In the first wool sale of the year on January 15 the crossbred indicator shifted 15 cents a kilogram at the Christchurch auction, compared with the previous sale in mid-December.
The overall indicator, which includes the results from crossbred fleece greater than 30 microns, reached a clean price just below $4/kg. This compares with about $3.50/kg at the same time last year and about $2.70/kg the year before that.
Just over 95% of the offering was sold on an exchange rate of 56c to the United States dollar.
PGG Wrightson South Island auction manager Dave Burridge said the clean price gain of about $1/kg over the past two seasons could be expected to circulate an extra $6.3 million into the rural economy.
"The crossbred wool market for this time of the year, when quality is a little bit challenged after summer conditions and with twin-bearing ewes, does have an effect for the wool harvest, but with the double effect of lower sheep numbers and mixed breeding coming on the supply of wool has diminished.
"We are seeing for the first time in many years that demand has exceeded supply and we are now hovering at that $4/kg clean for the crossbred wool indicator which is certainly pleasing."
New season’s lambs’ wool was also close to the $4/kg mark largely underpinned by reduced numbers again and there was less slipe wool.
Many meat companies were exporting salted skins from processed lambs instead of removing their wool and the slipe wool industry contributed about 15% of the wool volume.
Mr Burridge said that was having an influence on auction offerings.
He said the first wool sale of the year saw values improve on the back of limited volumes coming forward for sale.
"But at $4/kg clean farmers are surpassing their harvest costs for full wool sheep. It’s probably still marginal for lambs’ wool and for second shearing, but certainly for full-wool sheep there is a surplus after their shearing costs [which] had increased considerably in recent years."
He said a rising market would hopefully slow down a move to non-wool producing sheep such as Wiltshires and other breeds.
"Now that we are seeing prices come up there is a bit more interest in it. While there is demand it’s been largely driven by a lack of supply, so while we love to pin our hat on that it’s all been demand driven, the reality probably is there’s a shortfall. But it is healthy because it signals to overseas customers that the wool is not there as much as it was and the competition (increases)."
He said shearing had been interrupted by wet weather and coming sale quantities should fill, while the dollar had continued its decline against the greenback which had further aided buying pressure in the sale room.
Shearing patterns have changed towards a late summer or early autumn annual shearing in the South Island for crossbred fleece. Most of the island’s wool production comes from Southland with most of the incoming wool arriving in January through to early May.
Mr Burridge said the $4/kg clean price barrier would hopefully be exceeded in coming sales to set a new benchmark.
The next few months would tell how the market would play out when more wool arrived, he said.
"That will put the market under a bit of pressure as to whether it’s going to hold to these levels or as we hope will continue to see demand grow and we see a further uplift in the price for our wool. It is pleasing to see given that slight deterioration at this time of the year of harvesting that the price is the highest for up to seven years."
Full clearances at auctions with little wool carried over, passed or withdrawn had resulted in little unsold wool sitting in wool stores. This could encourage farmers to clear wool stored in sheds, he said.
During the mid-January sale good style crossbred fleece sold at a clean price of $3.90/kg, up 3%, with the same rise for poorer styles selling for $3.62/kg.
Oddments were up 7% at $2.82/kg, also at levels unseen for a long time and indicating buyers were adding it to their blends.
A 5% gain was made by both average-style crossbred fleece selling for $3.84/kg and good-style crossbred second shear fleece at $3.77/kg.
Halfbred fleece at 28 microns was up 2% at $4.55/kg.
