Wool Industry: Extra Quarter Billion Dollars Here to Stay

27 January 2011

Extra Quarter Billion Dollars is Here to Stay for the Strong Wool Industry

Exporters applaud the price increases as welcome relief for sheep farmers

Strong wool prices settled at today’s Napier and Christchurch wool auctions and wool is now pumping an additional $200 to $250 million dollars into the rural communities compared to last season, says the president of the New Zealand Wool Exporters Council John Dawson.

The strong wool indicator, which averages prices across a range of crossbred wool types, was hovering around 540 cents for today’s sales and is now at levels last seen in the early 1990s, said Mr Dawson, who is general manager for Wool Services International.

“There has been an increase in wool prices of between 30 and 40 percent and based on last season’s raw wool receipts of $552.5 million, we could expect strong wool will earn between $750 and $800 million for New Zealand over the next 12 months,” Mr Dawson said.

“The Wool Brokers Association has calculated that farmers are clearing $20 a ewe after deducting their shearing costs and that means wool is again making a serious contribution to farm incomes.

“There are many flow-on effects,” Mr Dawson said. “Banks start to feel more comfortable about the loans they have out there and the higher returns get reflected through to property prices and an increase in equity in the business of sheep farming.

“Exporters and the industry in general are absolutely delighted with these increases and a real return back into farmers’ pockets,” he said. “We have ridden through the global financial meltdown storm and we are now heading into a period where the viability of sheep farming is much more assured and positive.

Mr Dawson has just returned from an annual promotions and marketing trip to Europe, visiting major clients and buyers of New Zealand wool and the Domotex Carpet Fair in Hannover. He said the various sectors along the wool pipeline were much happier, because activity has resumed and improved.

“They were not happy with the speed of the price increases. Growers are getting more and the retailers are making the same or better margins, but there are a few in the middle processing stages who have taken a hit,” he said.

“This is the most positive outlook we’ve had for wool prices in years and the overall message is that these levels are sustainable especially with international wool industry initiatives to re-create consumer demand for woollen products,” Mr Dawson said. “This recovery has been led through the wool auction system, which remains the wool industry’s main barometer for setting prices and an important freedom of choice selling option.”

ENDS

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