Mid mi­cron wool prices buoy­ant but coarse wool a dif­fer­ent story

Otago Daily Times - - BUSINESS & MONEY - SALLY RAE

MID mi­cron wool prices are ex­pected to re­main near cur­rent high lev­els over com­ing months.

At the last South Is­land wool sale, there were some ‘‘very ex­treme’’ prices for mid mi­cron wool, CP Wool supply re­la­tion­ship man­ager Roger Fuller said.

‘‘We be­lieve some of these lev­els have not been seen ever,’’ Mr Fuller said.

ASB’s lat­est Farmshed Eco­nomics re­port said it had been a ‘‘crack­ing year’’ so far for mid mi­cron wool. 27 mi­cron prices were up 29% while 29 mi­cron were up an im­pres­sive 33%.

The rel­a­tively healthy global econ­omy and firm con­sumer de­mand would help to un­der­pin those prices, se­nior ru­ral econ­o­mist Nathan Penny said.

For coarse wools, the out­look re­mained mod­est, as de­mand re­mained struc­turally weaker.

As a re­sult, it was ex­pected prices would track side­ways over the rest of the year, Mr Penny said.

In West­pac’s fort­nightly agri up­date, se­nior econ­o­mist Anne Boni­face said de­mand from China had played a crit­i­cal role in the slide in coarse wool prices.

The value of wool ex­ports to China, tra­di­tion­ally, a key mar­ket for New Zealand wool ex­porters, slumped al­most 30% in the year to June.

There have been some signs of im­prove­ment. Wool ex­ports to China have in­creased over the last six months and av­er­age ex­port prices are also up a lit­tle.

Some of the other fac­tors weigh­ing on coarse wool prices had also un­wound ‘‘a touch’’. The New Zealand dol­lar had fallen and was ex­pected to fall fur­ther in the com­ing year.

There were anec­do­tal re­ports of lo­cal stock­piles start­ing to un­wind. And oil prices had risen, in­creas­ing the pro­duc­tion costs of syn­thetic al­ter­na­tives.

Look­ing ahead, some of those fac­tors were ex­pected to re­verse. Most no­tably, oil prices were fore­cast to fall in 2019 as higher prices en­cour­aged a lift in frack­ing pro­duc­tion and growth in China was fore­cast to slow.

That could limit the ex­tent of any im­prove­ment in price.

Ris­ing labour costs — and a re­cent fo­cus by the in­dus­try on im­prov­ing com­pli­ance with labour laws — could also mean shear­ing costs came un­der some up­ward pres­sure.

The search was on to find al­ter­na­tive uses for cross­bred wool. More re­cently, a wool in­dus­try sum­mit was fo­cused on find­ing in­no­va­tive so­lu­tions for some of the chal­lenges the sec­tor was fac­ing.

While con­sumer pref­er­ences could be fickle, mar­keters of coarse wool needed to find a way to con­vince con­sumers that their of­fer­ing was also worth pay­ing a pre­mium for, Ms Boni­face said.


Go­ing nowhere . . . Econ­o­mists ex­pect coarse wool prices to track side­ways for the rest of the year.

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