By Andrew Woods | Source: AWTA, Mecardo
The dry seasonal conditions in eastern Australia are setting the pre-conditions for a smaller wool clip in 2018-2019. How this plays out will ultimately depend on spring rainfall. In this article, we look at the changes currently taking place in the Australian wool clip.
AWTA core test volume data for July shows a continuation of recent trends. In Figure 1 the year on year change for July and the three months to July are shown for micron categories ranging from less than 15.6 micron to greater than 30 micron. 18 micron and finer volumes are rising, while 21 to 23 micron volumes continue to be well below year-earlier levels. Crossbred volumes vary, but on the whole, they are up slightly. Overall the total volume tested by the AWTA was down by around 3% (farm bales) in July and 1% for the three months to July. As usual, change in the total volume masks considerable supply volatility at the micron category level.
The change in individual micron category volumes needs to be weighted by the micron distribution to develop a balanced perspective of the changes taking place. Figure 2 takes the year on year change in volumes for the past three months from Figure 1 and overlays the micron distribution for the past three months (line). The big micron categories by volume are 17 through 20 micron (accounting for 60% of recent Australian production), with the 21 micron category coming next in size (8%) followed by the 27-29 micron categories (9%).
The big changes in volume begin outside of the 17 to 20 micron categories. 16 micron volumes were up by 61% in July (39% for the three months to July) and on the other side, 21 micron volumes were down by 37% in July (31% for the three months to July). In Western Australia, South Africa and South America the 21 micron category remains a major category by volume, as it was in the eastern Australian clip 18 years ago. It is still called a medium micron category (Article on merino micron labels Here) which can be misleading when considering production changes in Australia as it anchors our sense of the average of the clip around 21 micron. In reality, the average micron for the Merino clip in Australia is around 19-19.5 micron.
Seasonal conditions are going to continue pushing the Australian clip finer, perhaps more for the Merino component as the crossbred component will benefit from less extreme conditions in south west Victoria and southern South Australia.
* Recent trends in AWTA core test volumes continued in July.
* Sub 17 micron volumes continue to rise strongly while 21-23 micron volumes continue well below year-earlier levels.
* Volumes for the core 17 to 20 micron category are relatively unchanged at this stage.
* Crossbred volumes are relatively unchanged.
What does this mean?
The merino clip continues to have strong increases for fine micron categories and strong decreases for 21-23 micron categories. This will continue to put contractionary pressure on price differentials between micron categories. Volumes for the main micron categories will start to reflect dry seasonal conditions late 2018 into 2019, especially if spring rainfall proves to be disappointing.