Exporters Say Wool Market Has Turned Corner

Wool Market Turns The Corner With More Good News Ahead

The New Zealand wool market has turned the corner and members of the wool exporters’ council expect demand for coarse wool will remain strong, with prices continuing to rise over the coming months.

Strong demand held prices steady at their higher levels at today’s auction in Christchurch, where 20,000 bales of North and South Island wool were auctioned.

The increases mean more money has started to flow back into farmers pockets, with auction prices pushing ahead of the strong and volatile New Zealand dollar.

The exporters’ council members, who collectively buy, market and sell 85 percent of the New Zealand clip said gradual price increases over the last 12 months had been swallowed by the increasing New Zealand dollar.

But the recent surge in demand had enabled wool prices to break free from currency effect and now represented good news for beleaguered wool growers.

Since mid-January there have been week-on-week auction price increases that have gathered momentum over the last few weeks. Exporters are unanimous the market has turned the corner and are “reasonably optimistic” the rising market is sustainable.

Peter Crone from John Marshall & Co who is just back from a major international fair in Germany where he has been marketing a new bedding product, said the big mills in Italy, United Kingdom and other parts of Europe had used up their stocks and a recent surge in demand had seen them come back strongly into the market.

The supply of wool has been falling over the last few years, they’ve used their stocks and now have to replenish their supplies to fill their orders, he said.

New Zealand farmers normally got a premium over other world wool producers, but at the moment growers in the United Kingdom were getting a $1 kg more due to an unprecedented 45 percent jump in prices for British wool over the last few weeks. Mr Crone said this indicated there was still more upside in the New Zealand prices, especially if demand continued to improve.

John Dawson from Wool Services International said the market had stumbled along for the last 18 months, but over the last few weeks it reached a tipping point with demand for raw wool outstripping supply.

“We’re not getting euphoric at the moment, but our confidence is certainly better than it was six months ago,” he said. “The indicator for strong wool has risen from a low of 264 cents a kg last July to 326 cents at the sale last week.

Keith Cowan from H Dawson and Sons, who’s principal Jo Dawson is part of the committee assisting Prince Charles campaign for wool, said the Royal message that wool is 100 percent natural, renewable and sustainable was starting to get through to manufacturers. He also believed the blisteringly cold northern hemisphere winter had also helped play a part.

People were realising that oil based fibres were not keeping them warm and they were turning back to the natural qualities wool offers for bedding and clothing, he said.

Peter Whiteman, whose firm Segard Masurel buys wool at auction and competes directly with brokers by offering an auction catalogue and buying direct from farmers, said his positive optimism flowed from a number of factors that had “lined up”.

Mill stockpiles were depleted and prices from all of the world’s wool producing countries had risen, meaning New Zealand supplies would not be undercut by cheaper offerings.

At the February sale last year 29 percent of the offering from Napier and 15 percent of Christchurch wool was passed in at auction. At the same sale this year only 6 percent of Napier and 3 percent of Christchurch wool did not sell.

Mr Whiteman said North Island farmers who had held last year’s clip either in brokers’ stores or their own sheds, were now selling into the rising market and gaining the benefits.

Wool exporters’ president John Henderson from Fuhrmann said the Chinese GDP had gone ahead by 10 percent while other economies of the world had gone backwards.

“Now that demand is starting to pick up in the other economies we have shortage of supply, which is reflecting in real price increases for farmers,” Mr Henderson said.

Lambswool, which only comes available for three months of the year, was in particularly high demand and prices were a full dollar ahead of where they were last year, he said.

Farmers should not expect the prices to head straight upward and a “saw tooth” would undoubtedly appear on the price charts in the coming weeks or months, but the general pattern is a lot better for 2010 than it was in 2009.

Mr Henderson repeated the need for the wool producing countries of the world to jointly promote the benefits of wool fibre and gain back some market share from synthetics.

The International Wool Textile Organisation included producers and mill owners from around the world and offered the collective financial and marketing grunt that could further stimulate the price rise momentum, he said.

ENDS

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