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Beyond the Bale : June 2017
Woolgrowers who tuned in to a recent webinar run as part of the Making More From Sheep (MMFS) Summer Webinar Series learnt some useful insights into the latest trends in wool price discounts. The guest speaker on the webinar was wool market analyst Andrew Woods from Independent Commodity Services in Wagga Wagga, NSW. For those who missed it, the 'Wool Quality Discounts' webinar was recorded and is available free via the MMFS website. It comprises a half hour presentation by Andrew, plus a half hour Q&A session in which Andrew answered approximately 20 questions from webinar viewers. "Woolgrowers can avoid discounts at auction by producing wool with the characteristics that are valuable to buyers, processors and consumers," Andrew explained. "While micron remains the major driver of price premiums and discounts -- accounting for about two-thirds of the variation in price for clean fleece wool -- the price of wool sold at auction varies according to several other characteristics. These include staple length and strength, point of break and vegetable matter. However, the degree that some TRENDS IN WOOL QUALITY DISCOUNTS A recent webinar provided an assessment of present day wool quality discounts in a historical context to help woolgrowers understand what the future may bring, and what this might mean for the management of their wool flocks and marketing of their clip. of these characteristics have an effect is changing over time." OBJECTIVELY MEASURED CHARACTERISTICS Andrew explained that discounts for staple length and strength in the Merino market have been shrinking over the past two decades. "Discounts for length and strength have become markedly less. We were absolutely hammered for selling overlength, underlength and low strength wool in the late 1990s -- in the case of 19.5 micron 56-60mm wool for example, discounts for the short length could be 25-35%, whereas now they'd be around only 5%," he said. "Short and long staple prices tend to be similar -- where short staple discounts go, long staple discounts tend to follow. Hence long staple discounts have been shrinking over time in step with shrinking short staple discounts. Discounts for Merino pieces have also tracked short staple length, and therefore become smaller over time. "Length and strength are generally interchangeable (although there can be some slight variation). A drop of 5mm in length but with a rise of 5N in strength will create a reasonably similar outcome. Consequently, low strength wools have also had shrinking discounts over the past couple of decades. "The current low discount for staple strength won't change the value of your wool by much, especially at the finer end. This can have implications for longer term budgeting, such as if you are chasing genetics for staple strength then there might be a large opportunity cost in doing so." Andrew said discounts for mid break are tied in with staple strength premiums and discounts. "However mid-break is highly seasonal -- peaking around about Christmas time -- and its pricing tends to correspond to that supply. "Discounts in c/kg terms for vegetable matter (VM) haven't changed much over time, but discounts have decreased as a percentage of wool's value because the EMI has increased over time. Occasionally there are a couple of good seasons back to back which leads to VM levels markedly above the average, especially in the pastoral zone. This is when discounts for VM increase in response to the extra fault in the clip." SUBJECTIVELY ASSESSED CHARACTERISTICS Subjectively assessed characteristics cover a wide range and include colour, water stain, mycotic dermatitis, cott, jowls, stain, mud, medullated fibres, fribs and dags. Supply varies with seasonal conditions. Andrew said discounts vary depending on supply and the buyers' assessment -- when wool supply exceeds demand, these characteristics can become a big issue for a buyer, but when the supply is scarce these characteristics don't worry the buyers so much. PREPARATION AND UNSKIRTED FLEECES Andrew said crossbred wool suffers from variation in preparation quality, associated with unskirted wool (about 30% of crossbred wool is sold unskirted) -- and poorly prepared crossbred wool tends to sell for 300 cents clean or less. For unskirted Merino fleeces (only about 1.9% of Merino wool is sold unskirted), Andrew said it can be tricky to predict how large the discount is going to be on the day. A slide from the webinar. Short staple length is one of several wool characteristics that have enjoyed decreasing discounts over the past two decades. 52 ON FARM