Rachel Shearer, General Manager of PGW Wool, speaks with Jamie Mackay from The Country about recent market movements, global demand, and why the long-term outlook for wool remains positive.

After several months of exceptional growth, the strong wool market has eased as major global buyers step back following a period of heavy purchasing.

Rachel said while the recent price movement is disappointing, it is not unexpected after the rapid gains experienced earlier in the year.

"The market went up incredibly fast," Rachel said. "The good news is we're still around $2.00 ahead of where we were this time last year. We've got to put things into perspective."

China pauses after filling forward orders
Rachel said much of the recent softening can be attributed to overseas buyers, particularly in China, who secured significant forward commitments during April, May and June.

"The market was really oversold through April, May and June," she said. "Those buyers have filled their forward commitments, so they're choosing not to enter the market at the moment."

With prompt buying slowing, the market is now waiting to see where demand settles. At the same time, European woollen mills are returning from their traditional summer break and beginning to write new business, providing encouragement that demand is continuing to build.

Volatility expected as supply remains tight
Rachel said periods of price volatility are likely to continue, but the underlying market fundamentals remain unchanged.

New Zealand's wool production continues to decline as sheep numbers reduce, meaning supply remains constrained and future supply squeezes are still expected.

"The fundamentals of reduced supply have not changed," Rachel said. "We will see more supply squeezes in the future, which will more than likely result in continued price volatility."

While prices may continue to fluctuate in the short term, the longer-term supply outlook continues to support demand for New Zealand wool.

Quality wool continues to come forward
Around 8,500 bales were offered at the latest national auction, with Rachel describing the quality of this season's clip as particularly pleasing.

"The wool that's coming forward is good production, good colour, and there's real soundness in the wool," she said.

The first fine wool sale of the season is scheduled for 20 August. While the Australian fine wool market has also eased slightly, expectations remain positive for the season ahead.

Looking ahead
Although buyers are taking a more cautious approach for now, the broader outlook remains encouraging.

Strong wool prices remain well above where they were a year ago, and when combined with improved sheep and lamb returns, the overall economics of sheep farming are substantially stronger than they have been for some time.

As global buyers return to the market and supply remains constrained, volatility is expected to remain a feature of the season ahead.

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