It has been a long time coming – two years, in fact – but smiles are beginning to crack on the faces of those involved in the wool industry.
New Zealand wool auctions have been trending upwards in both pricing and demand since September and into the opening two weeks of October, although the wool market still has a long way to go to break into profit-making, sustainable levels.
A significant improvement in wool quality is the biggest factor influencing the shift, after two years of very poor coloured fleeces due to wet weather. Spring fleeces are coming in clean and dry and have been rewarded with improved returns.
September experienced some seasonally high prices for good quality crossbred wool, with the best fleeces often well into mid- to late-$3/kgCL. But the highs have been lifted further since and at the most recent South Island sale, $4/kgCL was broken at the top.
Fusca’s indicator for coarse crossbred fleeces has risen 49c/kg clean, 16% in the past five weeks, taking it to 3.47/kgCL, a level unheard of since September 2018.
Another driver helping to lift prices is renewed interest from international buyers. There have been some new buyers, creating added competition.
The export market is still heavily reliant on China, and although there’s talk that this market is improving, this is yet to be seen at the ground level. However, a lot of work is being done on getting wool into other markets, with success.
Buying is reported to be especially strong out of India. In August, New Zealand exported 1485 tonnes of coarse wool (36 micron plus) to this market, nearly double the volume taken in July, taking them to a 40% market share on this grade of wool.
This has helped the North and South Island to have consistently high clearance rates in the 90% range through spring, with one North Island sale reaching full clearance.
A better exchange rate for sellers since the start of August has also strengthened returns.
The New Zealand average export value for coarse degreased wool is at its highest since January, coming in at $3.78 /kg in August.
Farmgate wool prices usually settle from around December onwards as summer shearing lifts the volumes trading, and while El Niño sounds like it could deliver some difficult feed conditions, the warm, dry and windy conditions will work in wool’s favour until then.
