Wool Prices Increases are Sustainable

Wool Prices Increases are Sustainable

Prices for crossbred wool took another substantial lift with an average 10% increase at sales in Napier and Christchurch on Thursday morning, despite the New Zealand dollar breaking through USD.76 during the sales.

Wool exporters are confident that the lift in crossbred wool prices is sustainable and will continue on an upward trend, although there will probably be some ups and downs along the way.

Fuhrmann New Zealand Ltd director, Mr John Henderson said that crossbred wool prices have been quietly improving for the last 15 months. In US dollar terms they are more than 50% above the May 2009 market and are now at a 14-year high. Mr Henderson said that it is only in the last two to three months, when the prices have moved ahead of the strong New Zealand dollar that farmers have benefited from the increases.

“Unfortunately, most of the improvement in prices in the international market has been masked by the appreciating New Zealand dollar. That means that although our customers have been paying significantly more for our wool, neither the farmer nor the exporter has benefited from that in cash terms. In the last little while there has been a much more rapid climb in prices and for the first time in a couple of years the wool price has managed to beat the increased value of the dollar. That is directly reflected by more dollars in the farmer’s pocket.” Mr Henderson said.

The price lift has come through a combination of reasons. Mr Henderson said that there has been a noticeable increase in demand for wool at consumer level in our major markets. Some of this he sees as attributable to the efforts of the world wool industry to work together to highlight the benefits of wool and to recreate demand for woollen products. Those New Zealand wool exporters that are affiliated to the National Council of New Zealand Wool Interests and the International Wool Textile Organisation have been actively involved and have helped fund this work.

Mr Henderson said that it is easy to look at reduced quantities of wool being produced in New Zealand and to assume that that is what has caused the tip in the balance of supply and demand in the farmers favour. He said that while that has had some effect it is not the whole story. “The market price reflects the worldwide wool supply, not just New Zealand situation. It is the strengthening of demand that we have achieved that has created the pressure on overall supply.”

He said that a good example of this is the British wool market, where farmers have enjoyed quite significant price increases.

“The British wool supply is basically steady and the UK currency has been quite stable. This has allowed the demand driven increases in wool prices to flow through to the farmers without the mask of an appreciating currency such as New Zealand farmers have suffered.”

Mr Henderson said that recent significant price rises for cotton and more particularly a 35% jump in nylon fibre prices showed that fibre prices are on the move and that wool may well make additional gains in market share and in price because of that.

ENDS

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