Wool on $500m comeback trail

ROBERT KITCHIN/The Dominion Post

DYNAMIC COMMODITY: Demand for wool remains strong, with China taking 30 per cent of the clip.

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Crossbred wool auction prices have stabilised after making a strong recovery from the lows of last year's world recession.

Prices for best-style clean fleece and second shear are up 20 per cent to $3.50 a kilogram on prices in July and August; good lamb's wool is up 15 per cent to $4.30 and oddments are up 30 per cent to $2.70.

Wool was last at these levels towards the end of 2008 when it was on its way down from a high of $4 a kilogram at the height of the world commodities boom.

Wool exports earned New Zealand $576 million in the year to March last year and the Agriculture and Forestry Ministry estimated in July 2009 that this year's export returns would fall to $458m.

However, that was on an estimated average sale price of $3.05 a kg. The price has been steadily rising since the beginning of this year at a time when wool volumes have been high and exporters expect annual returns to once again climb above $500m.

Coarse crossbred wool, used in carpets, rugs and textiles, makes up most of this and, up until this week's combined auction of North and South Island wool at Christchurch and Napier, was climbing in price as manufacturers replenished stocks allowed to deplete during the recession.

However, prices at the auction remained steady or eased slightly, which exporters are taking as a sign of consolidation.

"This is very healthy," Peter Whiteman, managing director of Segard Masurel, said yesterday. "When a market starts to rise people think it's got to keep going, but to me that it's stopped going up is healthy. We can bank a few gains, consolidate the gains, get the customers used to them, then the market can go again."

Demand remained strong, he said. China was the biggest market, taking 30 per cent of the clip for hand and machine knitting and for its growing carpet industry.

New Zealand and Australian carpet mills took 20 per cent, India 10 per cent to 12 per cent for rugs, and other sales were being made to European and Middle East manufacturers.

Mr Whiteman was optimistic more wool than usual would be grown this year. Farmers were holding on to lambs longer as pasture growth continued over the wet summer.

"They've been shorn once and are being held on to, so we're hopeful we will get some more wool off them."

However, there was a downside. More undesirable yellow wool, the result of a combination of summer rain and heat, was being seen than usual. It was being sold at discounted prices, the second shear mainly to local carpet mills and the fleece wool to India.

Other influences on the market were the high kiwi against British and European currencies and tight freight space as shipping companies showed caution in returning to pre-recession capacity. Mr Whiteman expected prices to remain at present levels for another two months.

- © Fairfax NZ News