Woolsheds are filling up with unsold bales, with some farmers holding onto their wool in hopes a low market will rebound.
PGG Wrightson general manager of wool Cedric Bayley said the crossbred wool market had become extremely fragile since the Chinese market had effectively closed down.
The Chinese had previously bought about 50 per cent of the New Zealand clip. Chinese purchases had reduced to a low of about 30 per cent, and were now back up to 35-40 per cent, he said.
“Good strong wools are struggling to find a place out there.”
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Each part of the wool chain is feeling the dip in the market and is beginning to carry stock.
Manufacturers, exporters and farmers were all affected, Bayley said.
Farmers were wanting prices to get back to $4 a kilogram for more for their wool, but were getting valuations closer to $2.70/kg and were holding their wool back from sale, he said.
“There’s a lot of people thinking that there might be a rebound and they’ve held a lot of wool off the market.”
The industry had lost a lot of wealth and contracts had to be renegotiated at lower rates, he said.
Prices fell again for a mainly crossbred offering at the South Island wool sale in Christchurch last week.
A limited offering of crossbred fleece from 31 to 34 microns, including hogget wools, was 1-2 per cent cheaper compared with the last Christchurch sale on April 6.
Crossbred fleece 35 microns and stronger was back 4-6 per cent and crossbred second shear was down 3-4 per cent. Lambs’ wool was 5-8 per cent cheaper with the broader micron types most affected and crossbred oddments were down 5-9 per cent.
About 29 per cent of the 8450 bale offering was passed in after failing to reach reserve prices.
“China is a huge part of the market and we just can’t go somewhere else,” Bayley said.
February was the lowest point in the market decline, and while there was a slight recovery in March, the demand had not been there for prices to rebound, he said..
Since the dive, a lot of people were sitting outside the market and waiting to see what would happen with prices.
Bayley said there was likely more than 100,000 wool bales sitting in woolsheds, and with merchants and brokers.
“The outlook I think is going to be difficult over the next few months. I think the current conditions are going to carry on. We have to be careful about the amount we supply to the market [so] we’re not over supplying.”
Keeping the supply low was important to avoid international buyers believing they could pay less because of an overabundance of wool, Bayley said.
The best thing farmers could do was to ensure the wool preparation was done well, he said.
Farmers would need to be careful about drafting to avoid mixing black wool as well as making sure bellies and pieces did not make their way into fleece wool bales. Making sure wool was not contaminated with vegetable matter was also important, he said.
“It’s still better to put up a better prepared line than a poorly prepared one.”
When the market was going through difficulties, it was important to to look after the wool so international buyers would keep coming back for the quality, he said.
“When the market gets difficult, unfortunately we need to work harder to look after the wool.”