2.2.2 Wool
Production and trade
New Zealand wool sales for the year ending June 2003 are estimated to fall by 4.1% to 167,000 tonnes clean, reflecting lower sheep numbers. Over the medium term, production is forecast to fall as sheep numbers continue to decline.
Wool exports for the 9-months ended March 2003 of the 2002/03 season totalled 104,600 tonnes clean, down 8% compared with the same period the previous season. Exports to the China (New Zealand's largest market) and the United Kingdom (the second largest market) fell by 28 percent and 1% respectively. The US was the only significant buyer that bought more wool, up 42%, over the last 9-month of the 2002/03 season. China remained the largest purchaser of New Zealand wool taking around 18,400 tonnes in the 9-months of the 2002/03 season, 23% of total wool exports.
The recent drought in Australia and the declining world production are expected to keep wool supplies tight on the international market over the medium term. Demand for woollen apparel in the major consuming countries is expected to remain depressed in the short term due to poor economic growth in the major world economies, which is only starting to pick up. Competition from synthetic fibres will continue to exert downward pressure on wool prices internationally.
Prices
The annual average auction price of New Zealand wool is estimated to increase in the year ending June 2003 to about 590 c/kg clean, reflecting substantially higher fine wool prices. One of the results of the Australian drought was to create panic buying by some wool marketers and processors, in anticipation of greatly reduced supplies and escalating prices.
Reduced Australian wool production and declining world stocks have substantially lifted fine wool prices in the June year 2003. However, the current high prices for fine wool cannot be sustained for long due to:
- ever rising competition from synthetic fibres
- the appreciating NZD against currencies of our major trading partners
- reduced retail demand for woollen apparel in the major consuming countries.
Consequently, fine wool prices are forecast to fall in June years 2004 and 2005. A gradual increase in fine wool prices is forecast from 2006 onwards, due to increasing world economic growth. Medium wool prices are forecast to follow the same trend as fine wool over the outlook period.
Following a small decline in June year 2004, strong wool prices are projected to rise out to 2007. This reflects increased demand for carpets as the world-housing market continues to expand. However, rising world interest rates are expected to exert downward pressure on strong wool prices, leading to a projected fall in strong wool prices in June year 2008.
Contact for further information:
Jagdish Prasad
Phone: (04) 474 4153
Email: jagdish.prasad@maf.govt.nz
