Wool trade at a standstillWritten by Jennifer Womack
“We were doing really good until these storms hit,” says Reece. Shed lambing is wrapping up, range lambing is beginning and shearing season is underway. “You need three days after a storm hits,” says Reece of shearing and the time needed for sheep to acclimate to their thinner layer of insulation. “If you have a storm within 72 hours of shearing you’re going to lose some sheep. This is the time of year you have to shear them because you have to get that wool off of them before range lambing.”
While he hasn’t heard any exact numbers, Reece anticipates sheep producers will report some losses from the ongoing series of storms. But, he says, dealing with unpredictable Wyoming weather is nothing new for the industry. “This is what we deal with almost every year and you’ve got to weigh the impacts of these storms with the good moisture they bring. The harsh realities of this business are we always end up trading baby lambs for grass with these types of spring storms.”
As the challenges of springtime storms fade, the next hurdle for sheep producers may be the wool market. Industry experts say the weakened global economy has the textile industry in a holding pattern.
“With all of the bad economic news coming out around the country as well as the world, the textile market has been almost at a standstill,” says Bruce Barker of Great Plains Wool Company in Big Horn.
American Sheep Industry Association Executive Vice President Peter Orwick attributes the slowdown to two primary factors. Business people are not buying suits at the same pace they were earlier and aren’t willing to pay as much for wool. Second, is the exchange rate between the U.S. and Australia. He says the Australian dollar has gone from 80 to 90 cents per U.S. dollar to 50 cents. It’s a scenario that creates an “exchange rate discount” for those importing wool.
“After three or four years of pretty aggressive wool markets where you could sell all grades and types it’s hard to see a market that’s pretty shallow without a lot of demand,” says Larry Prager of Center of the Nation Wool in Belle Fourche, S.D. “We’re looking at half of what we got last year.”
“They report that there is a lot of clothing still on the shelves from this past fall and winter. This makes weavers very leery of how much cloth they will be able to sell to the garment makers in the near future,” says Barker. “The question of how much wool will be needed this year is looming over the industry’s head. Wool mills are finding it very difficult to do business with foreign banks so money is very tight this spring.”
“Greasy wool exporters are finding it very difficult to get the Chinese mills to buy at current levels and the European mills do not seem to be in the market at all,” says Barker. “Banking is a big concern for these exporters as well.”
“Everybody seems to be waiting to see what happens,” says Reece of uncertainty surrounding the global economy. “The outfits that buy wool depend on credit. They have to have good sources of credit to buy raw wool and move it on into other areas. With the credit markets in turmoil, I think that has a lot to do with where we’re at right now.” In a general sense, Reece says he anticipates the wool markets will turn around in unison with the world economy.
On the supply side, Barker says, “There is not a huge stockpile of wool anywhere in the world, but the combing mills are not willing to purchase much inventory either. They just seem to be buying enough to fill orders that they already have. Hand-to-mouth as they say.”
Prager and Orwick say the American military is currently a bright spot in the wool market. Orwick says the Army’s change to blue uniforms is partially driving demand in this area. Almost all of the wool Burlington, the company fulfilling the government contract, uses is 64s – 20-23.5 micron range. A new U.S. Navy contract, says ASI information, calls for 62s. Four states, Texas, California, Wyoming and New Mexico, according to ASI, account for 81.5 percent of all 22 micron and finer wool produced in the U.S.
Prager says a market persists for American wool thanks in part to a Congressional provision called the Berry Amendment that says America’s military uniforms will be made on American made machinery and out of American wool. “Of the wools I see going into the market place the next six months,” says Prager, “the vast majority will be for military use. Prices aren’t going to be good, but I think we’ll have an opportunity for those people who would just as soon sell their wool.”
“For producers,” Reece says, “it’s a tough call whether to sell their wool for what they can get right now or to speculate and hold onto it waiting until the market recovers.”
Programs are available through the Farm Service Agency to help those producers looking to hold their clip, but Orwick says rules haven’t yet been published. While FSA can tell producers about the programs, he says they haven’t yet reached a point where they can write contracts. “I can’t get a read if we’re talking weeks or if it’s longer term than that,” says Orwick of questions he asked while visiting the nation’s capitol late March.
“No one would have dreamed a year ago that we’d ever see $2 a gallon gasoline again,” says Prager. “The wool market has kind of gone the same route.”