Tuesday, 19 July 2016 15:19

Hold tight 'till 'perfect storm' clears — wool brokers

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Philippa Wright (pictured), Wright Wool Ltd, says the sale last week was disappointing. Philippa Wright (pictured), Wright Wool Ltd, says the sale last week was disappointing.

Three of New Zealand's leading independent wool brokers seek to reassure growers that the disappointing sale last week is likely to be a blip due to a perfect storm of events.

"Coming off one of the best seasons for wool for many years it was disappointing to witness a poor sale in Napier last week," says Philippa Wright, Wright Wool Ltd.

Last week saw 46% of wool passed in at Napier's wool sale and the South Island levels were firm with Napier.

"We will be going into the sale this week with an open mind and our advice is to hold tight for now, sell if you have to and keep sight of the fact that, even though the price has dropped from a buoyant run, it is holding at the same price it was a year ago," says Peter Tate, Fred Tate Wools Ltd.

A perfect storm of events has culminated in a unique situation in the auction house creating a degree of uncertainty and, understandably, forcing the industry to be cautious.

The very high NZ dollar, Brexit, Britain selling wool at much cheaper levels due to the drop in the pound, a slow-down in Chinese demand due to the weakening of their domestic economy, a build-up of wool inventories and the northern hemisphere being at the height of their holiday season have impacted on wool buying.

There is no history to draw on to know where these events will lead but our advice is to hold tight and let the situation settle.

"This situation is unique and given this we recommend that growers sit tight and wait for the traders to establish their levels again, says Richard Kells, Kells Wool Ltd.

"What we do know is that the demand for long wool remains firm and growers are prepared to set realistic reserves and accept that they may have to wait until September to see any improvement in demand, says Kells.

"If you don't have to sell then set reasonable reserves rather than dump large quantities of wool into what may be a fragile market, says Peter Tate.

Tate also reminds growers that while prices are down they are still a long way off lows of recent years.

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