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Challenging times ahead for wool industry

25
Mar '08

Wool New Zealand's forecasts of wool prices and wool production point to continued challenging times ahead for the NZ wool industry.

Last season the average greasy price received by wool growers for auction wool increased moderately year-on-year, driven by a sharp increase in fine wool (<24 microns) and an increase for mid micron wool (24-31 microns) while strong wool (>32 microns) prices decreased moderately.

This season, it is expected that fine wool prices received by wool growers will increase further but by a smaller amount. In contrast, prices received for both mid-micron and strong wool are expected to fall. The poor price outcomes in NZ$ terms are due to the increase in the NZ trade weighted exchange rate.

M&W's New Zealand Economic Service estimates that sheep numbers will decline further in 2007/08. This follows the decline during the 2006/07 season that was driven mainly by a decrease in sheep numbers on the East Coast because of drought conditions.

As a result of the doubling of dairy prices on the world market, the dairy herd continues to expand to the detriment of both sheep and cattle. Declining sheep numbers will be partially offset by an increase in fleece weights in 2007/08, however total (shorn plus slipe) wool production in New Zealand is expected to decrease in 2007/08.

Despite the current negative situation regarding sheep profitability, M&W New Zealand remains confident that better global demand for protein and the growth in developing markets will ensure better returns from sheep farming within the next 2 to 3 years.

Australian Wool Innovation Limited

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