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Beyond the Bale : September 2012
35 ON-FARM September 2012 BEYOND THE BALE STAPLE LENGTH PREMIUM ( DISCOUNT) RELATIVE TO WOOL 70 80MM (C/KG CLEAN) ULTRAFINE SUPERFINE FINE MEDIUM BROAD <16.5um 16.5- 18.4um 18.5- 20.4um 20.5- 24.4um >24.4um Not measured -494 -224 -114 -61 -9 20-30mm -491 -270 -195 30-40mm -686 -372 -218 -150 -52 40-50mm -543 -228 -142 -110 -47 50-60mm -575 -197 -112 -94 -44 60-70mm -233 -86 -50 -35 -26 70-80mm Base case for comparison 80-90mm 36 10 7 5 9 90-100mm 75 7 4 5 11 100-120mm 42 NS -6 NS 8 >120mm NS -128 -76 -49 15 Table 3: Premiums and discounts for staple length relative to 70-80mm wool Micron premiums in the ultrafine and fine wool categories fluctuated over the years. In 2007-08, the premium for ultrafine wool reached a high of 934c/kg. However, the gap between premiums paid for ultrafine and superfine wool narrowed in 2010- 11, when the ultrafine premium was 292c/kg clean compared to a superfine premium of 182c/kg clean. CATEGORY PREMIUM C/KG CLEAN % OF CLEAN PRICE Ultrafine <16.5 micron 544 30 Superfine 16.5-18.4 micron 112 10 Fine 18.5-20.4 micron 103 11 Medium 20.5-24.4 micron 32 4 Broad >24.4 micron 31 7 Table 2: Average premium for a 1 micron decrease in fibre diameter Figure 2. Contributors to variation in clean price (whole sample) MICRON PREMIUMS REMAIN A number of wool characteristics and external factors contributed to variation in wool prices over the seven years of the sample period (see Figure 2). However, micron remains the major driver of price premiums and discounts, accounting for two-thirds of the variation in price for clean fleece wool. Premiums for diameter in superfine, medium and broad wools remained steady across the seven selling seasons, in percentage terms. DISCOUNTS FOR SHORT STAPLE LENGTH The majority of ultrafine, superfine, fine and medium wool lots were measured for staple length, staple strength and midpoint break. However, only 21 per cent of broad wool lots were measured for length and strength. Large discounts applied to wool lots not measured for length, strength and mid-point break, with wool lots without length measurements attracting the largest price discounts (see Table 3). Small premiums were paid for staple lengths of 80-120mm for most wool types. However, discounts increased when staple lengths were shorter than 70mm, and could be severe for most wool types below 60mm. There were premiums for length 80 mm to 120mm even for the ultrafine and superfine wools. The review also highlighted interactions between midbreak percentage and staple strength. While midbreak percentage attracted discounts when wool was tender, the discounts were minimal when wool was strong. OTHER INFLUENCES ON WOOL PRICE Discounts were very small for vegetable matter content below 4 per cent, and decreased during the review period, largely because dry conditions prevailed. The full report on the study also discusses price variation impacts from: l Style (1%) l Exchange rates (4%), GDP in key markets (2%) and prices of substitute fibres (1%) l Faults excluding vegetable matter (1%) l Other market variables including sale day and location, mulesing status, fleece preparation type and others (7% combined). 12 per cent of wool price variation over the seven selling periods could not be explained by the categories used in the models (ie shipping deadlines etc). An awareness of which wool characteristics are valuable to buyers, processors and consumers will help woolgrowers produce wool that better meets the market. Taking a market focus to production is the basis for better management of price risk, selling to advantage, and improved profitability. AWI products like the Market Focused Wool Production module in the Making More From Sheep manual (www.makingmorefromsheep. com.au) provide a background to wool enterprise planning. Links to other modules on managing business and people, pastures and natural resources, and sheep production are designed to make it easier to maximise the characteristics of your wool that are most valuable to your buyers, processors and consumers. More information: The Economic Value of Fleece Wool Attributes 70 page report will be soon on www.wool.com. The report's availability will be advised in AWI's monthly woolgrower e-newsletter. To subscribe, send an email to email@example.com with "Please subscribe me to the AWI Woolgrowers' Newsletter" in the subject line. 1% Prices of substitute fibres 67% Micron 1% Styles 2% GDP 7% Other 3% Length 1% Contaminants 1% Stength 4% Exchange rates 12% Unexplained 1% VMC