Supply will dominate wool prices

The supply of coarse-grained wool is tight worldwide, and prices hit a new high in more than 20 years, which may eventually reverse the long-term weakness of wool prices. PGW Wrightson (PGGW), the largest agricultural services company in New Zealand, believes that the price of wool is rising for a long time, mainly because of the reduction in the number of sheep and wool worldwide.

PGGW wool procurement manager Rob Cochran believes that the price of wool is still very good compared to two years ago. Economic problems around the world still exist, which may hinder the further increase of prices. However, due to the small supply of wool, stocks are scarce and there is almost no excess inventory. Large numbers of buyers from China, Asia, the United Kingdom and European markets are highly competitive, making wool the same as food, and prices are rising. Two years ago, wool appeared to be a by-product in some herdsmen. However, in October 2010, the price of wool soared to its peak in 20 years and reached a record high in January 2011.

Cedric Bailey, general manager of PGGW wool, said that from January to March, a large number of New Zealand wools will enter the market, which will bring seasonal pressure on wool prices. As Europe is trying to resolve its debt problems, wool buyers have recently reflected a wait-and-see mood on rising carpet wool prices. However, the strength of the New Zealand dollar further led to higher wool prices.

Mr. Cochran said that when the economy is in recession, most European consumers first choose food, not carpets. The weakening of the euro has made New Zealand wool carpets more expensive. Carpet companies and some manufacturers have turned to synthetic products. Only when it comes to making high-end products, wool is the preferred choice. However, the supply of good-quality hybrid hairs is limited, and global stocks are almost zero, and their development prospects may change momentarily.

Manufacturers choose short-term payments when purchasing wool, and only purchase when they are needed; rising wool prices are also unaffordable for small-scale spinning mills.