15 Oct 2013

Low wool supply puzzles exporters

9:30 am on 15 October 2013

Wool industry representatives are trying to unravel the mystery of an unexpected drop in the amount of wool coming forward for auction.

Thursday's South Island sale had fewer than 8000 bales on offer, about 40% less than expected, while the amount of wool for next week's North Island sale is 25% lower than what was rostered.

That's even more of a surprise, as recent North Island sales have been offering more than the amount forecast.

New Zealand Wool Services International marketing manager Malcolm Ching says the likely explanation is that more wool is being diverted from auction into other selling avenues, such as contracts or private sales.

"Anecdotal evidence suggests that shearing is right up-to-date," Mr Ching says, 'stock numbers are only back a small amount, the weather effect has only been minimal, so there doesn't seem to be this massive shortfall of wool overall.

"Our export figures are up to or ahead of where they were at the same time last year, so it's basically indicating that there is less wool coming through the public auction system in the south at the moment."

Mr Ching says wool can also be diverted through other channels such as direct contracts between growers and exporters or growers and brokers; the private merchanting network; and an electronic auction system mainly used by private merchants and wool exporters.

Te says the unexpected drop in supply for auction can upset the buying arrangements of those who use the auction system, but at the same time it benefits farmers by lifting prices.

"The more wool that is not available on the open market actually makes what is available on the open market more sought after, and the auction is what is used as the benchmark for setting prices both locally and overseas. So it can be a positive move to help stabilise prices."

The wool industry's rostering committee of exporters, brokers and merchants met on Friday to discuss the issue.