Wool prices decline at auction amid limited competition, plant contamination

New Zealand wool prices declined at auction this week with limited competition from buyers as wool contaminated with plant matter was discounted.

Strong wool of 39 microns dipped to $5.55 per kilogram at yesterday's South Island auction, from $5.65/kg at last week's North Island auction, and $5.75 at the previous week's South Island auction, according to AgriHQ. Strong wool, which makes up the majority of New Zealand's production, is trading about 8% higher than at the same time last year.

Lamb wool of 30 microns traded at $6.25/kg at yesterday's South Island auction, compared with $6.20/kg at last week's North Island auction, and $6.40/kg at the previous week's South Island auction, AgriHQ said. It is 5% below its year-earlier level.

Some 9509 bales were offered at the latest auction, with limited competition from buyers capping the clearance rate at 74%, AgriHQ analyst Shaye Lee said. Next week's North Island sale will offer about 5100 bales.

Ms Lee said buyers' appetite remained for good quality wool that matched their contractual needs. However New Zealand Wool Services International noted buyers were applying "significant discounts" for wool contaminated with a high amount of plant seeds.

Following dry conditions, there is typically a surge in the growth of weeds and plants pumping up seed heads to try to survive, which get caught in sheep wool as stock push into rougher country containing more trees, bushes and grass seeds. That contaminates the wool and makes processing more difficult.

Wool is New Zealand's 14th largest export commodity, with $827 million of the fibre exported in the year through February, 7.1% ahead of the year earlier. The latest merchandise trade figures for March will be released by Statistics NZ next Wednesday.

(BusinessDesk)