Wool price rises to 25-year high

Wool prices have hit a 25-year high as the global supply and demand balance continues to tighten.

Average British Wool Marketing Board prices for the 2010 clip were double that of 2009 and three times the 2008 prices (see table), and this year’s clip looks set to be worth even more.

BWMB projections based on auction sales results between January and April suggest the average 2011 producer clip value of Blackface breeds will be up to £1.14/kg, with Texel/ Lleyns to £1.30/kg and Mule/Cross wool to £1.38/kg.

Declining sheep numbers globally were one of the main reasons for the higher prices, said BWMB chairman Malcolm Corbett. “There are a lot fewer sheep about than there used to be and we’ve seen what that’s done for lamb and cull ewe prices. The same applies to wool.

“It’s not just here though. Numbers are down globally – there was a massive hike in New Zealand wool prices recently – and all the signs are that we’ll maintain the strong prices, which bodes well for producers this season.”

Indeed, the New Zealand Ministry of Agriculture said the average sale price received by NZ producers was up 32% on last year, to 503 cents (about 257p) per kilo of clean wool for the year ending 30 June 2011. It predicted prices would average 515 cents/kg (263p) in 2012-15, due to relatively high international prices and an assumed depreciation of the NZ dollar.

Mr Corbett said the multinational Campaign for Wool, launched last October, had also had a positive effect on wool demand, while China was starting to use more wool. The board’s grading system had helped access different markets, he suggested.

But with 70% of British wool used in the production of carpets and rugs, demand from this sector would continue to drive future prices, said Aidan Walsh, managing director of Ireland-based wool merchants Texacloth. He warned pressure on consumer spending was hurting carpet sales, making it difficult to pass on future raw material price rises, which could in turn affect wool demand and prices.

“It’s good to see the better returns for producers, but this price increase isn’t demand-driven and it’s not going to stay there forever. If carpet sales aren’t booming, how can the wool price keep increasing?” He suggested speculator activity had driven recent price rises and said sheep numbers would begin to increase as farmers returned to the sector.

Farmers Weekly Farmer Focus writer Charlie Armstrong welcomed the increase in wool prices, but said they still only just covered the cost of shearing his mainly hill breeds. “Shearing typically costs £1-1.50 a sheep, which is about what we’re getting for the wool, so it’s difficult to get excited about prices,” he said.

Haulage was the biggest issue and he was trying to reduce costs this year by using a wool press hired from the BWMB. “It’s the first time we’ve used a press, and we’ll also be delivering the wool ourselves to try to cut costs.”

Average producer clip value

2008      33p/kg

2009      48p/kg

2010      102p/kg

Source: BWMB