Crossbred wool prices cheaper still

The crossbred wool industry is facing tough challenges.

New Zealand's crossbred wool industry is facing ''real challenges'' heading into the new season and returns to growers are well below sustainable levels, brokers say.

The market continued to ''melt down seemingly with no bottom'', especially for wool carrying higher vegetable matter content and high colour readings, PGG Wrightson Wool's South Island sales team said.

The season was drawing to a close, with only one South Island sale left, and sellers
were keen to meet the market at last week's sale.

But with a further significant drop in the market, reserve prices were not met, adding to growing amounts of unsold stocks being carried in wool stores.

Crossbred fleece, 31 to 34 micron, including hogget wool, was 3% to 4% cheaper on a limited offering, while 35 micron and stronger was 5% to 8% cheaper. Lesser styles were most affected.

Crossbred second-shear was down 5-8% while lambs wool was 7-10% cheaper.

Roger Fuller, of CP Wool, said passings of 45% was a true reflection of where the market was. It was very difficult to get buyer interest in good pre-lamb fleece, which was concerning for the next couple of months.

Mid micron and a small offering of merino created strong interest. With the fine wool market in Australia having some good momentum, that was reflected in the sale, especially for merino oddments, Mr Fuller said.

ANZ's latest Agri Focus said coarse wool prices were expected to remain low until the northern hemisphere winter led to a substantial drawdown in raw wool inventories.

In-market prices had found a (low) base, supported by favourable valuation metrics versus other fibres and farmers withholding supply awaiting better prices.

That, combined with steady demand for woollen floor coverings in the United States, should support a recovery in prices towards the five-year average of mid-$3kg (greasy).
At the finer end of the clip, prices could face pressure from higher Australian supply.

Demand growth from both the United States and China for luxury items was expected to provide an offset.

Total New Zealand wool production was expected to improve to 143,000 tonnes (up 3%) in 2017-18, driven by slightly higher fleece weights as well as higher breeding ewe and retained hogget numbers. A larger lamb crop was also expected to increase fleece and slipe production.

The improvement had to be put in the context of an estimated 18% decline in total production between 2012-13 and 2016-17 (down 4.6% per year), the report said.

While supply was lifting off a low base, potential export volumes were higher in 2017-18 due to very low export volumes in 2016-17 because of poor prices.

In many cases, wool had not been sold and prices were below the cost of production through the seasonal peak for sales.

The 2016-17 season had seen a dramatic (37%) decline in exports to China, badly hurting in-market prices.

The issue for price recovery was that the gap left by China was too large for others to fill. So until China had substantially reduced its semi-processed and unprocessed wool stocks, a more sustainable price recovery would not be able to occur, the report said.

In-market fine wool prices had been supported by lower Australian supply, a pick-up in US woollen apparel demand, and continued demand growth for luxury items within China.
A range of prices from the South Island sale. -

Beattie and Son (Outram), 25 bales Perendale hogget AA, 32.5 micron, 79.8% yield, 389 greasy, 487 clean; G M and C A Shaw Co Ltd (Balclutha), nine bales crossbred 2-tooth second-shear AA, 38.4 micron, 81.5% yield, 276 greasy, 339 clean; D and E Neill (Otago), 26 bales Perendale AA, 37.9 micron, 81.4% yield, 310 greasy, 381 clean; Roseberry Ridge (Otago), four bales Perendale lambs, 31.2 micron, 80.2% yield, 357 greasy, 445 clean; Longslip Station (Omarama), eight bales merino bellies, 17.9 laser, 60.3% yield, 1152 greasy, 1910 clean, and two bales merino crutchings, 18.4 laser, 64% yield, 901 greasy, 1408 clean.