Crossbred wool price rise is likely a blip

Recent increases in crossbred wool prices are good news for southern farmers, but the price is likely to return to its previous lows in the next few months, reports Yvonne O'Hara.

An outbreak of foot and mouth disease in South Africa last month has led to a slight increase in the price southern farmers received for cross-bred wool.

As a result, China, which is the world's largest wool trader, stopped buying wool from South Africa last week, and is looking to other countries for crossbred and fine wool.

PGGW wool procurement manager Rob Cochrane said the increased demand had meant prices improved slightly during the past couple of wool sales.

''Good style second-shear crossbred fleece [50 to 100mm] 35 to 37 micron is currently averaging about 300 to 305 cents per clean kilogram,'' he said.

''About three weeks ago the same wool was averaging around 295 cents per clean kilogram, which equates to about a 3.5 per cent increase.

''It should be noted however that the supply of good style wool is currently very limited, as most summer-shorn full length fleece types are of average-to-poor style, with current pricing around 275 cents clean per kilogram.''

He said there were always some anomalies in trying to average wool prices as it was difficult to compare ''apples with apples'', plus there were quite substantial differences between North Island wools and South Island wools.

While the increases were good news for southern farmers, the price changes were likely to return to its previous lows in the next few months.

''China remains a big player in the global wool market and any slowing down in demand from that sector has wide-reaching effect,'' he said.

''My own opinion is that while the current market prices for New Zealand crossbred wool have improved of late minimally, due to what looks like a slightly better demand, prices are a long way from satisfactory but unlikely to improve much in the foreseeable future.

''The FMD thing, I think, is only a temporary glitch and because of the nature of the South African wool clip being mostly fine wool, there was a slight reaction in mainly Australia, which has similar types.

''As far as New Zealand crossbred wool is concerned, the market has been weak for the past couple of seasons, and most wool growers have accepted that fact.

''However, there are a few growers who have remained staunch and have not sold their wool, with some withholding from market the majority of two complete seasons' production, but it must be noted that they are a minority in the larger scheme of things.''

Cochrane said the exchange rate also had an impact.

He said crossbred wool was environmentally friendly and sustainable, and therefore should be well sought-after, but there was insufficient demand.

There was a lot of work going on behind the scenes by innovators wishing to use wool for other products (not textiles).

There had also been research into turning wool components into pharmaceuticals, etc.

''There are niche products out there, but there is not enough of a demand for them.

''Creating demand is the key.''