Mecardo Analysis - Merino fleece staple length P&Ds
- By: "Farm Tender" News
- Ag Tech News
- Nov 08, 2018
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By Andrew Woods | Source: AWEX , ICS.
Since 2013, the Merino Cardings indicator (locks and crutchings) has spent nearly all the time above 70% of the Eastern Market Indicator (EMI), a level exceeded only in 1987 and 2010 between 1981 and 2013. This has been a period of extraordinary cardings prices, both in absolute terms and in relation to combing wool prices. Since August cardings prices have fallen by a third. In light of this fall, this article looks at the effect of staple length on Merino fleece price in October.
Figure 1 shows the relative price for differing length 16.5 micron Merino wool from short locks, to crutchings, to carding length fleece (30-50 mm) then onto combing length fleece, up to 110 mm. Wool without subjective fault and with a vegetable matter up to 2% was used. The data is for eastern centre wool sold in October. The base price used in the 90 mm length price.
Given the increased supply of fine wool, data was available for all length categories. In October, 68 mm length fleece wool was still trading at minimal discounts to 90 mm length wool. Below 68 mm, the discounts increase steadily as the staple length decreases, ending with the locks discounted to full-length fleece by around 40%. Note, the 110 mm length fleece is discounted by similar levels to 58-63 mm length wool.
Figure 2 repeats the exercise for 18 micron Merino fleece wool. For 18 micron fleece, the discount for 58-68 mm length fleece wool are similar, as are the discounts for carding length fleece.
In Figure 3 the effect of staple length on price is shown for 19 micron Merino fleece. There is a gap in the graph for 30 mm length wool due to a lack of data. It has a similar pattern to Figure 2. Note the minimal difference in price for the 68 to 110 mm length wool.
Finally, Figure 4 repeats the exercise for 20.5 micron Merino wool. There is no crutching or 3050 mm length data. The locks are heavily discounted to the full-length fleece price. Prices for 20.5 micron combing length Merino fleece vary little across the different lengths, reflecting in part the extreme squeeze on supply for broad Merino wool.
Feedback from sales this week indicates that discounts for sub-60 mm length wool seem to be widening, which makes sense in that the much weaker cardings prices are likely to pull the shorter combing length prices lower.
Key points
* Locks are trading at discounts in the order of 35-40% to full-length fleece prices, after a stellar run since 2013.
* Carding length fleece discounts are following the locks/crutchings discounts.
* At this stage, the discounts for 55-60 mm length fleece are holding at modest levels, but the expectation is that they will widen.
* Discounts for long staple length (110 mm in this article) continue to track the discounts for 55-60 mm length wool.
What does this mean?
The price structure of the Merino market is changing, with the drop in the Merino carding indicator of 33% since August. Discounts for carding length wool have widened, and the discounts for short combing length wool are expected to widen as well. This implies the discount for long staple wool will also widen slightly, tracking the short combing length discounts.
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