Mid micron wool prices buoyant but coarse wool a different story

Wool prices are expected to stay high.

Mid micron wool prices are expected to remain near current high levels over coming months.

At the last South Island wool sale, there were some "very extreme" prices for mid micron wool, CP Wool supply relationship manager Roger Fuller said.

"We believe some of these levels have not been seen ever," Mr Fuller said.

ASB's latest Farmshed Economics report said it had been a "cracking year" so far for mid micron wool. 27 micron prices were up 29% while 29 micron were up an impressive 33%.

The relatively healthy global economy and firm consumer demand would help to underpin those prices, senior rural economist Nathan Penny said.

For coarse wools, the outlook remained modest, as demand remained structurally weaker. As a result, it was expected prices would track sideways over the rest of the year, Mr Penny said.

In Westpac's fortnightly agri update, senior economist Anne Boniface said demand from China had played a critical role in the slide in coarse wool prices. The value of wool exports to China,

traditionally, a key market for New Zealand wool exporters, slumped almost 30% in the year to June.

There have been some signs of improvement. Wool exports to China have increased over the last six months and average export prices are also up a little.

Some of the other factors weighing on coarse wool prices had also unwound "a touch". The New Zealand dollar had fallen and was expected to fall further in the coming year.

There were anecdotal reports of local stockpiles starting to unwind. And oil prices had risen, increasing the production costs of synthetic alternatives.

Looking ahead, some of those factors were expected to reverse. Most notably, oil prices were forecast to fall in 2019 as higher prices encouraged a lift in fracking production and growth in China was forecast to slow.

That could limit the extent of any improvement in price. Rising labour costs — and a recent focus by the industry on improving compliance with labour laws — could also mean shearing costs came under some upward pressure.

The search was on to find alternative uses for crossbred wool. More recently, a wool industry summit was focused on finding innovative solutions for some of the challenges the sector was facing.

While consumer preferences could be fickle, marketers of coarse wool needed to find a way to convince consumers that their offering was also worth paying a premium for, Ms Boniface said.