On the danger of repetition, wool is an industrial commodity, with a protracted provide chain, that means its basic value degree is pushed by demand from the foremost economies of the world. Grain, oilseeds and meat are agricultural commodities the place the steadiness of provide and demand is a extra essential and fast driver of value, with a shorter provide chain. Given this background, anticipating wool costs to rise considerably whereas the foremost economies of the world wrestle (particularly China and Europe) is an train in disappointment.
Wool is one group of attire fibres amongst a a lot bigger market of fibres (136 million tonnes). Totally different sections of the wool advanced have various relationships to different fibres, with a basic rule being that the broader the wool, the higher the connection to artificial staple fibres (see extra right here). The staple fibre group (wool, different animal fibres, linen, cotton, polyester, acrylic and viscose) are likely to react to frequent macroeconomic alerts, having related rising and falling cycles besides the place some issue peculiar to a fibre pushes that fibre out of line.
Determine 1 reveals the connection between merino wool and a weighted common value for cotton, polyester, acrylic and viscose (NWSF – non wool staple fibres) for the previous twenty years and nominal Australian greenback phrases. Merino costs outperformed in 2017-2019, as did the NWSF in 2010-2011 (pushed primarily by cotton). For the reason that pandemic dip in value in 2020, merino and NWSF have moved carefully collectively, till the present season. In 2024-25, the merino value has managed to extend whereas the NWSF has tended to be decrease. The worth ratio for merino (the common merino fibre diameter, MPG) has risen from round six to seven. Decrease provide has been working, pushing the wool value up relative to the final degree of the foremost staple fibres.
Determine 2 compares the rolling 12-month change (3-month smoothed) within the merino and NWSF in Australian greenback phrases. This reveals extra clearly the frequent value actions the 2 collection usually share.
Determine 3 repeats Determine 2 in US greenback phrases, the place the optimistic correlation between the 2 collection is kind of excessive. From a provide chain perspective, that is how the merino market can be seen. Whereas merino (and crossbred) wool costs are unexciting, they’re unexciting according to the foremost staple fibres.
