It may take at least another 18 to 24 months for China to regain the levels of economic growth that fuelled the strong demand for the broad spectrum of food and other agri commodities that so characterised 2014, according to British Wool marketing Board Chief Executive, Ian Hartley.
“As an organisation we have extremely strong links with that market,” he said.
“The latest predictions by Chinese business analysts points to a gradual realignment of that country’s economy, a process that may take until 2018 to complete. However, beyond that the business outlook for China is predicted to be very positive.”
Hartley confirmed that agri food companies supplying the Chinese markets must get to grips with the challenge of volatility.
“This is a fact of life. Markets can fall with little or no warning. But they can move in the other direction just as quickly.
“Currency is a key factor when it comes to dealing with China and it has nothing to do with Sterling and the Euro. The key driver in this regard is the exchange rate between the US and New Zealand dollar.”
“At the present time the New Zealand currency is extremely weak, which is making Kiwi exports to China extremely attractive.
“Agri food businesses in the UK have no option but to cut their cost base and become more efficient.”
Specifically, where wool is concerned market prices have fallen by approximately 15% over the past three months.
“This is a direct impact of the recent downturn in the Chinese economy,” he said.
“However, there are now indications that the market has bottomed out.”
Hartley indicated that the fall in wool prices may impact on the producers paid by the Wool Board in 2016.
“It’s still too early to say if this will turn out to be the case. However we are currently managing our fortnightly auctions to ensure that we have as high a clearance as possible. The last thing we need is a significant quantity of wool over-hanging the market next spring,” he said.