The crossbred market remained in a flatline state for a long time until last August, when demand from India and China began climbing.
A 6200 bale offering of mainly crossbred wool rose again to a clean price of more than $5 a kg at PGG Wrightson’s South Island auction on Thursday, up an average 38c a kg from a month ago.
In nearly a full clearance, crossbred fleece increased 9% to $5.18/kg for good style wool and 8% to $4.77/kg for poor styles at the Christchurch auction.
Mid-micron fleece, often used for outdoor clothing and semi-worsted interior products, has risen about 40% from last season, peaking at $15.25/kg for halfbred hogget wool at 23 microns.
In Australia, mid-micron prices went up $1/kg in the first sale of their season.
Farmers will be heartened — as wool returns were not covering shearing costs — but some insiders are starting to get worried the market is becoming overheated.
South Island auction manager Dave Burridge said the wool market was in a dramatic lift for all wool types based on a global shortage, particularly in Australia.
Demand was up for all wool breeds, microns and types, including lambs’ wool, he said.
"Across the Ditch, sheep numbers are much reduced and it has come at a time when there is more interest in wool and an upswing in demand. There is just not enough wool to fill the level of inquiry that currently exists."
He said Chinese buyers had finally woken up to a depleted wool pipeline, as the wool they bought today would not go on shelves for 12 to 18 months.
Relaxed tariffs and free-trade agreements with India and China were also working in the favour of wool sellers, Mr Burridge said.
He said the wool price had yet to reach sustainable levels for farmers, despite the increases.
Further gains at a slower pace would give them more confidence in the new pricing levels.
"There is concern the market has gone up very quickly and, without wanting to dampen spirits, we are going up 10% between sales — and that has in the past created a red flag that stocks could be over-sold, which is not healthy for the long-term sustainability of the business."
Almost 10 years have passed since the market reached $5/kg for most crossbred wool types and a year before that reached $6/kg.
Traditional 30 to 33-micron fleece previously sought after by the Chinese was back in demand and fetching previous premiums.
"Even the oddments are lifting, everything, and it’s like ships in the harbour — all get lifted on a rising tide. That’s exactly what we are seeing."
Most of the sold crossbred wool — above usual quality for this stage of the season — is headed for carpet and textile manufacturing.
Mr Burridge said he could not remember the last time the auction reached close to a full clearance.
Only one lot with a high reserve failed to sell in an increased catalogue originally rostered for 5400 bales.
Most of it was summer-shorn wool, with the influx of Southland wool to come through from next month.
Farmers would be looking closely at the results of the next Christchurch sale on January 29, and the end-of-season fine wool sale on February 26.
