Mecardo Analysis - Long staple length discounts

By: "Farm Tender" News
Ag Tech News
Apr 02, 2019
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By Andrew Woods | Source: AWEX, ICS.

This article is bought to you by Glendemar MPM.

A correspondent asked Mecardo about how discounts for long staple length merino fleece (over length fleece as in it is a lot longer than the average length for a given micron category) had changed with time. This article takes a look at eastern Australian over length discounts during the past couple of decades.

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In Figure 1 the price for 110 mm length 17.5 micron merino fleece is compared to a base length of 80 mm (with a staple strength of 35-39 N/ktx). Typically 110-120 mm length wool will make up 0.5% or less of 17 micron volumes. A range of staple strengths (25 to 39 N/ktx) have been used in developing the 110 mm price. The longer staple length wool has been discounted to the base length in recent years by around 5-6%. This discount has been relatively stable for the past 15 years at much smaller levels than seen in the 1990s.

Figure 2 shows a similar analysis for 19.5 micron wool, with an extra 10 mm added to the long and base length. For 19 micron 110-120 mm length makes up around 1% of sales volumes. It shows a different pattern to Figure 1, with the discount trending lower since around 2004. In this case the discount began around 14% early last decade and trended lower so that it has spent the past couple of seasons around a minor 3%. This has been a clear structural change in terms of the relative pricing for long staple length fleece.

2019-04-02 Wool 1

In Figure 3 the analysis is repeated for 21 micron merino fleece wool. Around 1% to 2% of 21 micron wool has a staple length of 110-120 mm. It has a similar pattern to the 19.5 micron, with the discount trending lower since 2007-2009. It has shrunk from around 8% to 2-3%.

2019-04-02 Wool 3

As general rules, average staple length decreases with fibre diameter, average staple strength decreases with the increase in staple length and the proportion of 110-120 mm merino wool is very small. The small volumes of 110-120 mm wool mean they will be slotted into consignments rather than have consignments built around them. This means that there is little or inconsistent notice taken of staple strength and mid-point break for 110-120 mm length wool, so the pricing for these types jumps around according to where a spot has been found to put them.

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An old rule of thumb to price low strength 120 mm wool is to look at the price for 60 mm length wool. The shrinking discounts for 110-120 mm length wool of the past 10-15 years match a similar trend seen in the discounts for shorter staple wool, which fits with this rule of thumb.

Key points

* The discount for 120 mm length 19.5-21 micron merino fleece wool has trended lower during the past 10-15 years.

* The discount for 110 mm 17.5 micron has been relatively stable during the past 15 years.

* Shrinking discounts for long staple fleece match the trend seen in shrinking discounts for short staple wool during the past 10-15 years.

* The proportion of merino wool sold at auction accounted for by 110-120 mm length lots is very small.

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What does this mean?

Discounts for staple length have generally shrunk during the past decade. At the same time discounts for low staple strength have also shrunk, with is consistent with the Team formulae which show that staple length and strength have a similar value when calculating top specifications (they are interchangeable). Having long staple wool does not cost as much as it did 10-15 years ago in terms of lower per kg price.

www.mecardo.com.au