Mecardo Analysis - Non-mulesed premiums for selected fine Merino types
- By: "Farm Tender" News
- Ag Tech News
- Mar 26, 2019
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By Andrew Woods | Source: AWEX, ICS.
Sellers in the greasy market view it in terms of individual lot results, while the buy side views the market from the perspective of consignment averages, with individual lot prices constantly changing to enable required consignment averages to be met. That constant changing makes analysing lot sales data a messy process. Given that caveat, this article takes a look at premiums for selected fine wool (“Italian” for want of a better term) types in recent years.
To set the context, Figure 1 shows the AWEX 17 and 18 MPGs for eastern Australia from mid-2013 onwards in Australian cents per kg terms and is presented as monthly averages. The two series follow each other closely until 2017 when the 17 micron price traded at sizeable premiums to the 18 MPG, before closing in on the 18 MPG again from mid-2018 onwards. Changes in the supply of fine wool explain the majority of this variation in price difference between the 17 and 18 MPGs. A detailed explanation of the makeup of AWEX indicators can be found Here.
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Figure 2 shows two series of premiums for 17 and 18 micron selected types compared to the 17 and 18 MPGs. The selected types aim to approximate the preferred characteristics of specialist fine wool processors in terms of length (70-90 mm), strength (40+ N/ktx), vegetable matter (0-2%) and fault (none). The lots are all Merino fleece, have P certificates and no subjective fault.
In Figure 2 the premiums to MPGs shown vary from near zero to 6-8%. However, if you draw a trend line through the premiums it sits around 3-4% on average. Some forward contracts for Italian processors show a range of specifications they prefer with a matching range of prices/premiums, so the 3-4% premium shown in Figure 2 is really an average of a range of premiums that operate in the market for these selected types.
What about non-mulesed wool? The selected types used to develop Figure 2 were all mulesed or non-declared lots. In Figure 3 the difference between CM-NM selected fine types and those used for Figure 2 is shown. In effect, this is another layer of price effect to be added to the premium to the MPGs shown in Figure 2.
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In Figure 3 a rolling 12 month average of the price effects for 17 and 18 micron wool operated around 0.5% through to 2017, with plenty of variation about this rolling average. In 2018, in particular, from the beginning of this season, premiums for non-mulesed wool started to show up in earnest, with the rolling 12-month averages liftering to be currently around 1.5%. There is still plenty of variation around the rolling average but the premiums for non-mulesed wool have lifted to appreciable levels in the past year, with the effect larger still for comparable 15 and 16 micron wool.
Key points
* The better style 17 and 18 micron Merino fleece types have averaged premiums of 3-4% compared to their MPGs in recent years.
* When a non-mulesed specification is added to these selected types, another 1.5% premium has developed in the past year.
* Premiums for non-mulesed wool in the 15 and 16 micron categories have been even higher in the past year.
What does this mean?
The development of non-mulesed premiums for better fine Merino types has been well reported this season, adding an extra dimension to the premiums already paid for these types. While the rolling 12 month average for non-mulesed premiums is around 1.5%, in recent months it has been more like 3-4% for fine wool. This is the number which should be used when developing valuations for this wool, especially in direct to mill contracts.
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