Fine wool prices soar while coarse remain in the doldrums
Prices for fine wool are on a high, in complete contrast to those for coarse crossbred wool which make up 90 per cent of New Zealand's clip.
PGG Wrightson South Island sales manager Dave Burridge said the present demand for merino fine wool harked back to the 1990s period of "micron madness", when it was then wanted for high-end suits.
After 18 months the boom ended in a bust, from which the industry took decades to recover, and large stockpiles built up in Australia and New Zealand.
Prices recovered during the 2000s, and after the Global Financial Crisis of 2008 there was a shift from using merino for suits to sportswear.
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Per kilogram prices for merino at auction last week were over $28, and Burridge was hoping for some "sizzle" at a special auction at the Canterbury A&P Show on Thursday, when he predicts they could top $30.
This latest bull run was driven by Chinese buyers, "but I suspect now it's not making a whole lot of sense", Burridge said.
He stressed merino made up about 5 per cent of the total New Zealand clip, and was a niche part - albeit very valuable - of the market.
So in demand is merino that last week outdoor clothing company Icebreaker signed a 10-year, $100 million supply contract with New Zealand merino farmers.
The contract has been developed with The New Zealand Merino Company. Icebreaker will pay a premium above market prices to recognise long-term farmer loyalty, and to tell stories about the farms for its global marketing campaigns.
But the contrast between fine wool and coarse crossbred wools prices is chalk and cheese.
"It's poles apart, for crossbred wool we're 10-15 per cent below the lowest that prices have ever been for crossbred wool, which is by far the bulk of wool in New Zealand," Burridge said.
Crossbred wool is used in making carpets and some clothing.
Most farmers were still only covering their shearing costs, although there had been a slight improvement in crossbred prices in the last week.
Nevertheless, PGG Wrightson was carrying over about 25,000 bales from last season, and Burridge estimated farmers were holding on to about 20-25,000 bales in their woolsheds.
The total number of bales produced in New Zealand a year is 750,000 bales.