NZ wool prices fall on high seasonal supply, strong currency

Friday 9th January 2015

New Zealand crossbred wool, which accounts for the majority of the country's production, declined 3 percent at the latest auction as high seasonal supply and a strong local currency weighed on prices.

The price for 35 micron clean wool, commonly used for carpets, fell to $4.95 per kilogram at this week's North Island auction, down from $5.10/kg at the previous auction on Dec. 18, according to AgriHQ.

Wool prices softened at the latest auction amid high seasonal supply from the 'main shear' shearing season from December to early February. Main shear typically accounts for about 60 percent of the annual crossbred wool clip. An increase in the New Zealand dollar since the last auction weighed on exporters, with the kiwi recently touching a 2 1/2 year high against the euro and close to its record.

"A high seasonal supply typically weighs on prices at this time of year," said AgriHQ agriculture analyst Ivan Luketina. "Currency movements since the last auction have moved against exporters too, especially for those exporting to Europe."

A slump in the price of oil, which has fallen to its lowest level in 5 1/2 years, has also hurt wool prices as alternative synthetic fibres, such as nylon for carpets, become cheaper.

"Despite the potential for good fundamental growth from the US housing market growing this year, if synthetics are more favoured due to the oil price drops, it could well mean an overall decline in demand for wool," Luketina said.

Still, clean lamb wool prices have bucked the trend, rising 1 percent to $6.05/kg in the latest auction on demand from China for the fibre which is typically used in clothing. Dry weather in the Otago region in the South Island may crimp supply as farmers with lower pasture growth delay shearing because it stimulates feeding, Luketina said.

Mid micron and merino wool didn't trade at the latest auction.

Wool is New Zealand's 14th largest commodity export, worth an estimated $741 million in the year through November.

BusinessDesk.co.nz

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