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NZ wool market recovers from lows in latest season as demand picks up; outlook uncertain

Thursday 12th July 2018

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The market for New Zealand coarse wool, which makes up about three quarters of the country's clip, has picked up from the previous season's lows as demand improved, pushing up prices and volumes.

A total of 522,039 bales were offered at auction in the season that ended June 30, with 445,553 bales sold and 76,486 bales passed in, where the reserve price wasn't met, resulting in a clearance rate of 85 percent, according to AgriHQ data. That's an improvement from the previous year's season when with 108,680 bales were passed in and just 311,698 bales were sold, by far the lowest level since AgriHQ began collecting the data in the 2009/10 season.

The 2016/17 coarse wool season was characterised as the country's worst since the global financial crisis as China, the largest buyer of the fibre, switched its preference to fine wool and away from coarse wool, prompting many farmers to stockpile bales in hopes the market would pick up. That strategy paid off with New Zealand Wool Services International, the nation's largest wool exporter, estimating about three quarters of the stockpiles were shipped in the latest 2017/18 season as prices improved, with NZWSI's coarse wool indicator increasing from $2.67/kg to $3.41/kg during the season.

"Wool prices did actually improve over the last season, from obviously very low levels,"  said NZWSI chief executive John Dawson. 

Dawson attributes the improvement to increased demand from China, where several large companies have reintroduced New Zealand wool into some of their upholstery and garment fabrics, which could bode well for the future. European demand also picked up as UK wool prices increased, turning buyers' focus back to New Zealand wool, he said. A weaker currency also helped. 

Meanwhile, prices for merino wool, which makes up a smaller proportion of the New Zealand clip, continued to be buoyant over the past season on the back of good demand, Dawson said. 

The average auction price for 18-micron merino wool over the 2017/18 season lifted to $23.81/kg, from $17.10/kg in the previous 2016/17 season, according to AgriHQ data. That's the highest price for the merino benchmark since AgriHQ began collecting the data in 2010/11, surpassing the previous record of $20.66/kg set in 2011/12.

Still, Dawson said today's wool auction, the first of the new 2018/19 season had a weaker tone as buyers were concerned about the potential for US tariffs on Chinese textiles in the future, something which would ultimately flow back to New Zealand wool markets. 

"Sentiment is huge. If people are positive about things, they will make decisions, if there's any uncertainty, they'll put them off and that affects demand from the source," he said. "We certainly get the feeling here that it is certainly causing a bit of indecision as far as people committing to new purchases."

(BusinessDesk)

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