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NZ wool prices rise; lamb wool returns to record levels

Friday 22nd January 2016

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New Zealand wool prices rose at auction yesterday, with lamb wool matching its all-time high, as a lower currency and diminishing supplies underpin demand.

Lamb wool climbed to $7.50 per kilogram at yesterday's North Island auction, up from $7.30/kg last week and matching its record high set in November, according to AgriHQ. The price for clean 35-micron wool, a benchmark for crossbred wool used for carpets and accounting for the majority of New Zealand's production, edged up to $5.90/kg from an average $5.87/kg from two auctions last week. Some 98.6 percent of the total 8,383 bales on offer were sold.

New Zealand wool prices are being underpinned by diminishing supplies as the annual clip reduces in line with a decline in the sheep flock and a switch to meat-producing sheep breeds. Meanwhile, expectations that dry conditions in the South Island would continue through the summer has prompted many sheep farmers to sell their stock early, reducing the amount of wool that will come up for sale this season. A decline in the kiwi dollar has also helped, making the country's exports more attractive.

"The weaker New Zealand dollar combined with steady offshore interest resulted in most wool types experiencing increases," said AgriHQ analyst Emma Dent. "Lamb wool is once again sitting at its record high price."

Wool prices were showing no signs of softening, even with market turmoil in China, the largest buyer of New Zealand wool, and there were reports buyers were baulking at the higher prices and eyeing cheaper synthetics, said Richard Kells, director at Napier-based brokerage Kells Wool and the chair of the North Island Wool Brokers Association. 

"With all the bad news we have heard about China, you would think 'well, what's going on?" But I think they are still going to import raw materials and transform them and export them again," Kells said. "We should have a little bit more confidence in wool. I'm feeling very confident."

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