The Courier & Advertiser (Fife Edition)
Wool price hike means better deal for farmers
SHEEP FARMERS dealing with the British Wool Marketing Board look set to receive an average of £ 1.24 per kg for their 2011 wool crop.
It might not seem a huge price for a top-quality natural fibre, but it does represent a 22-pence-per-kg increase over 2010 and helps establish wool at a new level.
According to South of Scotland BWMB member Hugh Blythe the days of 60 penceper-kilogram prices are in the past.
At an Edinburgh press conference yesterday Mr Blythe, who runs 600 cross ewes and 40 suckler cows near Maybole in Ayrshire, said: “At least the price now covers costs and will still leave enough to fill the Land Rover with diesel.”
Shearing costs just over £1 per head depending on breed making a good 2.5kg fleece worth just short of £3.
BWMB chief executive Ian Hartley said he could see a strong worldwide market prevailing although much depended on continued growth in China.
This vast country with its increasing affluence now bought 70% of the Australian wool crop and around 60% of both the New Zealand and UK crops.
“For many years much of the UK clip has headed for China for scouring, “he said.
“It is still cheaper to send wool there to be treated rather than half a mile down the road in Bradford.
“The difference now is that much of the wool is staying in China rather than being re-exported.”
Mr Hartley did, however, warn of an “iffy world market” in coming months thanks to the euro zone crisis, currency movements and above all consumer confidence.
Affluence is key to the demand for wool in a world where man-made fibres dominate with a 69% market share. Cotton accounts for 28.7% with wool only taking 1.5% of the global market.
“In the US, wool has a 2% share but even if it moved to 3% we couldn’t supply enough,” he said.
Interestingly, BWMB seems to be gaining a larger share of UK supplies with volume up 8% in Scotland and 6% across the UK. This doesn’t sit easily with Defra figures which show the national ewe flock increasing by only 3%.
The reason could be increased market share. As the last statutory marketing board in the country with monopoly powers, BWMB should of course attract 100% of the commercial wool but a loophole has of late allowed buyers based in the Republic of Ireland to buy wool for direct export.
The proportion of the clip which escapes the BWMB is unknown but the figures would suggest that the Irish have lost market share this year .
Mr Hartley was yesterday reluctant to put that interpretation on the market but it is difficult to see any other.
The Irish buyers, principally Texacloth, pay on delivery, whereas the BWMB only pays a 14-pence-per-kg initial payment followed by full settlement at the end of the marketing season.
It seems, however, that producers have seen the long game as worth playing in 2011.
The BWMB initial payment will once again be 14 pence per kg for the 2012 clip.
Mr Hartley said: “I think wool producers know how we operate and expect that level of payment.
“If it was any greater it would give us cash flow problems.
“There is already a £19 million funding gap between intake and payment costs and sales receipts each October and it would be difficult to finance anything greater.”
BWMB holds regular auctions throughout the marketing year which eases the cash position but, compared to recent years when there was a complete clearance of stocks, it transpires that around 10% of the 30 million kilogram 2011 clip remains in stock.
According to Mr Hartley this is no real cause for concern and he denied suggestions that he should have dropped the price to make sales.
It was all-top quality wool and he had no doubt it would be sold. It had been written down in value and this had been allowed for in the final payment.
Wool promotion is very much ongoing at present thanks to the internationally supported Campaign for Wool (CFW).
The Prince of Wales had headed up the campaign and been responsible for attracting huge support from wool marketing bodies across the world.
Retail outlets and fashion designers had also embraced the concept and a range of activities lasting into 2013 is planned.
This will include major events and “wool weeks” in China, the US and the UK.
Wool marketing organisations, including those in Australia and New Zealand had contributed £800,000 in cash and much more in kind to ensure success.
The BWMB had committed £160,000 in cash to the project and had allowed for around £110,000 of in kind contribution. This included Mr Hartley’s time spent as an executive director of the campaign.