Confidence in prices for wool sales may be premature

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Sheep farmers have been told that the price they should get for their wool this year will be better than the 2012 cheque – but this optimistic prediction may prove to be of little comfort.

Last year at this time, a similarly rosy outlook came from the British Wool Marketing Board (BWMB) but, within weeks, China, which dominates the world wool market, pulled the plug on its purchases.

Such was the Chinese influence on the market that prices plummeted and by the time they came back into the market in November, the damage was done and British sheep producers will only receive half of what was originally expected from the 2012 clip.

“It is no secret that the market was not in good shape last summer and autumn but thanks to the BWMB’s strong cash flow position, we were able to hold wool back when the trade was tough and as a result stimulate demand for farmers,” said Ian Hartley, BWMB chief executive on a visit to Edinburgh yesterday.

Even if they are major buyers and are likely to again set the trade this year, Hartley regretted the degree of influence China now held in the wool world. He said he would prefer to see them buy only about 15 to 20 per cent of the British production rather than the 30 to 40 per cent they are currently taking.

Leaving more wool in this country would help the whole industry, he claimed, from the farmers, through the wool merchants and scourers to the carpet manufacturers. Their economic well-being was all linked together and if too much wool was exported then, he believed it could weaken the whole industry.

However with China now in buying mode and New Zealand, which has an annual clip five times the size of Britain, facing its lowest wool production since the early 1940s, Hartley believed wool prices would firm by about 15 per cent in the coming months.

But, according, to Hugh Blythe, BWMB vice-chairman and an Ayrshire farmer, most producers would see a reduction in the amount of wool they had for sale. Bad weather, lighter fleeces and sheep losses would negatively impact on the wool clip this year, he believed. Although the situation varied across the country, he added he would not be surprised if the total tonnage was down by 10 per cent.

In a normal year, Britain produces over 30 million kilos of wool but last year, thanks to a carryover from the 2011 clip, the BWMB sold 37 million kilos and all the 2012 wool has now been sold.

Talking about the value of wool, Blythe said: “Coming after all the other knockbacks the sheep sector has had, it is hugely disappointing but it reflects the markets we are dealing in.”

One drag on the market has been the demand for carpet wool which is where most of the Blackface clip is headed. In order to counteract this, Hartley said an industry link up will later this year promote a Scottish carpet made with 100 per cent Blackface wool and manufactured in the UK.

Although the official launch will not take place until September, Hartley said samples were already circulating in the trade, building up future sales.

The use of a single breed to promote wool sales was a marketing ploy but one which he believed could create almost 2 million kilos of sales, more than the annual Scottish Blackface clip.