Wool marketing body admits it was ‘too optimistic’

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Sheep producers were in sombre mood yesterday as they listened to Malcolm Corbett, chairman of the British Wool Marketing Board (BWMB), state that the company had been “too optimistic” in its calculations for the price of wool this year and that it had held back too much of the 2011 clip to sell this year.

Later in the meeting, held in Edinburgh, Ian Hartley, the BWMB chief executive, revealed the level of wool from 2011 held for sale this year, with five million kilos or about one sixth of the 2011 clip still looking for a buyer when the 2012 sales started and after the demand for wool had collapsed.

Only in the past month or so had the BWMB started to sell this year’s clip and now they have 6.3 million kilos, or about one fifth of the total yield, sold.

On price, he said that he hoped for a final level of 80p per kilo; a level which he admitted was a significant reduction on the 2011 figure of 124p and even that 80p figure was dependant on the price holding for the rest of the season.

Corbett said the problem in the world wool market was not supply, as most of the main wool producing countries were at best static in production. The problem was a lack of demand, with big wool customers such as carpet manufacturers seeing a downturn in sales.

One such buyer had admitted that, while they wanted to buy British wool, they had had to look for alternative products so that they could offer more choice for their customers.

Corbett said: “After last year’s good price, we are down to earth with a bump this year. After underestimating the market for the past two years, we have been guilty of being too optimistic for this year.”

He defended the BWMB system of selling wool at a monthly auction, saying slashing base prices would not have resulted in any increase in sales.

Looking forward, Hartley said there were positive signs that consumer confidence was growing, although he admitted this was from a very low base.

The market in China, a major buyer of wool, was slowly improving and production in New Zealand was fairly static, with a reduction in sheep numbers balanced out by an increase in production.

In presenting the annual report to the end of March 2012, he pointed out that operating costs were being held at just over £10 million but there still remained a substantial deficit in the pension fund, a problem he said dated back to the 1980s.

The last valuation of the pension deficit in 2009 produced a figure of £7.5m and, with little change in the gilt market since then, that was unlikely to be much changed. However, last year, the board put just over £1.5m towards filling that pension gap.