Mecardo Analysis - Wool prices from other origins
- By: "Farm Tender" News
- Ag Tech News
- Sep 20, 2018
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By Andrew Woods | Source: AWEX, RBA, IWTO, Cape Wools, Prolana, SUL, BWMB.
Greasy wool is produced across the world, and with the decline of volumes produced in Australia wool from other origins has increased in proportion of world supply. Modern communications, starting with the international telegraph in the late 19th century, has moulded the international greasy wool market into a closely interconnected set of smaller markets. This article takes a look at prices from a range of smaller markets.
As is often mentioned in these articles “wool ain’t wool” so we need to be careful in comparing different price series in case they represent quite different types of wool. Figure 1 shows 20 micron price series for Australia (eastern MPG) and South Africa, from 2007 onwards. The prices are presented in Australian cents per kg terms on a clean basis. The Australian and South African series follow each other very closely (keeping in mind the South African wool is quite short).
Figure 2 compares an Argentine average greasy wool price (right hand axis) and the Australian eastern 21.5 MPG (left hand axis) from 2007 onwards. The main micron category for Argentina is around 21 micron but there is a wide fibre diameter produced and the clip is partially processed before export. However, the general movement in the Australian 21.5 MPG explains most of the movement in the Argentine price series.
The Uruguayan wool clip is more complex, with the 28 micron category being the largest category by volume in addition to a sizeable merino proportion. Figure 3 attempts to cover this by comparing the Uruguayan price series with the Australian 23.5 and 28.5 MPGs. The Uruguayan data only runs to mid-2017, and the Australian 28.5 MPG does a reasonable job of aligning with the South American series.
In Figure 4 we switch to the northern hemisphere and look at a wool price series out of the United Kingdom. In Figure 4 the UK price series is compared to a 36 micron price series from Australian auctions from 2007 onwards. The two series follow each other quite closely.
The comparisons shown in this article reveal a greasy wool market that is well aligned between the different geographic regions of production.
Key points
* Wool prices for similar wool types between geographic regions are closely aligned.
* The implication is that the buy side views wool supply from a world perspective (quality allowed), not a regional perspective.
* We should understand supply changes in the other regions to complement our local supply knowledge.
What does this mean?
When thinking about wool sales, prices and supply, Australia needs to understand the close integration of the different geographic regions in the supply chain. Wool price series from South Africa, Australia, South America and the UK shown in this article demonstrate the integration of these markets by their strong correlations. Our horizons, when thinking and planning for the industry, need to extend beyond the shores of Australia.
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