High clearance rates at the British Wool Marketing Board's wool auctions in the first half of 2013 means the organisation is heading into the new wool season in a strong marketing position, according to Chief Executive Officer Ian Hartley.
Addressing a meeting of the English press at the NSA North Sheep event in Harrogate, Hartley said: "As a result of a competitive market in the early part of the year BWMB has been able to sell the entire 2012 clip ahead of schedule and also clear a 5m kg carry over from the previous season. The market was so strong that we have had to cancel the final auction of the season as we had insufficient wool to sell".
After an extremely turbulent period of trading in mid-late 2012 when both prices and clearance rates fell sharply, producer payments for this year will be lower than last year but Mr Hartley says the recent surge in demand is welcome news for wool producers.
"It is no secret that the market wasn't in very good shape last summer and autumn. But thanks to BWMB's strong cash flow position we were able to hold wool back when trade was tough and as a result stimulate demand for the benefit of BWMB supplying farmers."
Last summer's dip in trade was a direct result of slowing demand from China, a major trading area for British wool, and reduced sales in to the carpet sector which has been hard hit in the economic downturn of recent years, he says.
"Carpets are generally a significant purchase for most households; as such they are replaced relatively infrequently. The economic uncertainty in much of the world has resulted in much lower carpet sales which have fed back through to wool sales."
Looking ahead to the coming season, BWMB Chairman and English Northern Board member, Malcolm Corbett says he is hopeful of the recent strong demand continuing. "There are no signs of demand slipping at the moment and there are signs the market in China is rising again.
"Economies around the world look to be improving and there are clear signs of an improvement in the USA economy which will be of major benefit to wool sales. And on top of this there is a growing trend towards wool and natural fibres from both the fashion and interior design sectors."
Mr Corbett says this increasing demand for wool products is in part down to the continued work of the Campaign for Wool (CfW) and reflects the significant work CfW has done across the globe to show the versatility of wool as a truly modern, sustainable fibre.
Average producer payments for the coming season will be 77p/kg – with wide variations within that average across all breeds and wool types. Mr Corbett said “it was disappointing that, at a time of severe hardship within the sheep sector, the poor trading conditions meant that the wool cheque is down on last year”. The Board, as has been the case in previous years will continue to project average producer clip values based on last year’s selling season. On this basis the average guide price for 2013 producer Clip Value of the Texel / Lleyn breeds, for example, is anticipated to achieve £1.03/kg and Mule/Cross at £1.00/kg.
For 2013/14 Mr Hartley stated that supply, not demand, will be the determining factor. We sold nearly 37 m kg last year and will have only 30 m kg available for next season (19% less).
Therefore, he said, ‘’If we can sell this volume of wool at these prices over the last few months, it is reasonable to assume that these are base prices going forward. The general economic situation, although not good, is an improvement on last year. We would expect next season’s auction price to be higher than the current years, especially in those fine and medium wools favoured by China, and we would expect carpet wools to be about the same average producer return.”
