Mecardo Analysis - Real broad wool prices
- By: "Farm Tender" News
- Ag Tech News
- Dec 11, 2018
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By Andrew Woods | Source: Eurostat, BWMB, Meat and Wool NZ, Beef + Lamb, AWEX, RBA, IWTO, ICS.
A reader has asked about British broad wool prices, (as in mid-30 micron and broader) which make up only a very small part of the Australian wool clip. New Zealand is the key producer, with other regions such as the United Kingdom also producing this type of wool. This article takes a brief look at the prices for these types.
The first issue regarding broad wool is obtaining useful price data. The European database has a range of price quotes for European countries but the quotes are all in greasy terms. New Zealand is the largest producer but with the closure of detailed wool market reporting a decade ago, prices tend to be limited to big averages which are used as indicators. The following has been cobbled together from a range of sources with some IWTO estimates for yield used.
Figure 1 shows annual price series for wool sold in the United Kingdom from 1990 through to 2018. The 2015 boom in crossbred wool shows up in the UK price series. The price series is shown in Australian dollar terms, which flatters the current price. The British Wool Marketing Board view the British clip as very much like the New Zealand (without the sixty thousand bales of Merino wool).
Figure 2 compares a monthly average price for Australian 36 micron wool with the UK price series from Figure 1. The Australian series is an all-in series but limited to a narrow micron range, whereas the UK series takes in a wide range of micron categories (and types). There is some similarity between the two series but also plenty of differences.
Figure 3 compares the UK price series with a cobbled together New Zealand broad wool indicator. The relationship between the two series is tenuous, and the New Zealand series surprisingly is relatively high. The feedback out of China for broad wool of the type New Zealand and the UK produce has been dire and below acrylic fibre prices. Hence the New Zealand series appears to be high.
Finally, the Australian 36 micron and New Zealand series are compared. We know the Australian series is based on good data, even if the volumes are sparse. The two series line up reasonably well, with the biggest discrepancy in the 2018 price where the New Zealand series continues to look out of place.
Key points
* Australian broad wool prices seem to track the New Zealand market fairly well, which makes sense.
* Data from the UK wool market is only a broad indicator and the correlation with the New Zealand market is sketchy at best.
* The current New Zealand broad wool indicator is surprisingly high given the dire nature of that section of the wool market.
What does this mean?
Trying to make sense of the broad wool market is difficult due to the limited price data easily available. This is a reminder to Australian wool growers to cherish AWEX and the role it carries out. The Australian broad micron price series follows the lead of New Zealand prices, which makes sense as New Zealand is the biggest producer by a large margin.
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