Wool market turnaround in December

Press, 17 January 1986, Page 10

Wool market turnaround in December

The wool market turned around dramatically during December according to the Wool Board. Until then it had been dominated by a continued strengthening of the New Zealand dollar, high interest rates and strong Wool Board support, the board said in its latest market review.

In the first half of the 1985-86 season the board bid on 44.4 per cent of offerings, buying 20.7 per cent at a cost of $77 million. The board also supplemented wool prices using $13.9 million of growers’ money during this period. During December several factors combined to reverse the downward price trend of

the first five months of the season and to significantly reduce board market support. These factors included a dramatic, downturn in the value of the New Zealand dollar, an easing in interest rates and a further shortfall in wool rostered quantities (23 per cent below forecasts). New Zealand wool became more favourably priced than equivalent Australian types and there was a re-emergence of China and Western Europe as major customers and a further strengthening of demand from Russia. In December 170,030 bales of new clip wool (26 per cent down on original

rostered quantities) lifted the season’s auction disposals to date 639,672 bales. (New season auctioned quantities for the same period last season were 738,266 bales).

The crossbred selection of mainly fleece and second shear was over all not up to the standard of earlier sales. The fine wool selection of Merino, Halfbred and corriedale wool at times showed the effects of last season’s drought with a number of clips being irregular or short in staple length.

The market indicator moved dramatically upwards during most of December to peak at 491 cents per kg clean on

December 19, up from an end of November seasonal low of 435 cents per kg clean. Following this rapid increase the market indicator eased 8 cents to close for the Christmas recess at 483 cents per kg clean, 2 cents below the season’s opening levels.

The market during December reflected almost the entire weakening of the New Zealand dollar with the bulk of production fully recouping the effects of the fall in value, even taking account bf slight easing of prices at the final sale on December 20. Compared with the

November close, prices for 24 micron fleece and finer were on average fully 5 per cent higher, while prices for 26 to 31 micron fleece and skirtings improved 10 to 15 per cent and 32 to 41 micron crossbred fleece and second shear were up 10 per cent. . At the same time bulky skirtings and clothing oddments improved between 7.5 and 12.5 per cent. Competition during December was more animated and widespread than in earlier months. Eastern Europe was the major buyer, supported at selected sales by China, Western Europe and New Zealand mills. Buoyant market prices meant board support levels were substantially reduced.