Mecardo Analysis - Top 20 weekly wool price rises in past three decades

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By Andrew Woods | Source: AWEX, ICS 

Key points

· The price rises last week favoured the broader merinos, cardings and crossbreds with many of these categories enjoying their biggest one week rise in price in 30 years in c/kg terms.

· The average merino micron price enjoyed a strong rise but in proportional terms it was "only" the thirteenth largest weekly rise of the past three decades.

Following a horror August when greasy wool prices plunged in a manner not seen since the fall of the Reserve Price Scheme, April 1973 and late 1951 (everyone remembers the peak but not the subsequent retreat in prices) the market staged a recovery last week. This article takes a look at last week's rises and ranks it against weekly changes during the past three decades.

The first thing to note about the price rises from last week is that they were not evenly spread. Figure 1 shows the week on week rises by AWEX indicator, in cents per kg terms (bars) and percentage terms (line). The 19.5 to 21 MPGs had the biggest rises in absolute terms, with the Merino Cardings beating them in percentage terms. If this was the Australian wool clip from 10-15 year ago it would show the major micron categories rising. Last week the average merino fibre diameter was 18.74 micron, so the big rises were on the broader side of the merino distribution, with the finer microns having modest rises.

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It is a similar story in US dollar terms, except that the proportional rises are slightly greater, reflecting an increase in the exchange rate in the comparison week.

Figure 2 shows the proportional fall in price level by AWEX indicator from mid-July to the first week of September. It shows the 20-25 micron categories suffering the biggest falls. It makes some sense then that in the subsequent recovery rally this week these categories enjoyed the greatest rises.

So, where does last week's rally stand in relation to historic weekly price rises? It all depends on which indicator is analysed. For the 19 and 21 MPGs it was the biggest one week price rise in 30 years, and in proportional terms it ranked third for the 21 MPG and fifth for the 19 MPG.

For the average merino micron combing price the rise was more sedate. Figure 3 shows the top 20 weekly price rises for the average merino micron from the past 30 years. The rise last week ranked thirteenth, a solid but not spectacular lift in price. In absolute terms (c/kg) it was the third largest weekly rise in the past 30 years.

In contrast for merino cardings it was the biggest price rises in both absolute and percentage terms of the past three decades. For the 28 MPG is was the second largest week on week price rise fo the past 30 years.

What does this mean?

A big lift in price following an even bigger fall in price is no great surprise, the key uncertainty being the timing. Price regained nearly half of their recent falls for the broader merino categories, all in the space of a day and half of trading with prices easing on Thursday afternoon. The speed of the retracement was unusual, usually taking weeks if not months to achieve. This fast rate of price rise, which looks to have topped already, indicates that the price volatility of the past couple of months is still with us so be prepared for more big weekly changes in price.

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