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Mecardo Blog

How do wool minimum price contracts work?

Posted by Matt Dalgleish on 17 October 2018

Markets can be volatile, however there are a number of tools which are available to reduce the risk of adverse price movements. 

There are two predominant strategies to reduce the effect of price volatility when selling wool. These are by using a forward contract or using a minimum price contract (MPC). In this article we examine the MPC, and how it can be used by producers.

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Topics: Australian wool industry, Wool market / wool price, Risk management

Are you sure the wool market can only go up?

Posted by Robert Herrmann on 11 July 2018

The wool market has finally shaken off the disappointing prices of the 1990’s and early 2000’s to currently sit at levels many wool producers have longed for.

As in the past when markets surge, the underpinning fundamentals for the strong market support a positive outlook into the future.

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Topics: Australian wool industry, Wool market / wool price

Has the wool game changed?

Posted by Robert Herrmann on 8 December 2017

As Charles Massy explains, from the 1840s wool was the backbone of the national economy. Indeed, in the mid-20th century, Australia boasted the greatest wool industry the world had seen.

 

In this article, we ask, has the wool game changed?

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Topics: Australian wool industry, Wool market / wool price

To shear or not to shear, is that the question?

Posted by Robert Herrmann on 1 June 2017

For some time, there have been messages from wool processors that much of the Australian wool clip is too long. If this is true then shorter lots should attract a premium – this would be a normal economic lever to attract more of the type, and if that is the case can wool producers justify the additional cost of two shearings in one year?

To get to the bottom of this issue, a full understanding of the situation is needed. It is normal for suppliers (wool growers) to want to meet customer requirements (processors). At the same time, meeting the “new” requirement cannot increase the net costs to the business unless there is an off-setting increase in income.

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Topics: Wool industry, Wool market / wool price

How to use "one cancels other" wool orders.

Posted by Matt Dalgleish on 23 May 2016

The purpose of this blog is to explain more about using “one cancels other” or OCO orders on the Riemann wool forward market with a particular focus on the 19 and 21-micron contracts. As part of the blog we will also undertake analysis of the basis between 19 and 21-micron classes to outline the seasonal movement in this basis, including how/why the basis has narrowed over time. 

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Topics: Wool market / wool price, Wool industry

Australian wool industry - is it all doom and gloom?

Posted by Robert Herrmann on 10 December 2015

In his iconic 1975 song “Slip sliding away”, Paul Simon most certainly wasn’t talking about the merino sheep industry. However, the lyrics could easily relate to the direction that flock numbers and wool production has taken, especially since the 1990s.

Analysis: Has Merino wool production stopped falling?

In fact, this trend isn’t confined to Australia: the number of sheep worldwide have also fallen over this period.

Usually, the cause of such a decline would be readily understood: low prices, diminished demand, or a combination of the two are the usual culprits.

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Topics: Wool market / wool price, Flock size, Wool industry

Stop fretting about wool prices – it’s outside our control!

Posted by Andrew Woods, Independent Commodity Services on 11 September 2015

Wool prices are something of a hot topic at present as the industry debates what is responsible for current price levels. As usual, the debate tends to be mired in detail, with more detail added by various protagonists muddying the argument further.

Since the industrial revolution, the Australian wool industry has been fighting a rear guard action against technological change (led firstly by the cotton industry and then the manmade fibre industries). This has been rather than simply accepting that continuous on-farm productivity improvements are required from here to eternity to keep the industry competitive. This is what happens in other industries, rather than expecting rising prices to maintain profit margins.

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Topics: Wool market / wool price, Exchange rate

Sheep numbers down, down...market outlook up, up?

Posted by Robert Herrmann on 16 July 2015

Sheep meat demand has a rosy forecast, while wool is also showing optimism after a period of struggle. On the supply side, world sheep numbers from the major wool and meat producing countries since 1990 have fallen, with falls ranging from 67% in Uruguay to just 3% in South Africa.When looking at the market outlook for any commodity, but especially agricultural commodities; taking account of projected supply & demand and assessing price risk is a good starting point.

This then leaves the question of market risk.

"High prices correct high prices"

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Topics: Sheepmeat market, Wool market / wool price, Flock size

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