5 Nov 2010

NZ dollar surge hits some wool prices

3:03 pm on 5 November 2010

The sharply rising New Zealand dollar has hit strong wool prices at this week's auctions.

After a period of steady increase, driven by renewed world demand and short supplies, cross-bred prices eased back a bit in local currency terms, at this week's North and South island sales.

But the rising dollar wasn't enough to offset the surge in fine wool prices. The indicator price for merino wool lifted by 44 cents a kilo on the back of a very strong Australian sale this week.

The mid-micron indicator rose 14 cents, driven mainly by demand from China.

Most of New Zealand's merino clip is sold in Australia by the New Zealand Merino Company, which had its biggest offering there for the season so far, last week.

The general manager of exporter Wool Services International, John Dawson, fine cross-bred indicator depreciated by 3 cents over the past week, and the coarse cross-bred indicator by 6 cents. Over the season, he says, there's been a movement in the strong wool indicator of $1.50 a kilo, which is too much, too fast.

The executive director of Beef and Lamb New Zealand's economic service, Rob Davison, says the sector exports about 90% of what it produces - so a high New Zealand dollar is of real concern.

Mr Davison says one of the positives at the moment is good prices offshore - but the exchange rate is just eroding those gains.