Strong demand, tight supply lift lamb wool prices to record

New Zealand is heading for its smallest annual wool clip in six years. Photo / HBT

New Zealand lamb wool prices jumped to a record high amid strong demand from exporters and limited supplies.

Lamb wool climbed to $7.45 a kilogram at Thursday's South Island auction from $7/kg at last week's North Island auction - the highest price that AgriHQ has recorded since it began collecting wool prices in July 2005.

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, held at $6.20/kg for a third week - its highest level since November 2013 and 17 per cent above levels a year earlier.

Some 6876 bales were offered at auction on Thursday, down from 8907 bales last week. While volumes are expected to increase to 9100 bales at next week's North Island auction, the following week's scheduled South Island auction has been cancelled due to insufficient wool.

Demand remained strong at this week's auction, with 94 per cent of the wool offered at auction sold - the ninth straight week the auction clearance rate has held above 90 per cent.

"It is anticipated that early winter shearing will cause some increases in volumes in the short term," said AgriHQ analyst Emma Dent.

New Zealand is heading for its smallest annual wool clip in six years, reflecting the lowest sheep flock in more than 70 years, dry conditions and an increased focus on meat producing breeds of sheep, say analysts.

A weaker New Zealand dollar is also making the nation's wool more competitive, with the Kiwi currency down about 1.3 per cent against the US dollar since the last auction.

The value of wool exports increased 15 per cent to $796 million in the year through April, making it New Zealand's 13th biggest commodity export.