Auckland, NZ, Aug. 29--Prices for both fine and medium wools have rebounded in recent weeks, which should be a good sign so early in the season.
However, exporters say overseas markets are unsettled and buyers are increasingly resistant to higher prices, according to Stuff.co.nz.
Some of the problem centers on the increasing volatility of the New Zealand dollar, especially against the US currency. Over the past fortnight, this cross rate bounced between US57.5 cents and US59 cents, creating increasing headaches for traders.
At the same time there are worries over the likely quantity and quality of Australian fine wools. These have been hit by drought that has left both the sheep and their wool in poor condition. It is generally believed that there will be considerable quantities of poor Australian wool. However it is likely the quality will be highly variable. Some regions and states including Tasmania were not affected by drought and this wool will be in good condition.
Peter Whiteman of Masurel Fils says New Zealand merino farmers are likely to benefit. "The price differential that saw these farmers get more than the Australians has narrowed and virtually disappeared in recent years.
"However, this season New Zealand merinos should again fetch the higher prices as the climate has been so good and our sheep are in good condition," Whiteman says.
He says there should be no reason why prices for New Zealand merinos should fall over the next couple of months--though "people aren't happy paying the prices".
The fine wool indicator has risen from $11.14 on July 31, the first major sale of the season, to $12.61 last week.
In its latest report, the Agriculture and Forestry Ministry forecast that this season, returns on its model South Island merino farm would fall by 8%, from $9.15kg to $8.39kg. MAF said many in the industry felt its forecast was too optimistic, given the 30% fall in prices of Australian wool and uncertainty in key consumer markets such as the US and Japan.
"However many merino farmers have signed up to contracts with the New Zealand Merino Company at prices similar to last season. This gives them confidence in prices for the coming season."
Prices for medium wools have risen from $6.45 on July 31 to $6.86 last week. Whiteman said the rise had been largely driven by the return of Chinese buyers to the market last month. However, the Chinese had not succeeded in buying large volumes, simply forcing others to pay more.
"The Chinese are being very careful buyers this season, in contrast to, say, this time last year when they were much more active."
They continued to buy for their domestic hand and machine-knitting markets.
Prices for crossbred wools have shown relatively little movement so far this season, with the strong indicator rising from $4.22kg to $4.28kg last week.
Whiteman said there were increasing signs of buyer resistance in overseas carpet markets, especially in Europe and Britain.
"New Zealand wool has become very dear in terms of the sterling, the euro, the US dollar and the yen."
However, prices remained okay for the Australians, whose mills continued to operate at near capacity.
Though prices were unlikely to come back sharply in the short term, he believed it was possible that strong wool prices could come under pressure over the coming months from alternative wool suppliers and synthetics.
"I'm not unduly alarmed, but the current level of buyer resistance could be a signal that the market may be coming off the boil."
The market could face a more testing time in three months when the quantities reaching auctions picked up.
"The market just doesn't feel as positive as it did. Overseas buyers who bought their wool on forward contracts are telling us to hold on; they no longer want it straight away."
