Reports of new crossbred business proved to be correct, with the 28 MPG lifting by 8% (and holding above US300 cents). It was a week of firmer prices for 20 micron and broader wool, with finer micron prices easing. In sum, the micron curve which is still steep by historic standards, flattened out slightly.
This trend should persist into mid-2022, as a function of changing supply trends now that the post drought recovery in seasonal conditions in eastern Australia has run its course. What happens beyond mid-2022 depends in large part on seasonal conditions in 2022, which we will have to wait to see unfold.
On a more immediate topical subject, Cape Wools in South Africa are reporting very large premiums for merino fleece wool which is accredited to RWS. Such premiums will be sensitive to the volume of supply, so presumably a substantial increase in supply would lead to lower premiums, which is something to keep in mind.
In addition, for fine merino wool the specification of a wool lot is important to whether it achieves a premiums. For broader merino wool there is a wider scope of specifications which will be acceptable.
The fall in merino micron is taking place mainly in Victoria (including the Riverina) and South Australia, with Western Australia still broadening by 0.5 micron. Supply of fine wool is picking up as a consequence. Premiums for RWS accredited lots are sensitive to subjective fault, staple strength and staple length.
The 19 micron category is the middle/average of the Australian merino clip. As such it did not change much this week as the finer micron categories weakened and the broader micron categories strengthened. Discounts for vegetable matter around 2% continue to shrink.
Reports indicate that demand for wool to be used in Chinese uniform orders (focussed on 21-22.5 micron) were the driver in the market. These micron categories have been extremely cheap in relation to the medium/fine merino categories and also offer the prospect of delivering hard wearing cloth. Reported premiums for RWS wool in South Africa are around 20%, so it will interesting to see if this is repeated in Australia.
The 28 MPG looks to have found some support around US300 cents. It appears that some Chinese uniform orders with a broad micron average might use a blend of medium merino and finer crossbred to bolster the supply of broad merino wool, hence the improvement in crossbred prices.