Stability of price premiums for wool

The objective of this study was to determine whether long-run relationships existed between price premiums for wools with different fibre diameters. Based on cointegration analysis using monthly data from 1976.8 to 1999.10, the results showed that price premiums, in relative price terms, for fibre diameters between 19 and 23 micron were cointegrated. Furthermore, the price premiums for 19, 20 and 21 micron were found to be weakly exogenous. The latter result suggested that price premiums for finer wools tended to be more stable, compared with coarser wools which appeared to bear the burden of price adjustments. The implication is that wool producers would enjoy more stable prices, and hence income, by focusing on finer wools.