NZ lamb wool prices fall from 4-year high as higher kiwi makes local wool more costly

New Zealand lamb wool prices fell from a four-year high at auction last week as a rising local currency made the fibre more expensive for overseas buyers.

The price for clean lamb wool slipped 2.3 percent to $6.50 per kilogram from the previous week's auction, which was the highest since February 2011, according to AgriHQ. The average price for clean 35-micron wool, a benchmark for crossbred wool used for carpets and accounting for the majority of New Zealand's production, was unchanged at $5.25/kg.

Movements in wool prices at the latest auctions in the North and South islands were driven by the rapid rise in the New Zealand dollar against the US dollar, according to AgriHQ agriculture analyst Ivan Luketina. The New Zealand dollar jumped against the greenback last week as traders pared back their expectations for when the US Federal Reserve may start to hike interest rates. The weaker US dollar means the cost for buyers paying for local wool in that currency are higher.

"Lambswool, while losing a little bit of ground, remains very strong, having gained 6 percent since the start of the year and holding 32 percent above price levels from this time last year," said Rabobank commodity analyst Georgia Twomey. "The clear strong demand for this type which is feeding into the woollen supply chain for knitwear, overcoats and bulkier woven fabrics is being mirrored in Australia where the 24-32 micron types and merino cardings have also been performing strongly this year.

"The positive news for the outlook lies in the strength of the demand, while cautiously optimistic for some continued strength, given prices such as the 28 micron combined indicator in Australia has reached 12 year highs, how long this will be sustained with competition for similar types available from alternative suppliers is the question."

Wool is New Zealand's 14th largest commodity export.