Lower dollar puts more in growers’ pockets

“What is bad for the dairy industry is certainly helping other sectors,” says Palle Petersen, general manager, Bloch & Behrens Wool, the wool export arm of PGG Wrightson.

“Longer term there is some uncertainty on demand in China which could affect the market,” he told Rural News. 

“As with milk powder they sometimes seem to get themselves in a big stock position with wool, and they pull out. Whether they do that deliberately to get the prices down or not… we will get continued volatility, but the amount of wool available is limited these days. I don’t think we will see a collapse of prices. 

“We will see a fluctuation, but it will remain at healthy levels for the next nine months unless something unforeseen happens.”

Demand from Europe seems steady. “There is a bit of uncertainty on China’s economy and the situation in Europe with Greece, but that is already factored in. 

“We can expect some ups and downs because China now takes more than half our clip; they tend to run hot and cold so we will see some fluctuation, but in the last five years the prices have been a lot better on average than in the previous 20 years so that is a good sign.

“I don’t see much chance of the New Zealand dollar recovering much in the short term; dairy seems to dictate what the NZ dollar does. For where the dollar is now for the next six months it is looking good.”

Malcolm Ching, Purelana manager with Wool Services International, says lambswool was pushed up to very high prices at the end of the season
with interest mainly
from China. For most of the season lambs wool was about $6.50/kg, but with a half dozen sales it climbed over $7/kg to a high of $7.39/kg. “We haven’t seen lamb up at that price for many years,” he says.

At the beginning of the season prices stayed high even though the currency had lifted significantly, he told Rural News.

Things got out of kilter at the end of the season, he says, with the dollar dropping from about 88c vs the US dollar down to about 69c.

“However with wool prices normally you would expect a significant jump, but price values continued to drift off and didn’t capture that currency lift,” he says. Either overseas clients are fully stocked or their sales of woollen products have not been as buoyant as expected so they’ve gone cautious.

“The demand seems to have slipped a little. In their terms the price has still gone up. Although we haven’t captured all the currency drop, the prices in offshore terms to their clients have still gone up. They were already saying NZ wool prices were dear relative to other fibres and other product use. So there has been resistance offshore at what has happened recently.”

Prices today are still relatively good historically. 

“Farmers always say they want more but you have to put things into perspective with competing fibres in the marketplace. Our wool price is still a reasonable price given the worldwide textile scene.”

Everyone is picking a further slide in the dollar says Ching, but we will not capture all the currency shift. “There is still continuing resistance to the price our customers have to pay in their currency terms.”

Overall he says it is a “murky odd picture” at the moment. 

“The rules that would normally apply, struggle to apply at the moment. Our prices were high when we had a high dollar. When we have a weak dollar it should be in our clients’ favour but that doesn’t seem to be happening.

“They get cautious about when they buy and how they buy. They turn to other textiles which may be cheaper. 

“There is still always an underlying demand for NZ wool. The market moves up when it is really pressured; that pressure will not be as big as in the last couple of seasons.”

He does not believe there are stockpiles of NZ wool.