Higher wool volumes at auction as stockpiles linger

A higher volume of wool was offered at New Zealand's latest weekly auction as stockpiles from last season come to market.

Some 8,873 bales were offered at yesterday's North Island auction, 32 percent above the 6,697 bales offered at the same time last year, AgriHQ said. The auction achieved a strong clearance rate of 81 percent, ahead of the 74 percent average clearance rate in the previous season which ended June 30, AgriHQ said.

New Zealand has just ended the worst wool season since the global financial crisis as China, the largest buyer of the fibre, switched its preference to fine wool and away from strong wool that makes up the majority of the country's clip. Industry estimates suggest between 150,000 to 200,000 bales may have been stockpiled by farmers, brokers, merchants and exporters, as sellers rejected weak prices below the cost of production.

"The volume on offer remains higher than the same time last year as the large stockpiles of wool slowly makes its way into the market, the rate it is being released so far is not causing any problems as of yet," said AgriHQ analyst Sam Laurenson. "There still seems to be no sign of improvement in prices in the near term due to a lack of demand."

The wool on offer at the latest auction was very limited with the majority of the fibre being crossbred second-shear wool, and prices generally eased amid a stronger New Zealand dollar, Laurenson said.

Longer 37-micron crossbred second-shear wool was unchanged at $2.65 a kilogram compared with the previous North Island auction two weeks ago and was 15 cents/kg below last week's South Island sale. Meanwhile shorter styles were down 5 cents to $2.40/kg compared with the last North Island auction, and unchanged compared with last week's South Island sale.

As a result, the coarse wool crossbred indicator dropped 7 cents to $2.69/kg. That's just above the $2.67/kg level a fortnight ago, at the first sale of the 2017/18 season, which is one of the lowest points in AgriHQ's records since 2000.

(BusinessDesk)