Mecardo Analysis - Mohair update

This article is bought to you Morgans and Loadshift.

By Andrew Woods  | Source: AWEX, Mohair South Africa, WTiN, RBA

Key points

• Mohair prices have weakened during the past year, in line with greasy wool prices.
• The weakness in broad mohair prices has been in line with the weakness seen in fine crossbred prices (in this case the 25 MPG).
• Mohair prices are following the lead of other apparel fibre prices.

Greasy wool prices have had a rugged month, with prices down by 10% to 20% depending on the category. The fall in price, while a surprise in terms of the rate, was in line with the general pattern seen in apparel fibres during the past year. For Australian wool prices, the trend has been masked by the floating currency and interrupted supply of South African Merino wool. In considering other apparel fibres, this article takes a look at mohair prices.

As the Mecardo article from last November discussed, mohair is like wool in the sense that the name covers a fibre of a wide range of characteristics such as fibre diameter. This means that prices for different categories of mohair while following similar trends and cycles, will deviate occasionally from the general price moves in the market.

Figure 1 compares a 31 micron mohair price series and the 25 MPG, both in Australian dollar terms, from 2008 to this month. The 31 micron mohair series followed the general rising trend from 2008-2009 which the 25 micron price has followed. Unlike the 25 micron price, however, the 31 micron mohair price picked up in 2015 when most apparel prices were moving through a low period. In late 2017, the mohair price started to pick up again and held into the spring of 2019 before starting to weaken.

In Figure 2 the exercise is repeated for an adult mohair (37 micron) price series and the 25 MPG from the Australian wool market, from 2008 onwards. The correlation from 2015 onwards is very strongly positive. As part of this correlation, the prices for both series peaked in the middle of 2018, and have been weakening since then, before tumbling in recent months.

Figure 3 compares the 28 MPG from the wool market and the adult 37 micron mohair price series from 2008 onwards. The correlation between the two series since 2015 is reasonable but weaker than for the 25 MPG. In the 2008 to 2014 period the 28 MPG looks to do a better job in explaining the adult mohair price. Note the substantial fall in the 28 MPG in recent months. The lower wool prices are pointing to lower mohair prices.

Figure 4 shows three mohair price series in US dollar terms from 2008 onwards. It shows how the finer mohair series has a lower correlation with the broader mohair series. Mohair ain’t mohair. The US dollar price series are a way of checking on what is going on in Australian dollar terms. The broader micron mohair series confirm that prices peaked in mid-2018, and have been clearly trending lower since.

What does this mean?

Not all categories of mohair move in close concert (the finer mohair prices have held up better in the past year) but they tend to follow similar cycles and trends. Apparel fibre prices are in the grip of a major cyclical downturn, and mohair is following the down cycle. Exactly how much mohair prices will fall is not clear, but the general direction of prices is – down.

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