Saturday, December 2, 2023

Shearing costs eat wool cheques

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A fourth straight year of poor strong-wool prices lies ahead for sheep farmers.
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After the increase in shearing charges in 2018-19 Beef+Lamb has estimated that combined with continuing abnormally low strong-wool prices that in the North Island, where nearly all the wool clip is crossbred, shearing costs take up 90% of farm wool receipts.

Until the start of the downturn four years ago shearing costs typically accounted for just 45% of wool returns.

In its New Season Outlook B+LNZ said crossbred prices should be little changed on last year but overall the wool clip, from fine and mid-micron flocks as well, should be up slightly in volume, by about 1%, because of good seasonal conditions.

Fine wool prices are forecast to fall about 10% over the June 30, 2020, year but to remain high for a third year in a row. A 10% fall would take out the 9.6% average wool price increase in the 2018-19 year but not the 58% hike the year before that.

Fine wool makes up just 7% of exports but in the latest year made up 29% of total wool receipts.

A smaller fall, about 3%, is forecast for mid-micron wools but prices should remain relatively high for a second year. In 2018-19 mid-micron provided 15% of wool supply and 18% of export receipts.

That illustrates the poor returns for strong wool with 78% of total supply but just 53% of receipts. Income is expected to about $532m.

The New Season Outlook said, in inflation-adjusted terms, the estimated strong wool price will be the lowest since at least 1960-61.

This year average export receipts for all wools are expected to be down 1.7% at $5790 a tonne. 

Total volumes in 2018-19 were 90,800 tonnes clean, down 9.4% on the previous year, which had a lot of wool stocks carried-over from 2016-17.

North Asia, dominated by China, has been the biggest wool buyer, taking 49% of total exports over the last two years. The European Union took 30% though volumes fell significantly.

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