Wool prices in New Zealand, the world’s second-largest exporter, have fallen to the lowest levels in 30 year. The global constuction slump has devastated demand for carpeting in new buildings. And, let’s face it, if you’re going to cut back on expenses, passing on the new rug might be a good idea.
“Adjusting for inflation, strong crossbred prices are about 75 per cent lower than 30 years ago,” Bloomberg reports.
Bloomberg reports that the price slump has prompted some wool farmers to hold back bales. Perhaps they are taking a clue from American bankers holding toxic asssets, assuming that the market for wool will quickly return. Perhaps its a liquidity problem. Experts warn, however, that no quick solution is likely and farmers holding back wool are taking a gamble.
The silver lining? This could be good news for sheep, John Jansen of Across The Curve points out. Some sheep may get to keep their wool coats. In the long run, however, we doubt this is actually good news for sheep. Farmers unable to monetise their flocks will seek to reduce inventory and overhead, which means culling the flock down to size.