Mecardo Analysis - Strong crossbred prices in Australia – what about New Zealand?
- By: "Farm Tender" News
- Ag Tech News
- May 01, 2019
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By Andrew Woods | Source: AWEX, RBA, PGG Wrightson.
This article is bought to you by Forest Springs Merinos.
In January Mecardo looked the correlations between Australian crossbred and New Zealand wool quotes. The correlation for full length 28 micron wool is good but gets weaker as the fibre diameter broadens above 30 micron. Given the 30% or so jump in Australian crossbred prices since January, we review how New Zealand wool prices have fared in recent months.
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Prices shown in the article are all in Australian dollar terms. New Zealand prices have been sourced again from the PGG Wrightson website, with AWEX MPG’s used for 28, 30 and 32 micron and average auction prices used to generate broader micron prices for Australia.
New Zealand, as the primary producer of 38-39 micron wool is the benchmark market for broad crossbred wool. With PGG Wrightson reports, New Zealand wool prices are available in a detailed and regular manner. For 30 micron and broader wool, New Zealand prices offer a more stable view than Australian prices, simply because they are coming from a bigger market.
Since January, the 28 MPG in Australia has jumped by 30%. Figure 1 shows the Australian 28 MPG and a 28 micron price series for New Zealand. The New Zealand series runs only to March, but tracked close to the percentage rise seen in Australia.
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Figure 2 shows the 32 micron price series for Australia and New Zealand. The Australian series is up by 31% since January and the New Zealand series by 24%.
In Figure 3, Australian and New Zealand price series for full length 34 micron fleece wool are shown, along with a shorter length 35 micron New Zealand second shear. The full length series have jumped by 40% since January, while the shorter length series is effectively unchanged. In the earlier article, Mecardo thought the Australian 34 micron series might follow the shorter New Zealand series more than the full length price. This idea has been debunked in the past three months.
What about the main New Zealand micron categories – 38 and 39 micron? These are shown in Figure 4 and we see they have eased in price slightly this month. They are some 2% higher than in January but at this stage, the strength seen in the finer crossbred categories is not showing up for these broad carpet wools. Wools ain’t wools.
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Key points
* The rise seen in the 28 to 34 micron categories in Australia is reflected in the New Zealand price series.
* Beyond 34 micron, the price rises peter out with the 38-39 micron categories hardly changed since January.
* The New Zealand wool reports continue to be useful for 32 micron and broader wool producers in Australia.
What does this mean?
Carpet wool prices are not rising as the mid-micron/Australian crossbred categories are. The 30-40% increase in 28 to 34 micron prices in the space of three months has been dramatic, albeit from very low levels by the standards of the past decade. Despite all this, the 34 micron category price remains very low in relation to the finer 28 micron price, so these broader category prices are not likely to fall away.
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