By Andrew Whitelaw | Source: AWEX, Cape Wools SA, ICS
Mecardo has looked at the supply and price of short staple merino fleece in recent years. As the market moves into the spring, away from the peak period of short staple fleece supply, it is timely to check back on how supply went in 2017-18.
In April last year, we looked at the change in short staple fleece supply for a range of micron categories. Figure 1 shows the annual (wool season) proportion of merino fleece ranging from 50 to 69 mm greasy staple length sold for 21, 19.5 and 17.5 micron combing fleece with vegetable fault less than 2.5%. The series runs from the mid-1990s to 2017-18. As earlier articles have pointed out, the proportion of short fine merino fleece is lower than in the 1990s, as shown by the 17.5 micron series, although the proportion for this series did pick up in 2017-18. For 19.5 and broader micron categories, the proportion of short staple fleece sold has lifted markedly during the past three seasons. The lift in proportion tends to be greater for the broader micron categories.
Figure 2 shows the monthly proportion of short 21 micron fleece sold since the mid-1990s. There is a regular seasonal pattern in this proportion, reaching a minimum around June-July and a maximum in April-May. In April the proportion of short 21 micron fleece reached 24%. The July proportion was 14%, which is a high seasonal minimum by historical standards. It seems the trend to shorter fleece is increasing.
The South African merino clip (which accounts for about two-thirds of the South African clip in greasy terms) has an average micron in the 19-20 micron range, similar to Western Australia. The point of difference to the Australian clip is staple length. Figure 3 shows the distribution by staple length for the merino clips in South Africa and Australia for 2017-18. Some 50% of the South African clip is 50-60 mm long, while the main staple length categories for Australia are 90-100 mm. It seems South Africans have also moved to shear more frequently.
While the South African merino clip accounts for around 12% of the Australian merino clip (clean basis), the skewed nature to short staple wool in South Africa means their production is sizeable in relation to shorter staple length merino production in Australia. Figure 4 shows the South African merino production as a proportion of Australian production by staple length for 2017-2018. For 60 mm length merino wool, South African production accounts for around 44% of our production. For 90 mm length merino wool, the proportion falls to an inconsequential 1%. This analysis is a good example of why the main southern hemisphere wool clips should be considered in conjunction, to better understand supply and its effect on price.
* The recent trends for increased supply of short staple merino have continued in 2017-18.
* South Africa merino production is short by Australian standards.
* South African production needs to be incorporated into assessments of the price effect of increased short staple wool supply.
What does this mean?
The continued increase in the proportion of short staple wool sold at auction in Australia is likely to put pressure on the price differentials between staple lengths, especially if the existing trends continue. The staple length of the South African clip is short and contributes greatly to the Australian supply of short merino wool.