Wednesday, July 6, 2022

Disruptions drive wool price rises

A strong sale and near clearance of 22,000 bales finished the otherwise forgettable 2012-13 wool season on a positive note but exporters are not prepared to be bullish about the new season.

They have tentatively suggested worldwide wool promotion, the reduced New Zealand supply and falling NZ dollar might hold the recent improvement in prices into the new season.

The test would come when greater quantities of crossbreds came forward in late spring, NZ Wool Services International general manager John Dawson said.

“Wool is short right now and the falling dollar has helped considerably but we will have to wait to see if these price levels persist,” he said.

Recent shearing and sale disruptions because of drought and storms and a lower NZ dollar value sparked the crossbred wool market into life at the June 27 sale.

Prices for most descriptions were up 3-7% over earlier June sales and 97% of the offering sold to exporters scrambling to fill orders ahead of the smaller offerings forecast in the next two months.

Council of Wool Exporters manager Nick Nicholson said a number of factors had combined to produce the price spikes on June 27 – the end of the season, the fall in the NZ dollar, previous gaps in the sale roster and weather disruption to wool harvesting.

“Until then there hadn’t been a lot of wool around and my members were trying to cover existing contracts,” he said.

“It is very hard to make a prediction on the basis of that sale.”

H Dawson Direct general manager Craig Sheridan said prices are being driven by short-term disruptions to supply and there was no evidence of additional demand.

“Our feedback is that wool supply will be down this season but we suspect the market will respond with short bursts, not a prolonged demand-led improvement.”

NZX Agrifax analyst Ivan Luketina said wool supply issues were both short and long-term.

The cancellation of recent auctions because of poor weather meant wool began to pile up and exporters were unable to complete orders.

Longer term, the drought forced the slaughter of 650,000 more ewes than usual which would reduce the national clip in the new season, he said.

Then May and June were uncommonly wet in many regions, further disrupting shearing.

The Agrifax wool price indicator rose 10% in June, led by the 35 micron clip segment.

The 35 micron price reached 510c/kg clean on June 27, compared with 455c at the start of April. The improvements over that three-month period for both 37 and 39 micron wools were in the order of 90c/kg or 20-25%.

“We have a positive outlook but we are not expecting a big lift in prices,” Dawson said.

“The wool market will be doing well to maintain these improved prices when the larger auctions resume.”

China is still taking half of all wool exports but business with European buyers has improved in the past few months, Dawson said.

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