Chinese re-entry to wool market expected

Press, 31 March 1989, Page 16

Chinese re-entry to wool market expected

China is expected to again boost the amount of crossbred wool it buys from New Zealand.

The president of the New .Zealand Council of Wool Exporters, Mr Xavier Droulers, said China had shown an increased interest in crossbred wool recently after a lull of several months. He was not sure of the reason for the lull or the resurgence but thought it was connected to the allocation by the Chinese Government of money for wool buying. The allocation was thought to have been made later this year than usual.

The managing director of the New Zealand Wool Board, Mr Bernie Knowles, said the recent drop in demand from China was related to an adjustment in China’s currency.

It was thought that much of China’s buying until September last year had been speculative in anticipation of the adjustment. Once the . adjustment was made the demand for wool eased. “We believe it reasonable to expect that by April the benefit of that early speculation would run out,” said Mr Knowles. China would increase its buying orders again as it ran out of the wool it had stockpiled earlier.

He said a return to the buying levels of China in previous years could create a shortage in wool. The managing director of Hart Wool in Christchurch, Mr Don Quested, said he understood there had been some problems with payment by China

and that it’s Government had clamped down on foreign exchange. The move was made as a bid against high inflation in China.

He expected a re-entry into the wool market by China at some stage but thought it was likely to be several months away, rather than weeks.

The expected resurgence of Chinese buying was mentioned by the chairman of the Wool Board, Mr Pat Morrison, as one reason he was optimistic about the outlook for crossbred wool. He told the board’s electoral committee that stock levels in Europe were low and there were signs of an increased level of activity in the carpet sector. The demand within North America continued to be solid.

Greater challenges faced crossbred lambs’

wool, he said. Traditional uses for this wool were under pressure but the board was responding with a programme of product development.

The board’s economic service was predicting a slight improvement in estimated farm incomes. Mr Morrison said the net farm income had been estimated at $28,500 per farm for 1988-89, a 13 per cent increase on 1987-88. Wool production was estimated at 250,900 clean equivalent tonnes for the year. The figure represented a three per cent drop on the previous season, although the amount put through auction and private sales was up by one per cent at the end of January. The lower production levels reflected, in part, the drought on the east coast of New Zealand. Wool quality had also been affected.

The drought was expected to reduce next season’s clip by three per cent and sheep numbers would fall 2.3 per cent. The end result would be a fall of 5.2 per cent in available wool to 236,500 clean tonnes, said Mr Morrison. The continued interest in Merinos was reflected in the annual sales in February. Most of the Merino ewes sold stayed in the South Island and most of the rams were being used over purebred ewes. Some rams were being used for crossbreeding, mostly over Halfbreds and Corriedales, he said.