While red meat markets have reflected market conditions and the season, the wool market has been chugging away steadily in the background. Reduced scouring capacity caused by damage from Cyclone Gabrielle did create some challenges, but the market is beginning to feel a little more normal with the Woolworks Napier scouring plant returning to maximum capacity.
Wool is flowing through processing chains again and buyers and growers can trade more confidently knowing wool isn’t going to be sat in storage long term.
This year’s prices have been stronger than last year, with crossbred fleeces reaching five-year highs. Fusca’s indicator has the coarse crossbred fleece average at $3.19/kgCL to date this May. This is the strongest it has been since 2019 when the average was $3.11/kgCL.
But while this is a positive, increased shearing costs have quickly absorbed this lift. Compared to prices received 10 years ago that were consistently mid to late-$4/kgCL, growers still need significantly more from their wool cheque to even cover costs.
But for now, in an industry that is struggling to find some positivity, this has delivered a renewed sense of enthusiasm.
Approaching winter, the focus has veered away from summer wool and turned to second-shear wools. Pricing for May has been on the rise, notably for very good-style second-shear wool.
With limited volumes available the market has been in seller’s favour and Fusca’s indicator was at $3.03/kgCL last week. This is 20c/kgCL stronger than in May 2023. Up to $3.44/kgCL was paid on the best fleeces in Napier this month, a recent high.
This could be a tentative sign that the market is getting back on track, however, the improvement also comes on the back of improved fleece quality, which had been hampered by a poor growing season.
The most recent export data released shows that coarse wool exports (36 micron plus) to China have been increasing, albeit slowly. In March, New Zealand exported 1040t of wool to China, the largest volume since May 2023.
This has been particularly beneficial for wool prices, as China tends to take the poorer quality fleeces, which in turn has lifted prices for other fleeces. Crossbred oddments are currently at a level rarely seen, commonly at $1.82-$1.92/kgCL.
Across the ditch, a similar lift in confidence is coming through, although the market remains in a tight trading range. Results hit levels not reached for months at the most recent Australian wool auctions held last week.
The Eastern Market Indicator (Australia’s wool price benchmark) lifted to AU$11.35/kgCL. This indicator isn’t entirely comparable to NZ’s indicators as although it includes 16-32 micron wool, it is weighted more heavily to the finer wool classes, 23 microns or less, which return a higher premium.
The Australian dollar has also had a strong influence on prices. The AUD has strengthened by over 1% against other major trading currencies. This meant buyers making purchases with USD or Chinese yuan had to pay a higher price to secure wool, which they have been happy to do due to a reduced supply of wool on offer.
For the third consecutive week, there were fewer than 40,000 bales offered nationally, and demand is beginning to outweigh supply. This is a lift from recent weeks, due to demand outweighing supply, but prices are still AU$1-2/kgCL behind last season.
This article was written by AgriHQ analyst Sara Hilhorst. Subscribe to AgriHQ reports here.
