Wool Prices Rise Despite Drop in Demand - 29 January 2009

Despite a major slump in demand, wool prices for the first three months of the season have been significantly higher than during the same period last season.

Wool Exporters Council president, Mr John Henderson said today that although export tonnages for the first three months of the season were down by more than 11% compared to the July – September period last year, the average prices received were up by 12.2%.

“The increases have come in the crossbred and mid-micron area, but the Merino sector has been down, on average by 20%.  The strong crossbred increase of 15%, the fine crossbred rise of 9.9% and the 13.9% rise in mid-micron price reflect the determination of wool exporters to get the best out of the sluggish and declining market.” Mr Henderson said.

“This is actually quite encouraging, especially because these rises have occurred while the NZ dollar was ridiculously high against our major trading currencies.  To some extent they reflect the better price levels New Zealand established late in 2007 and early in this calendar year, but there has still been a quiet but steady increase in recent months.

“Unfortunately the effects of the global financial meltdown mean that we have seen an even more significant drop-off of buyer interest in the last few weeks, so we probably won’t be able to reap much benefit from the lower dollar until things settle down.  But we would expect that we will see the upward trend continue as buyers come back into the market.”

Mr Henderson said that the rapid drop in the value of the dollar has been difficult for exporters because of the suddenness, but more particularly the volatility of the movement.

“It has been almost impossible to trade in the last few weeks because the dollar has appreciated and depreciated significantly during the same day making it hard to settle on a price for wool.  Naturally customers around the world, who are all caught up in some sort of spin-off from the current financial crisis, are looking to make the most of the changing currency and therefore are either trying to drive very hard bargains, or are just sitting back watching and waiting for our dollar to settle a bit so that they can put pressure on prices.”

Mr Henderson said that farmers had seen the damage being done by the fluctuating dollar and had opted to set reasonably strong reserve prices so that their wool did not get sold cheaply.  He said that although exporters did need to buy to fill existing export orders, he was pleased to see that last week auction prices for most crossbred wool were firm or up on the previous week.