Woolly thinking

by david on July 25, 2017

dogIT’S NO secret that current wool prices are awful, but the outlook for the fibre has been terrible for many years.

For some types of wool, more has been put in storage than has sold in the last nine months, mainly due to lack of demand from China.

According to reports, current wool exports to China are 40% lower than last year. This highlights the folly of the industry relying on China alone.

As Wools of NZ chair Mark Shadbolt says, “The world is our market so as soon as you allow 60% of all of our exports to go into one country then you are exposed.”

Things are not flash, especially at the stronger-wool end of the spectrum: sale prices for 39 micron wool have been about $3.25/kg versus $5.80 a year ago; 35 micron $3.35 vs $5.85; and 29 micron $6.65 vs $7.85.

These prices make wool basically worthless. How is it that a natural fibre with huge environmental positives and other benefits is worth nothing?

In the dark, distant past, NZ’s economic prosperity was put down to ‘coming off the sheep’s back’ – meaning wool – but not so for decades. Today, Beef + Lamb NZ estimates that wool only makes up about 9% of sheep and beef farm income. This figure is likely to fall further if the current market for crossbred wool does not improve.

Blame for the dismal state of the wool sector is pinned to over-reliance on China, the industry’s lack of added value and poor promotion.

Growers are not without blame. They basically gave up on wool promotion when they voted to can the wool levy a few years back. Others gave up completely on sheep, changing to dairy farming, hence the huge drop in the national sheep flock and the growth of the national dairy herd in the past decade.

The sheep flock’s drop from 70 million to below 30 million in 20-odd years has done more than anything else to slash wool’s annual earnings from $1 billion to $500 million.

Cheap political stunts such as proposing that public servants be forced to specify woollen carpets in government offices is about as forward-thinking as were carless days and forcing people to get a doctor’s prescription in order to buy margarine.

Such schemes may sound good to struggling wool producers, given the sector’s parlous state, but do farmers really want to go back to the days of relying on the whims of self-styled, political demi-gods for their economic survival?

If so, the wool industry deserves to go the way of supplementary minimum prices, the Berlin Wall and party telephone lines.

 

 

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