Thursday, 19 July 2012 20:25

Wool prices continue to head south

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The first South Island wool sale of the season continued in the same vein as last week's North Island sale with all price indicators weakening further.

The NZ Wool Services International wool market indicators were all back significantly – by around 4% on average. The Coarse Crossbred and Lambs wool Indicators were both back 18c/kg. The Fine Crossbred Indicator dropped 22c/kg to dip below the $4.50/kg mark. The Mid Micron Indicator bucked the general trend and firmed by 10c/kg.

Considering the NZ dollar was fairly steady week on week, its clear the downward pressure on prices is being driven by demand rather than currency factors. There were just over 10,000 bales on offer in the South Island and only 55% of that reached growers reserved and were sold – a clear indicator of limited buying power and a bear market.

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Nearly 50% of the offering was long pre-lamb shorn fleece and coarse 2nd shear wool. With the Western European markets on annual holidays and others reluctant to buy, the weakness in the market this week was no great surprise. Buyer competition was particularly restrained with only targeted buying on some types to meet immediate shipping requirements.

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The longer coarse crossbred 2nd shear and coarse crossbred fleece wool came under the most pressure with these types back between 5 and 8%. The fine crossbred fleece wool was 4-5% cheaper. The shorter end the coarse crossbred wools did not feel the heat quite as much with prices firm to 3% lower. The finer mid-micron wool was the highlight with prices firm to 4% dearer - however mid-micron wool only comprised around 10% of the offering.

Next week there is a combined sale in both the North and South islands with 15,000 bales rostered in total. With more supply and limited demand expected again next week, the market could well come under further downward pressure.

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