Wool prices rise on low supply and weaker dollar

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New Zealand wool prices rose at auction, with lamb wool touching a fresh four-year high and crossbred wool hitting a six-month high, stoked by a weaker local currency and low seasonal supply.

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, rose to $5.80 per kilogram at Thursday's South Island auction, from $5.30/kg in the North Island auction last week, and its highest level since November last year, according to AgriHQ.

Lamb wool jumped to $6.80/kg, from $6.40/kg, marking its highest level since April 2011.

The trade-weighted index, a broad measure of New Zealand's currency measured against our major trading partners, has slipped 2.6 per cent since Reserve Bank Governor Graeme Wheeler on April 30 took interest rate rises off the table and said he was watching conditions that could prompt a rate cut.

The lower currency makes New Zealand exports more attractive. Meanwhile, low seasonal wool supply following the end of the main shearing season saw 99 per cent of the 6346 bales on offer sold at the latest auction.

"The weaker New Zealand dollar and limited wool volumes resulted in local prices increasing across most categories," said AgriHQ analyst Emma Dent.

"Typically coarse wool has not been faring as well recently in the markets as a result of lowered demand due to the use of synthetics increasing," she said.

"However, fine crossbred wool and lamb wool have been doing well as a result of varied uses stimulating demand."

Some 4600 bales are on offer at next week's North Island auction, 32 per cent lower than anticipated, she said.

A decline in sheep numbers and drought conditions had also contributed to lower wool volumes, PGG Wrightson South Island sales manager and auctioneer Dave Burridge told AgriHQ.

He estimated this season's wool volumes may be as much as 4 per cent lower than last season.

Wool is New Zealand's 13th largest commodity export.