Analyst Intel


29 May 2020

PULSE | Down but not out

The wool industry has taken a significant blow in recent months. 

Prices have eased back 25% in the first sales since covid-19 lockdowns. 

New Zealand is not alone as Australian wool prices have also decreased by 25% since March. Prices achieved in NZ have dropped to average $1.50-$1.70/kg greasy for good, crossbred, second-shear fleece. 

That is a hard pill to swallow for many because crossbred wool returns no longer cover the cost of the shearing. 

AgriHQ data show crossbred wool prices are $1.84/kg clean, back by about 31% on this time last year and can only be described as dire. 

However, the industry is far from giving up. 

Those involved from the woolshed to the end market are working hard to ensure wool will continue to have its place in the market and recover from the downturn.

Wool prices have seen this sort of drop in prices before. 

At the back end of 2008, as markets reacted to the global financial crisis, wool prices dropped by about 25% to $2.92/kg clean in four months. Right now $2.92/kg clean for crossbred ewes’ wool looks attractive. 

Wool prices did ease about another 30c/kg clean to bottom out in 2009 but prices did improve from there to clear $6/kg clean at the peak in 2011.

Like any product, there needs to be demand from the end consumer for it to sell. Places like America that are a destination for the end product are still heavily affected by covid-19. Those markets need to be back buying and selling before the demand will flow back to the woolshed.

For farmers shearing will come at a cost in the short term but there is optimism that once the global markets get back on track demand and prices will improve. In the short term it is important to remember the animal health and management benefits of shearing. 

With lamb and ewe prices relatively strong it will not take many losses from cast ewes at lambing to cost more than the difference between the wool cheque and the shearing bill.

These are unusual times. Fortunately, wool still has a demand and wool can be sold. It might not be at a fantastic price but it could be worse. 

shearing

EXPENSE: Shearing now costs more than the wool fetches.