Merino growers getting squeezed on three fronts

The curtain is about to fall on a forgettable selling season for New Zealand's merino wool growers during which they have seen their returns cut in half.

A flat demand, a massive increase in supply of superfine wool from Australia and low market confidence have hit prices and put some overseas processors out of business.

"A lot of people have exited the wool industry because it has just got too tough," New Zealand Merino Company chief executive John Brackenridge said.

Two years ago he announced a joint venture with rural services company Wrightson to market NZ merino wool with the idea of lifting returns and increasing demand for merino fibre.

But the volume of Australian merino wool of less than 16 micron has increased 400 per cent, cutting the price for New Zealand's superfine wool.

Grant Edwards, chairman of the Otago Woolbrokers Committee, said that between November last year and November this year, the fine wool market indicator fell 34 per cent. From September to November this year, it fell 18 per cent.

Between comparable November sales last year and this year, the price for 16 micron wool fell 50 per cent, 17 micron 42 per cent, 18 micron 40 per cent, 19 and 20 micron 32 per cent and 21 micron 33 per cent.

While international supplies of merino wool have decreased by about 330,000 bales, the percentage of superfine has grown.

He said that to the end of October the number of bales tested in Australia was back 20.5 per cent compared with its level a year earlier.

But the percentage of bales testing less than 19.5 micron had increased from 27.7 per cent of the Australian clip to 35.4 per cent.

Edwards said the stockpile building across the Tasman had reached 655,000 bales.

"With the fall in prices, some growers here and in Australia are holding back their wool," he said.

With the New Zealand merino clip between 65,000 and 70,000 bales, prices were effectively dictated by what happened in Australia.

"The long-term outlook is positive because of the quality of the fibre and it is well sought after. It is the luxury fibre and the world economy and fashion trends do affect the price," he said.

Brackenridge said the solution was to find or convert new processors to use merino wool.

- NZPA