Mecardo Analysis - Merino wool supply is low and tricky to analyse
- By: "Farm Tender" News
- Ag Tech News
- Oct 16, 2018
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By Andrew Woods | Source: AWEX, ICS.
Merino wool production in Australia (which given low stock levels equates to supply) is a hot topic in the supply chain. Participants are coming to grips with a market which has strong demand, greasy wool supplies (already low) under pressure from drought and no real supply management beyond turning up at auctions, assuming what was offered last year will be offered again this year. Against this background, this article takes a look at Merino fleece wool sales by micron by region.
As past Mecardo articles have pointed out, different regions produce different categories of wool such as categories of fibre diameter and categories of breed. Figure 1 shows the monthly volume of sales for Merino fleece between 12 and 17 micron for wool from three regions. The regions are Western Australia, pastoral regions in eastern Australia (which the sweep of country from northern South Australia, through western NSW, including the north west plains up into Queensland – not including the Traprock region), and eastern non-pastoral regions (in which the Traprock region is included).
It clearly shows that the majority of 12-17 micron wool comes from the non-pastoral eastern regions. Some 80% of this fine Merino wool comes from the higher rainfall zones in eastern Australia. While volumes vary from year to year, there has been no real trend in supply since 2013. In other words, it has been stable. What Figure 1 tells us is that change in sub-18 micron volumes depends very much on what happens in these eastern regions in terms of seasonal conditions and enterprise mix.
Figure 2 shows the same analysis for 18 to 20 micron Merino fleece, the core micron categories by volume. For these core micron categories, around 60% comes from the eastern non-pastoral regions and 20% from both the eastern pastoral and Western Australian regions. Volume in Figure 2 also shows no real trend since 2010.
Figure 3 repeats the exercise for 21-24 micron Merino fleece. About half comes from the eastern non-pastoral regions, 30% from the eastern pastoral regions and 20% from Western Australia. The picture for 21-24 micron Merino wool clearly shows a drop in volume from around 2010-2012 and a steadying in volume between 2014 and 2017. Since 2017 volume has stepped down again, on the back of drought in Western Australia and then eastern Australia, centred on the pastoral regions.
Apart from showing the different trends in supply for the different micron categories of Merino fleece, the three figures also show the different weight the regions have with regard to micron categories.
Key points
* Eastern non-pastoral regions dominate the supply of 12-17 micron Merino fleece (accounting for about 80% of supply).
* The supply of 21-24 micron Merino fleece (the broader side of the distribution) is more evenly distributed between regions with 30% coming from the eastern pastoral regions and 20% from Western Australia.
* Analysis of supply of fine and broad Merino production needs to take into account the markedly different regions sources of supply.
What does this mean?
In a world of limited Merino wool supplies, substantial changes in supply are challenging as the supply chain has no insurance policy. We have seen some very substantial changes in supply in 2018 for broad Merino wool (down dramatically). This drop has been driven by Western Australia and then the eastern pastoral regions, as a function of dry conditions in these areas. Now we are going into a period where fine wool production will rise markedly, as a function of dry conditions in the eastern non-pastoral regions.
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