South African wool auctions have been suspended while issues regarding wool exports and the foot and mouth outbreak this year are sorted out.

Mecardo took a look at recent South African volumes in relation to Australian volumes, to give some perspective on how the temporary absence of South African wool should influence wool prices.

Figure 1 uses volume data from Cape Wools‘ report last week and compares it to Australian volumes. It shows the volume in farm bales for four micron categories. Less than 19.1 micron is the big category for Australia (19,983 farm bales), while the 20.1-22 micron category is the big category for South Africa (4,729 farm bales). The South African volume for 20.1-22 shades the Australian volume by 364 bales or 8%. On the surface, this looks to be a severe drop in volume for 20-22 micron wool, at a time of severe under-supply in Australia. The dollar rise in price on Tuesday makes sense from this perspective.

The South African wool clip has a short staple length compared to Australian wool (Prem wool supply August 2018) so we need to look more closely at the specifications of the wool supplied by South Africa. Figure 2 shows the volumes of wool 75 mm and longer which was offered in Australia and South Africa last week, in the same format as Figure 1. The volume of South African wool falls away, although the South African 20.1-22 micron category still supplied about 29% of the combined South African and Australian supply. The South African volumes for the other micron categories were inconsequential.

Figure 3 compares the volume of wool with a greasy staple length of 55 to 75 mm. For this category, South Africa exceeds the Australian volumes for 19.1-20 and 20.1-22 micron. South African volumes for less than 19.1 micron remain inconsequential.

Figure 4 repeats the analysis for wool less than 55 mm in length. For this length wool, South Africa was the dominant supplier last week for 19.1 to 22 micron.

The data shows that the reaction by an already chronically undersupplied broad Merino combing market makes sense, without telling us whether the dollar jump in price is an appropriate size change. The data shows that the supply of shorter length combing wool and cardings in the 19 to 22 micron categories will be severely affected while the South African auctions are in suspension. Any price effect for these categories will not be reflected in the Australian MPGs which focus on the full-length types.