Wool market to turn bullish with currency depreciation

18 Aug '08

2 min read

The next wool season is anticipated to bring relief to farmers who were so far bogged down due to strengthening of domestic currency against US dollar and the consequent hike in prices and weakened demand.

The recent depreciation of New Zealand dollar is indicating towards the approach of a profitable future market promising better margins to the farmers in 2008-09.

Industrial experts expect profits per farm to mount from an average of US $19,400 in 2007-08 to $53,000 in 2008-09. In fact, wool trade is likely to reap greater profits if New Zealand dollar continues to maintain its downward trend against all the major currencies.

Based on an estimated exchange rate of USc, the average price for lamb will rise from $56 last season to $73 this coming season. Besides, if New Zealand dollar depreciates to about 70c against the US dollar and other equivalent currencies, proceeds from lamb would increase to around $79.

However, another group of experts are of the opinion that since profit recorded last season were lowest in the last 50 years, it will take a longer time for the market to even out and farmers must therefore not expect a bullish market just as yet.

Moreover, reduced wool supply have been pointed out as one of the major reason behind soaring prices of the raw material and there are widespread fears that with falling stock numbers, the situation is unlikely to change in the coming years.