Covid collapse hits wool prices hard
I was asked over the telephone if I was sitting down as the valuation for our lambs’ wool was given to me. We were at the top end of the valuations at $1.40, yes you have read this correctly $1.40. Most of the catalogue sat around $1.25 to $1.30. I was asked for further instructions, without hesitation I pulled the line from the sale.
Rock bottom is an arbitrary construct. There’s no such thing as rock bottom. So, assume the worst is yet to come. The question is, what are we prepared to do about it? My short answer - whatever is necessary.
The focus should be… Forget the medium to long term vision around wool, we are currently in survival mode, as the industry has been in a steady collapse for some time. We need an immediate response to rebound prices which then could put us on par with our shearing costs. If our recent experience has shown us anything it is that large frightening outlooks require swift actions that mirror the approaching threat.
We can hope, which is about the only tool available to us now, that the anxieties around Covid19 will subside and supply chains will resume to some level of functionality.
I’m totally over farmers and industry commentators continually espousing all the great qualities that wool possesses. Most farmers actively walked away from wool many years ago through their rejection of a levy, wool didn’t walk away from farmers. While there is established farmer supported models, most hitch off our auction system, which has been described as an efficient means of disposal.
In a sector dominated by ‘‘margin takers’’ its highly improbable that traders will halt operations to protect the integrity of the entire sector as their self -interest and wool growers’ self-interest are not aligned. The real concern I have now is that farmers will become ‘‘desensitised’’ to these crisis prices and the buyers will find a new acceptable low.
The only way to halt this collapse is for farmers to collectively remove all their wool from auctions until some stability returns with a staged reopening of the world’s consuming economies. The problem is that farmers of course do very little collectively. Independence is our best and worst quality all rolled into one. Only those who do not have a solid grasp on the position wool is in will find this idea an overreaction.
A short term or long-term approach taken by the Minister’s ‘‘Wool Working Group’’ will indicate to me where they see the
New Zealand wool sector is along the continuum of this crisis.
To finish on a semi positive note, this Oscar Wilde quote is somewhat like how I look upon the wool industry - ‘‘We are all in the gutter but some of us are looking at the stars’’.