Soaring Wool Prices Not Helping Farmers

Auckland, New Zealand, Oct. 13, 2010--International wool prices are hitting highs not seen in a decade but farmers say returns at the gate are not sustainable, according to nzherald online.

The ANZ Commodity Price Index for September showed wool prices up 12% to a 14-year high.

However, the NZ dollar rose in value against the currencies of most trading partners on a monthly average basis, with the exception of Australia, which can have a dampening effect when prices are converted into local currency.

ANZ economist Steve Edwards said in New Zealand dollars wool prices were at about a two-year high, with market indicators of $4.26kg for cross bred wool at the last sale in September, compared with a low of about $3.10 in the middle of last year.

Skye Ward, Rabobank commodities analyst in Australia, said international prices were high, driven mainly by constrained supply, with a significant decline in the sheep flock in Australia during the past 10 years. In New Zealand total sheep numbers as at June 30 were up 2.5% to 33.2 million, with a peak of 70.3 million in 1982.

"The outlook is really hinging on the fact that supplies are fairly constrained," she said. "In terms of any upside for wool I think going forward it will really depend on a pick-up in demand."

The market was driven by demand for carpet and floor covering, with production accounting for about 45% of global carpet wool and 30% of that suitable for floor coverings.