Commodity index down, but wool does well

The ASB New Zealand commodity index fell last week but lamb, beef and wool prices all posted rises close to 2% in United States dollar terms.

The index fell 0.8% in New Zealand dollar terms, dragged down by a 1.9% appreciation in the dollar against the US currency. In contrast, the index rose 1.1% in US dollar terms, ASB rural economist Nathan Penny said.

Wool prices had recovered some lost ground. Coarse wool prices (35 micron) over the past four weeks had averaged around 5% higher than the corresponding four weeks three months ago.

Within the wool types, lambswool had been the standout. Prices reached as high as $6.65 a kg at one stage in March. April prices remained strong and at $6.30 a kg, were 22% higher than at the same time a year ago, he said.

''More broadly, we expect wool prices to track largely sideways over the year. Looking at demand, it remains sluggish.''

In Europe and Japan, demand was weak as those economies continued to struggle.

Similarly, the Chinese economy continued to stutter with consumer sentiment low, Mr Penny said. The only bright spot was the US, where the recovery continued to gather steam.

In contrast, wool supply remained tight. The drought in New Zealand had reduced the sheep flock which would constrain wool production. A similar dynamic was playing across the Tasman.

''All up, with tight supply offsetting weak demand, we expect the net effect is likely to be neutral for prices. Or, in other words, we expect prices to largely track sideways over the year.''

New Zealand Wool Services International general manager John Dawson said lower than expected wool volumes last week pressured the South Island auction, generally lifting the market 2%.

Of the 9265 bales on offer, 92% were sold.

The weighted indicator for the main trading currencies leading up to the sale was 0.21% stronger compared with the last sale on April 16.

Shipment pressure and a wider wool type selection than last sale added to the market strength, he said.

Prices for fine crossbred fleece, good and average style, were 1% to 3% dearer, with poor styles 3% to 4% stronger.

Longer coarse shears lifted 2% to 4% and short types were firm to 3% dearer.

First lamb shear 30 micron and finer were 2% to 4% stronger, coarser short lambswool was 1.5% to 3% firmer, with longer types up to 5% easier.

There was limited competition, with China dominating, supported by western Europe, Australasia, India and the Middle East, Mr Dawson said.

Mr Penny said forestry prices lifted 1.9% in US dollar terms, with the lift entirely due to higher log prices.

With log prices set in New Zealand dollar terms, the rise reflected the lift in the dollar rather than any lift in log prices.

Meanwhile, the dairy index was unchanged with none of the sub-components posting price movements.

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