Wool prices hold firm even with largest buyer China absent

New Zealand wool prices are being underpinned by a smaller national clip as sheep numbers fall to the lowest levels in more than 70 years. Photo / NZME

New Zealand wool prices held firm at auction even though buyers from China, the country's largest export market, were absent due to the Chinese Lunar New Year holiday this week.

The price for clean 35-micron wool, a benchmark for crossbred wool used for carpets and accounting for the majority of New Zealand's production, advanced to $5.81 per kilogram at yesterday's combined North and South Island wool auctions, from $5.74/kg at last week's auctions, according to AgriHQ. That's 14 percent higher than the same time last year. Some 83 percent of the 12,024 bales of wool offered at auction were sold.

New Zealand wool prices are being underpinned by a smaller national clip as sheep numbers fall to the lowest levels in more than 70 years, and as a 10 percent drop in the value of the New Zealand dollar against the US dollar in the past year makes the the country's wool exports more affordable. Still, a slump in the price of oil has made rival synthetic fibres cheaper, keeping the textile market competitive, analysts said.

"Wool exporters globally are facing some headwinds through 2016. With synthetic fibres already at low levels and weak oil prices set to continue, the textile fibre market is likely to get even more competitive," agricultural specialist Rabobank said in a report yesterday.

Currency and tightening supply will be critical factors in buffering these challenges to protect returns to New Zealand woolgrowers.

Lamb wool, which has traded at record highs of $7.50/kg this season, slipped in yesterday's auctions to $7.03/kg from $7.14/kg last week, although it remains 11 percent above the same time last year.