“It’s taken the edge off the high, but the market is not crashing,” says Malcolm Ching, marketing executive at WSI, although Europe and the dollar volatility remain wild cards.
A good colour clean fleece has dropped from a high of about $7/kg in October last year to $6.20/kg clean this year – a drop of about 11.5%.
“But two years ago it was around $2.20 clean – it is still now more than double what it was two years ago. Farmers are worried because we’ve got back to $6. Is $6.20 a good return for farmers – does it cover their costs and are they putting money in the bank? The answer is yes.
“We have seen the impact of the Euro zone on wool prices since about October – but don’t forget, this is off recent historic highs.”
Ching admits prices dropped about 4% at each of about three consecutive sales but price fluctuations varied according to wool type. Good quality wools are holding up or even getting higher prices.
The Euro zone is affecting the confidence of manufacturers who are managing stocks hand to mouth with no buffers.
Ching says another current factor is the Chinese New Year holiday, which is supposed to be a week but gets drawn out to a month. China produced a flurry before the holiday, will now be quiet for two or three weeks, but will then be back in the market for the next delivery.
“The Chinese never really disappear, they just get very active or less,” he says.
Prices will zig zag from now on depending on wool type. Poor-colour wool was fetching good prices before Christmas but will now drift off, with 1 to 3inch wool a “short-lived and fickle market”.
Lamb’s wool has come off significant highs, but WSI believes it has probably reached its lowest point and wools of three inch or longer are very versatile lengths particularly for China.
With farmers shearing lambs to take advantage of good feed supply, there’s a large quantity of poorer quality wools for sale at present.
“But once these lambs start to get a bit on length on them you are likely to get price recovery from where we are today. Some are going to go up and some ease back because of seasonality and availability.
“Whenever you get rapid lifts in any market there comes at some stage a resistance and we’ve been battling that resistance for a few months. Then you have other factors like euro-zone, strength of NZ dollar and market confidence. It’s taken edge off the high but we haven’t collapsed.
“Long term the ongoing demand for wool still looks quite good going forward. “
Mixed market last week
The market eased again on Thursday with the combined North and South Island Wool auction comprising 18,700 bales seeing 72% clearance, WSI general manager, John Dawson says.
The weighted indicator for the main trading currencies increased 0.94% compared to the last sale on January 12 contributing to the generally softer market.
Mid Micron Fleece saw the finer types ease by 3 to 5%, with the coarser end firming slightly. Fine Crossbred Fleece in both Islands was 1 to 3% easier. Fine Crossbred Shears were 1 to 2% cheaper in the South Island and 1 to 4% dearer in the North Island apart from the poor styles which were 2.5% softer.
Coarse Crossbred Fleece were between 2 and 6% were weaker apart from the Good Style in the North which were up to 2% dearer. Coarse Shears eased by 2 to 4% apart from the 2/4 and 2/3 inch wools in the North which strengthened 3 to 6%. First Lambs strengthened 2 to 3%.
All Oddments were strongly contested after being neglected recently, increasing between 2 and 8%.
About 10,900 bales from the North Island and 8,500 bales from the South Island will go to auction on January 26.
