Knowing the features of wool that influence demand and price
MLA & AWI August 5, 2024
The physical characteristics of wool that determine the price received are heavily influenced by genetics, level of nutrition, time of shearing, contamination (such as vegetable matter), and the way in which the wool is prepared for sale. In addition, any given wool type is subject to supply and demand factors that may alter within a wool selling season (short–term factors) or between wool selling seasons (long–term factors).
The pipeline from woolgrower to consumer is long and complex and which processing route the wool is destined for is generally reliant on its length. A simplified outline is presented below.
Source: AWI
About 70% of Australian fleece wool and skirtings are traditionally destined for the worsted processing sector (more than 60 mm in length) whereby all short fibres are removed. The longer fibres are combed parallel to each other, then spun on the worsted system to create a fine, strong yarn suitable for weaving.
A further 10% goes to the semi-worsted process (45 mm to 60 mm in length) which involves combing the fibres in parallel then being woollen spun, and generally knitted.
The remaining 20% is made into woollen yarn used in knitwear (from fibre less than 40 mm) where fibres are carded (fibre brushed back and forth) with varying lengths of fibre then spun together in a loose yarn which is knitted into garments.
Influence on price
Prices received for raw wool are heavily influenced by physical characteristics. In general, three major physical factors affect raw wool prices adversely in the market: position of break in the middle (POBM); overlong length; and AWTA certification suffix descriptor type. Discounts have been applied by the market to sale lines in the past few selling seasons that exhibited high (more than 85%) POBM readings (when the wool was tested, 85% or higher of the point of break occurred in the middle of the staple, opposed to the tip or base of the staple), lines that tested more than 110 mm in greasy staple length (SL) and to lines with certificates not suffixed with a P (lots that were not classed by an AWEX-registered wool classer).
These fibre characteristics are influenced by flock breeding programs, seasonal factors, on-farm management techniques, and in-shed classing.
Check out MMFS Module 9 Boost Business with Breeding to find out more about choosing sheep that are fit for purpose.
Pasture management throughout the year (see chapter 8.3 in MMFS Module 8 Turn Pasture into Product) and time of shearing strongly influence wool characteristics.
Certification type influences price received. Issues often arise with the lack of enough similar wool to form a grower sale line resulting in wool having to be bulk classed (B & Q certificate suffix) in brokers’ stores, woolgrowers choosing to not use the services of a registered wool classer (D certificate suffix) or small lines not considered commercial by growers or wool selling brokers, which need to be interlotted (I certificate suffix). The market applies discounts to all such certified sale lines, and broker advice is required to determine the best options available.
Lighter individual bale weights can also affect price returns, as per kilogram handling costs increase, which often reduces the amount the buyer and exporter can pay up-front for wool.
Short-term wool market factors
Wool is a global product. Supply and demand factors can influence the raw wool market after growers commit to producing a particular type and style of wool in the current season. These may occur when:
- stocks of wool in the form of tops and yarn build up in warehouses, and spinners slow down purchases of wool top, with corresponding implications for raw wool demand coming back along the supply chain
- the quantity and quality of wool on offer does not match current buyer demand. Unusually or unexpectedly higher number of bales of similar wool types in sale weeks can often bear down on price levels. conversely, lower than expected numbers can place upward pressure on market returns.
- major trading currencies shift, for example, a sudden rise in the Australian dollar may cause wool prices to decline at short notice.
Wool brokers and advisors have current information to help growers better understand these short-term factors.
Buyers also blend fleece wool to meet the specifications of a processor order. This is done because:
- most mill lots are large and cannot be obtained from one sheep producer, or fleece wool of one type
- processing efficiency often requires wool to be of different types and from various growing districts and farms
- it offers processors the opportunity to maintain continuity of supply of a similar blend throughout the year.
The practice of blending affects the supply–demand cycle. Wool of one specification is often blended with different types grown across Australia, as well as wool from other countries, to maintain a consistent, continuous supply of a particular blend required by a purchaser up the supply chain. This may explain price volatility for the same types of wool at auction on the same day and as processor orders are filled.
Long-term wool market factors
Some factors affect the market gradually, over a year or more. This provides an opportunity to respond with the type of wool produced. These factors include:
- An increasing consumer preference for light-weight apparel fabrics. Spinners and weavers have responded accordingly by increasing their demand for finer wool.
- Fashion trends and economic growth in the major industrialised countries. This affects consumer demand for textiles.
- Wool competes with synthetic fibres (polyester and acrylic), and natural fibres (cotton, cashmere, mohair and silk).
- Long-term trends in currency exchange rates.
- Growing casualisation in the workplace is reducing the volume of suits being worn by business people in many traditional markets. Slightly counteracting this trend is the uptake of suiting in some non-traditional wool markets in developing nations.
- Manufacturers are altering production processes to match and anticipate growing demand in markets for wool products, with the outdoor sportswear and next-to-skin lightweight garment sector a target. Formerly worsted spinner manufacturers have or are converting and replacing machinery and production to semi-worsted and knitwear operations, requiring different greasy wool requirements. Generally, this indicates a stronger long-term demand for shorter (40 mm to 70 mm SL) wool.
Breeding a fit-for-purpose animal
The challenge is to breed sheep that fit both the environment and the target markets. Such animals can be considered fit for purpose and are likely to improve enterprise profitability. Sheep producers choose the type of sheep and wool that best suit the farm’s physical characteristics, management operations and production environment. For more information on setting a breeding objective to match a farm and environment, visit MMFS Module 9 Boost Business with Breeding.
After selecting a micron range and breeding line, find out what characteristics or specifications processors require within that wool type, particularly those wool characteristics influencing price.
On-farm fibre measurement can help identify your most valuable wool-cutting sheep and make decisions directly related to your enterprise profitability based on objective information.
Woolgrowers can use AWEX market reports and wool brokers’ reports and advice to research the price implications of proposed changes to their sheep enterprise. The production and management decisions may range from:
- a shift from producing 21-micron wool (on average) to, say, 19-micron wool, while holding fleece weight at current levels; to
- supplementary feeding in times of feed stress or seasonal changes in feed quality to reduce the possibility of tender wool (below 40 Newtons per kilotex {N/ktex}), especially where the position of break would occur in the middle of the staple; or
- changing time of shearing or time of lambing, or increasing stocking rate.
In all cases, it is important to assess price information across a number of consecutive years, use knowledge of the wool market, seek advice from a broker and broker’s management services to interpret the variations in price and consider potential financial gains.
Pros and cons of particular markets
Each wool market has its opportunities and challenges.
Growing ultrafine Merino wool
This is an intensive, risky and highly specialised area of wool production. To achieve maximum returns from an ultrafine (finer than 16.5 micron) enterprise, quality is paramount. Vital attributes needed to achieve a profitable return are:
- high staple strength (SS)
- even and good length of fibre
- the finest micron possible
- exceptional style and whiteness
- a soft handle.
This market sector places extreme importance on excellent preparation of sale lines with an emphasis on uniform staple quality counts and strength. The cloth resultant from this area of production inevitably reaches the shelves of only a few of the world’s leading luxury tailors and commands an exclusive price tag, so any faults are heavily discounted. Low vegetable matter content percentage is essential. An Italian trade adage of “the finer the micron the better the wool has to be” should be kept front of mind.
As there are limited markets for this type of wool, keeping closely up to date on demand is key to being active in this market sector. A well-developed relationship through a wool selling agent to the manufacturer is important, not only in reaching satisfactory price returns, but in staying abreast of the latest technical specifications required and demand expectations.
Growing superfine Merino wool
The most important attributes of superfine wool (16.6–18.5 micron) that influence price received are:
- fibre diameter
- staple strength
- staple length
- position of break middle (POBM)
With most of the production in this superfine category heading for luxury apparel and increasingly to next-to-skin garment markets, buyers of this wool are expecting an overall higher quality raw material than broader Merino types. Ideally the staple strength should be showing a measured reading of above 35 N/ktex. The ideal staple length (SL) of lines should be between 70–90 mm SL as a guide, and as even in length as possible, avoiding mixing short fibres and overlong through the main lines. Quality counts should be visually adjacent and consistent.
As a specialty area of wool production, the superfine market segment also places a strong emphasis on the woolgrower’s clip preparation standards. Woolgrowers can expect to receive a premium for sale lines within an obviously well-prepared clip. Significant discounts are applied to superfine clips that exhibit inconsistent quality and poor preparation, as the better wool in this sector is generally destined for sensitive, higher-value end uses such as Italian men’s suiting and women’s apparel lines.
Growing consumer trends for lighter-weight, trans-seasonal and softer garments that can be worn next to the skin is increasing demand in this sector, with the development of new knitwear items in particular supporting greasy wool price. The high quality of the knitwear currently being produced, and the high-speed machines being used, mean the technical specifications of the greasy wool remain high, even though much of it is not being woven, but knitted instead.
Growing fine, medium and broad Merino wool
The most important attributes of fine, medium and broad Merino wool (18.6 micron and broader) that influence the price received are:
- fibre diameter
- staple strength
- vegetable matter
- position of break middle (POBM)
As this area of production is mostly treated as the ‘commodity market’ of the wool industry, high average fleece weights are vital to a productive and profitable enterprise. The broader the fibre diameter the more weight of wool is needed per head as market pricing reduces lower for each point of a micron.
While the fibre diameter remains the key pricing variance factor, the percentage of position of break (POBM) in the middle test result has grown in its influence on price.
Greasy wool characteristic discounts are less stringently applied by the trade in this category and clip preparation standards are not overly demanding, although minimum Code of Practice standards are mandatory to achieve full market support.
Growing crossbred, downs and carpet wool
The most important attributes of crossbred fleece wool (25–32 micron) that can influence the price received are:
- fibre diameter
- dark and medullated and fibre free
- style and colour
With a hefty portion of the Australian crossbred wool heading into the long knitwear sector, the ability to dye the end garment into modern-day fashion pastel colours remains a key component. Where possible all kemp, medullated and dark fibre should be kept separate, as these faults can lead to heavy discounts for the crossbred woolgrower.
The most important attributes of downs wool (28–36 micron) that influence the price received are:
- compression resistance
- vegetable matter content
The major end-use destination of downs wool is bedding and quilting manufacturing. This requires a spongy quality in the wool, which is the foremost influence on price. Vegetable matter content needs to be low for simply scouring rather than the more expensive (and sometimes damaging) process of carbonising the vegetable matter out of the fibre.
The most important attribute of carpet wool fleece wool (33–40 micron) that can influence the price received is a thick-stapled, durable wool type that will not break down under heavy use.
Australian Wool Production Forecast Report
The AWI Australian Wool Production Forecasting Committee publishes a forecast of Australian wool production three times a year to provide the best possible estimates of future sheep numbers for wool production.
The committee releases its forecasts of production as a press release with a report that provides detailed forecasts, historical data and commentary on the key drivers of the forecasts. This report is a useful planning tool for woolgrowers.
Developing a tailored clip database
Woolgrowers can establish a spreadsheet or use the ‘Clips’ function on Australian Wool Traceability Hub (AWTH) to record their annual production levels and quality and quantity of wool sold. They can then note the price received for each wool type and review these records to track progress towards their wool quality and production goals and embed it in their business plan (see chapter 1.1 in MMFS Module 1 Plan for Success).