Mecardo Analysis - Wool supply trends continue
- By: "Farm Tender" News
- Ag Tech News
- Jan 08, 2019
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By Andrew Woods | Source: AWTA.
The latest (December 2018) AWTA core test volumes show a continuation of recent trends. Under-supply remains a big issue for the broader Merino micron categories through the supply chain, while sub-17 micron volumes are in surplus. This article reviews recent volume data as a refresher.
Following the big 21% drop in November wool volumes, the AWTA total was down 8.1% (farm bales) in December. This was less than the progressive fall of 11.9% for the season to December. Volumes have been dropping compared to year-earlier levels since August, which is earlier than is normally expected in a drought year.
Figure 1 shows the year on year change in volumes by micron category for December and the three months to December. The pattern shown in Figure 1 is a simple continuation of recent months. 21 micron volumes continue to be 50% below year-earlier levels, a massive fall for a key micron category in the supply chain. The core 19 micron Merino category volume is down 10%, which is also a big fall in volume for a core micron.
Fine crossbred volumes are up slightly, with crossbred wool coming in finer than year-ago levels due to the seasonal conditions. The average fibre diameter for combing crossbred wool has been finer by 0.93 to 0.98 micron during the past three months.
Figure 2 compares the change in volume by micron category for the past three months overlaid with the volume distribution by micron for the Australian wool clip during the past three months. The micron distribution helps put a weighting on each micron category. It shows the 18-19 micron and 27-30 micron categories to be the peak micron groups for Merino and crossbred wool respectively.
Key points
* Recent supply trends in the Australian wool clip continued in December.
* 16 micron and finer wool volumes continue to be way in excess of year-ago levels.
* Broad Merino volumes continue to come in at spectacularly low levels.
* Crossbred volumes have also been affected by the dry seasonal conditions.
What does this mean?
The constrained supply of medium to broad Merino wool probably means that Merino wool prices will outperform the general apparel fibre markets. That does not mean prices cannot fall, as that depends in part on the general movement of apparel fibres which have been weakening this season. Sub-17 micron volumes will continue to put downward pressure on price premiums (imagine what would happen to lamb or wheat prices if the supply jumped by 60-100%). Crossbred prices seem likely to languish according to feedback out of China.
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