PGG Wrightson (PGW) wool manager Grant Edwards said record low prices are beginning to edge up.
“We all know this year has been extremely difficult for wool with sales suspended for six weeks in late March as the international wool industry set out to combat the challenges created by the covid-19 pandemic,” he said.
At the resumption of New Zealand’s market, strong wool prices were down 25-30% on what were already record low levels prior to the crisis.
Prices dropped a further 10-15% throughout June, although have more than recovered throughout July and into early August to prices closer to pre-covid levels.
Edwards said featuring in this albeit minor recovery, all export companies are participating and bidding enthusiastically at auction.
New business written out of India and China has provided the impetus, accounting for the bulk of the market.
Wool deliveries to Europe have also resumed with pre-covid existing orders flowing through the supply chain.
“Growers putting wool up for auction are generally prepared to meet the market at current levels realising low passing rates,” he said.
Consistent with more normal conditions, top wools with low vegetable matter content and good colour are in steady demand and achieving premium returns compared to less sought-after types.
“Crossbred prices, however, remain largely unsustainable given harvesting costs,” Edwards said.
New season’s crossbred lambswool contracts have proved popular and provided substantial premiums compared to the current auction levels.
“There’s ongoing demand for good quality crossbred lambswool going into upholstery and home textiles,” he said.
“These contracts have been building over several years with markets largely through Europe, with up to 10 major customers.”
Edwards said fine wool prices are being largely driven by the Australian market and have undergone a similar decline to that of crossbred wool prices in NZ.
Early August, Australian fine wool prices are about 30% back on pre-covid levels and 40% back on those achieved last year.
“NZ growers will be watching price trends with some apprehension as we kick off our fine wool season which runs from late August to November.
“Fine wool returns to growers throughout NZ are being underpinned by forward contracts, which many growers have elected to take,” Edwards said.
PGW’s international sales and marketing arm Bloch and Behrens has been at the sharp end of the covid pandemic with numerous and multifaceted challenges at every point in the supply chain, Bloch and Behrens general manager NZ Palle Petersen said.
One of the strengths with its loyal and well-established customer base is that each customer has found ways to tailor solutions to help get through the unprecedented period.
“This has enabled them to honour contracts and we have increased flexibility around the delivery of existing shipments and occasionally allowing slightly longer payment terms.
“We have successfully done this without affecting our growers’ contracts,” Petersen said.
“Working with our international customers, we managed to sign up some very good new business, which enabled us to offer fresh crossbred lambswool contracts for 2021.
“We are pleased to have turned a challenging situation into an opportunity to cement our relationships with key customers and protect the interests of our growers and our contracts.”
