Price of wool still on the rise

Farmers are welcoming the big lift in crossbred wool prices that continued to grow at yesterdays auction, although most have yet to recieve any of that benefit in their bank accounts.

A world wide reduction in sheep numbers is helping restrict supply and push demand, but the rises in a recessionary market and against a strong currency are significant.

The big volumes of spring and summer shorn wool that is to come and often of a lower quality, will test whether this market has been caught short by supply or driven by consumer demand.

Most farmers, after years of disappointing prices for this product will not be getting too excited just yet.

Strong wool prices are at levels not seen for 14 years. Prices leapt again at sales in Napier and Christchurch yesterday, adding another 10 per cent to a continuing 15-month upward trend. Wool exporters are confident the rises can be sustained, citing the strength of the demand despite the United States dollar exchange rate reaching 76c during the sales reports Stuff.

Fuhrmann NZ director John Henderson said that US dollar prices were more than 50 per cent above the May 2009 market and were at prices not seen since 1996. However, it was only in the last two to three months, when the prices had moved ahead of the strong New Zealand dollar that farmers had benefited from the increases. China, Australasia and India were the main buyers, supported by the Middle East and Western Europe.

Several reasons were behind the rise, he said. Consumer demand for carpets and textile furnishings had increased in response to industry efforts worldwide to lift interest in wool. Mr Henderson said that it was easy to look at a reduction in wool from New Zealand after droughts and the inroads of dairying into the sheep industry and assume that was what had tipped the balance of supply and demand in the farmers' favour.

"The market price reflects the worldwide wool supply, not just the New Zealand situation. It is the strengthening of demand that we have achieved that has created the pressure on overall supply.""The British wool supply is basically steady and the currency has been quite stable. This has allowed the demand-driven increases in wool prices to flow through to the farmers without the mask of an appreciating currency such as New Zealand farmers have suffered."

Mr Henderson said recent significant price rises for cotton and more particularly a 35 per cent jump in nylon prices showed that fibre prices were on the move and that wool may well make additional gains.