% in October, that’s on top of the surprise 19% fall in September.
* Drought continues to push the micron distribution finer, with increased fine wool and decreased broad Merino wool volumes being produced.
* Fine crossbred volumes were up in October, while the main crossbred micron categories volumes were down.
What does this mean?
While the overall market level will respond to the changing interaction between supply and demand, changing supply will continue to put pressure on micron price curves leading to their flattening (where they are not already flat or inverted).
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