NZ coarse wool prices lift from lows as demand picks up
By Tina Morrison
Feb. 5 (BusinessDesk) - Prices for New Zealand coarse wool have lifted at auction this year as the relatively low price stokes demand.
Coarse wool prices have improved over the past three wool auctions, helping lift the AgriHQ coarse wool indicator 22 cents a kilogram from the first auction of 2018. In the first February auction of the year, held in the North Island, stronger wool types all lifted by between 5 and 10 cents a kilogram compared to the previous week, AgriHQ said.
The nation's wool market is picking up this season after coarse wool prices slumped last season when China switched its preference to fine wool and away from strong wool that makes up the majority of the country's clip, leaving an overhang of stockpiles to sell in the current season. Prices remain comparatively weak however with the coarse crossbred indicator at 296 after last Thursday's auction, compared with 336 at the same time last year and 567 for 2016.
"The lift in the market reflects better interest across the board for NZ wool," said AgriHQ senior analyst Rachel Agnew. "This is a significant change in direction for the market given wool supply is nearing its peak period, stocks remain high and the NZD/USD is surging.
"Reports suggest that the enquiry from markets does indicate that the market may have finally past its low point. The demand is, however, largely driven the low price level of NZ wool, making it very competitive with substitutes."
Agnew said much of the demand has come from China, New Zealand's largest market, with export volumes lifting on the lows seen last year. Wool shipments to China for the first half of the 2017/18 season from July through December lifted 27 percent on the same period last year, however, the average value of the shipments to China was down 15 percent.
"Looking ahead into the short term, there are a few obstacles to face," Agnew said. "Chinese demand is expected to ease through mid-February as the market temporarily shuts down for its New Year celebrations. February and March will also see wool volumes seasonally peak. Exporters are confident the market will pass these obstacles, however, some relief from the currency would give it more of a chance."