New Zealand just finished its worst wool season since the global financial crisis as China, the largest buyer of the fibre, switched its preference to fine wool and away from strong wool that makes up the majority of the country's clip.
A total of 420,378 bales were offered at auction in the season that ended June 30, with 311,698 sold, giving an average clearance rate of 74 per cent, according to AgriHQ. The number of bales was up 1.1 per cent on the previous season as unsold bales were re-offered at auction, while the volume of bales sold dropped 15 per cent.
Demand for fine wool for clothing saw the price for 18-micron merino hit $18.60 a kilogram, and the price for 21-micron merino reach $15.60, the highest level for both grades since February 2012. However the picture was less rosy for coarser crossbred wool typically used for carpets, with 35-micron fibre closing down 44 per cent to $3.30/kg, the lowest level since January 2010, while 39-micron was also down 44 per cent to $3.25/kg, the lowest since May 2010, and 37-micron second-shear wool slumped 50 per cent to $2.90/kg, the lowest since October 2009, AgriHQ said.
"We haven't seen a market like this since the global financial crisis," said John Dawson, who is chief executive at New Zealand Wool Services International, the nation's largest wool exporter, and has been in the industry for 39 years. "We haven't seen extreme movement like this for quite some time. The speed of it took the whole industry by surprise. It's been one of those seasons that you want to forget."
New Zealand is the world's largest exporter of crossbred wool and weak demand for the fibre, which makes up about 80 percent of the national clip, has weighed on prices this season, prompting farmers to stockpile bales in hopes the market will pick up. Industry estimates suggest between 150,000 to 200,000 bales may have been stockpiled by farmers, brokers, merchants and exporters, as sellers rejected prices below the cost of production.