23 Jan 2017

NZ wool brokers worried the worst is yet to come

8:23 am on 23 January 2017

The New Zealand wool market has limped along this season and, with Donald Trump now officially United States president, wool brokers are worried the worst is yet to come.

Sheep waiting for sale

Photo: RNZ/Susan Murray

East Coast Wools manager Peter Tate said the wool market was sliding downwards because China was worried about Mr Trump's threat of trade tariffs.

ANZ figures show wool prices dropped by more than 6 percent last month, and 26 percent for the 2016/17 season compared to last season.

This was driven by a 55 percent fall in Chinese exports.

Mr Tate said the sector had predicted the market to lift by now as the aftermath of Brexit and the US elections settled.

Peter Tate from Fred Tate Wools Ltd

Mr Tate said farmers were worried about how they would sell their wool after the major international political changes in the last year. Photo: Supplied

However, he said it now seems a long way off.

"The big cloud hanging over it at the moment is what Donald Trump's going to do once he gets into power as far as tariffs on the Chinese imports.

"The Chinese are pretty reluctant to make any commitments until they find out what is going to happen there."

Farmers are really worried about how they will sell their wool after the major political changes in the past year, Mr Tate said.

"It's the last thing we needed on top of everything else with the British and the EU - it's just compounding."

Mr Tate said it was now a waiting game to see whether President Trump follows through on his words.

"He was talking a 35 percent tariff on Chinese imports, well that would just decimate a lot of Chinese trade with America and then you've got to worry about how the Chinese will retaliate.

"There were some good signs pre-Christmas after the last sale. That seems to have faded away now and everyone is in a holding pattern waiting to see what will happen in America."

The worry over the US, combined with low prices for sheep meat has been a headache for farmers this season and some farmers would be dropping sheep numbers, said Mr Tate.

On top of this it had been a bumper year for wool production - right when the market didn't need any more supply, said Mr Tate.

"In the last month we've had a great run of weather so there's been no break in shearing. So that's another problem - we've got a huge amount of wool coming in in a very short period of time and we don't want to dump all of that on the market when it's in such a fragile state."

Mr Tate said it was frustrating to have such a good season while prices were so low.

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