- Average Merino sheepskin prices for items free of vegetable matter (VM) rallied 88% from 1043 cents per skin at the start of 2021 to test 2000 c/skin.
- Merino skins with heavy VM recorded a 115% lift over the first half of the season from an average price of 785 c/skin to hit 1690 cents.
- On average, Merino skins that are free of vegetable matter (VM) hold an 18% premium over skins with heavy VM.
- China dominates the purchase of Australian sheepskins with more than 90% of the trade flows.
The tight supply of lamb and sheep are impacting more than just saleyard and meat prices with a lift in offshore demand for sheep skins pushing prices toward record highs. Average Merino sheepskin prices for items free of vegetable matter (VM) rallied 88% from 1043 cents per skin at the start of 2021 to test 2000 c/skin.
Merino skins with heavy VM have not been precluded from the rally, posting a 115% lift over the first half of the season from an average price of 785 c/skin to hit 1690 cents.
Analysis of the spread between Merino skins that are VM free compared to skins with heavy VM highlights that over the long term VM free skins achieve an average premium of 18% to skins with heavy VM. While it is not uncommon to see the VM free premium fluctuate between 10% to 25%, movements in the premium beyond 32% or towards a discount are fairly rare.
Currently the premium spread of VM free Merino skins to heavy VM skins sits marginally above the long-term average at around a 19% premium.
Taking a look at Australia’s key export markets for sheep skins highlights the dominance of the Chinese buyer with more than 90% of the flows going to China over the past five years with anecdotal reports of an increase in Chinese buying activity in 2021 that is behind the recent price surge.
In 2020 China accounted for 93.8% of the Australian sheep skin export trade, followed by Turkey on 1.1% and Russia in third place on 0.8%. Over the last five years China has averaged 92.3% of the Australian export trade of sheepskins. Meanwhile, Russia and Turkey have averaged 3.0% and 1.2%, respectively.