23 Jul 2012

Sheep farmers warn of disastrous wool prices

2:06 pm on 23 July 2012

Sheep farmers are again becoming alarmed about wool prices as they head back to levels that they say are below the cost of production.

Their concern has been reinforced by the results of last week's wool auction, the first South Island sale of the new selling season, when barely half the wool offered was sold and prices continued their downward spiral.

Exporters say demand was weaker than usual because European markets were on holiday.

But the chairman of the farmer owned marketing and technical advisory company Wools of New Zealand says carpet or strong wool prices have been declining steadily since peaking after their rapid rise more than a year ago.

Mark Shadbolt says it highlights the reality that wool growers remain at the mercy of a volatile selling system that needs changing.

He says since October prices have dropped around $2.50 a kilogram, which means a loss of around $40,000 in revenue for the average farmer.

"For every $1 a kilo that we lose in New Zealand we lose $120 million, so we have actually shaved off the best part of $250 odd million out of the New Zealand economy".

Mr Shadbolt says it highlights the need for the wool industry to look at new options and models to stabilise the prices and the volume of wool supplied.

He says if this trend carries on, there will continue to be a move away from producing wool into areas like dairy farming which farmers will perceive as more profitable.

Mr Shadbolt is a farmer on Banks Peninsula and is heading the latest attempt to set up a more co-ordinated wool selling and marketing system.

He chairs the farmer-owned promotional company Wools of New Zealand which would be the vehicle for a new integrated sales and marketing operation.

It has written to 17,000 wool growers, laying the ground for a fresh fund-raising bid later in the year.

Mr Shadbolt says 3500 - 4000 farmers already support Wools of New Zealand by paying a 3% voluntary fee on wool sold through PGG Wrightson.

"The first aim is, get Wools of New Zealand capitalised and endeavour to put in a stable pricing model that works for both growers and their customers on the other side of the world."