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NZ lamb wool prices jump to 4-year high, aided by Chinese demand, US dollar strength

13 Mar 2015

New Zealand lamb wool prices jumped to the highest in more than four years at auction yesterday on increased demand from China for the apparel fibre, and aided by a stronger US dollar.

Lamb wool rose 3.9 percent to an average $6.65 per kilogram from last week's auction, the highest price since February 2011, according to AgriHQ. The average price for 35-micron wool, a benchmark for crossbred wool used for carpets and accounting for the majority of New Zealand's production, slipped 1.9 percent $5.25/kg as it retreated after touching a three-month high last week on lower volumes.

The New Zealand dollar has declined against the greenback over the past week after better jobs data out of the US stoked speculation the Federal Reserve may raise interest rates in June. The stronger US dollar has meant that while the cost for buyers paying in that currency have remained relatively stable, the weaker New Zealand dollar means they are able to pay more for lamb wool in local currency terms.

"Lamb wool increased relative to the US dollar as there is very strong Chinese interest in this wool type, and trading to that country is done in US dollars," said AgriHQ agriculture analyst Ivan Luketina. "Other wool types where demand was spread over China, Australia, India and Europe had smaller increases as the NZ dollar has held up more against most of these currencies than against the US dollar."

Some 7,995 wool bales were offered at the latest auction in the South Island, the smallest weekly offering so far this year, as New Zealand comes out of its main shearing season from December to early February.

Wool is New Zealand's 14th largest commodity export.

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