The Australian Wool Industry: A hedonic pricing analysis of the factors affecting price of Australian wool

We estimate a hedonic pricing model to quantify the relationship between clean price of lots of wool and individual lot characteristics for all superfine, fine, medium and broad wool types. We expand on existing literature by controlling for key macroeconomic conditions at the time of sale and are able to examine the longer term trend in global demand for wool by utilizing data over a number of selling seasons. Our results indicate fibre diameter, strength, breed group, vegetable matter base and fleece contamination play a key role in the purchase decision. Premiums accrue for finer, strong wool which has been grower classed, while discounts have been identified for wool tainted by branding contamination, unscourable colour or the presence of skin pieces. Key market conditions such as world economic growth, price of substitutes and exchange rates with key trading partners have been found to significantly affect Australia’s competitiveness in the global market for wool.