Wool’s unrelenting price and marketing debates and a huge drop in total production in Australia have distracted us from seeing a remarkable story – the massive jump in the production of finer wools.
Just as remarkable is how well this sector of the wool market has actually faired in the auction room.
For some time knowledgeable commentators have warned about the dangers of addressing wool issues in aggregated terms.
Wool production delivers a huge spectrum of wool types to the selling room floor – everything from course, carpet-making types to silk-like, soft, upmarket superfine wools and the full spectrum in between.
It’s a vast range and highlighted by an analysis of changes in wool production since the most recent peak in the size of the Australian clip back in 1989-90.
In aggregate terms, in the 19 years from 1989-90 to 2008-09, total production of Merino fleece has dropped by no less than 63 per cent.
Or in other words production in 1989-90 was a whopping 167 per cent more than it was last financial year.
Yet within this aggregate, during the same period, production of fleece wools of 19.5 micron and finer have actually increased by 243 per cent.
You might well ask, how can this be?
First, wools in the 23-, 24-, and 25-micron band have almost disappeared from the woolgrowing scene, with production dropping by 95pc.
Second, for wools in the middle (20-, 21-, 22-micron) production range are down by 54pc according to the Australian Wool Exchange (which provided these statistics).
This movement is basically an economically rational response by our woolgrowers to move production in reaction to price signals and the premiums attracted by finer wools.
This assumes the gross margin premiums can be achieved without a loss of weight (cut per head) that negates the finer wool price premium.
This becomes more relevant given the importance of sheep meat returns today and the correlation between carcase weight and wool cuts.
I think the volume of evidence would suggest that, notwithstanding all the “bad-mouthing” of the industry, Australia’s woolgrowers are not stupid, and this movement reflects well on the flexibility and responsiveness of the industry.
Although I have seen no objective evidence, my observations suggest our stud breeders have done a great job in scaling up the size of finer wool sheep on the one hand and lowering the micron of our stronger wool sheep without a commensurate loss of frame or wool cut.
There is yet another factor at play.
The past decade has seen some very severe drought in much of the production area, albeit at differing times in different areas.
There is a strong correlation between micron and nutrition.
We really do not know how much of this “fining-up” is due to environmental factors and how much to nutrition (“hungry-fine”).
In addition, a lot of country in Far West NSW that once produced stronger Merino wools, has now been converted to running Dorpers, Damaras and goats in a switch to grazing for meat production.
While growers have lamented the level of wool prices, the price premium for finer wools remains, despite an increase in production.
And there has been no positive price response to the dramatic drop in production at the stronger end of the clip, so there seems little doubt what the market is telling us.
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