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NZ wool auction clearance rate slumps to 4-year low amid Brexit uncertainty

Friday 8th July 2016

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Global uncertainty weighed on the first New Zealand wool auction for the new 2016/17 season, denting prices and buying demand.

Strong crossbred second shear wool, which represented the majority of fibre on offer at yesterday's North Island auction, fell to $4.85 per kilogram from $5.40/kg at the previous week's South Island auction, and 13 percent lower than the year-earlier level, according to AgriHQ. The latest price is 4 percent below the five-year average.

The New Zealand dollar has strengthened amid global market volatility following the UK's vote to leave the European Union last month, making New Zealand exports less attractive. Analysts said wool buyers were cautious and bought only enough wool to cover their immediate requirements, with just 54 percent of the 7,500 wool bales cleared at auction yesterday, the lowest level since a 51 percent clearance rate in April 2012.

"The first auction of the 2016/17 season had prices falling further because of soft global demand," said AgriHQ analyst Shaye Lee. "The European demand that was partly supporting the China fall faded amid the Brexit referendum, as adverse currency movements undermined purchasing power of the buyers, as well as creating uncertainties around the future market direction."

Wool with high levels of vegetable matter was severely discounted because it makes it difficult for manufacturers to process, she said.

The next sale on July 14 includes about 5,600 bales from the South Island.

Wool is New Zealand's 14th largest commodity export, worth $793 million in the year through May.

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