Watch out for upward wool prices and some idle thoughts from a life time in wool

We were processing orders online and the hand held device lit up with a local Massachusetts number. What is typically a call from sweet Emily the computer voice was actually a call from a retired wool associate. When I was a kid and we would buy his samples that I would cart from his office on a two wheeler past South Station and over Fort Point Chanel he seemed old, so I wasn’t surprised when he told me he was 99…

He didn’t sound a day over 80, although his recollection of what businesses were still in operation versus those who closed over 20 years ago was a little foggy. He kept repeating about how fast things are changing and I couldn’t help but think about how indeed things have changed since I used to buy his samples.

Back then we had a set up to receive cables from Western Union and the new gadget was a Telex machine that could relay typed messages to another machine. We had a IBM Selectric with automatic erasing. When I first started trading we used to Instant Message over the Telex with our connection in Uruguay as they’d save money if they didn’t have to Telex back. Who knew were cutting edge then. We used to get Order Bill of Ladings sent via the new fangled Next Day Mail and then run them up to the Rail Road Company office to surrender them so our customer would order immediate payment. I spent hours operating the Numbers and Weights machine to translate my Dad’s hen scratchings into neat typewritten columns of Bag numbers and weights.

From there we progressed to the fax machine which sped up a lot of things. No more need for the Next Day Mail as we’d fax all the copies of sheets down immediately. We didn’t have to go to the Rail Road Company office, but fax the B/L to the supplier. The telex and cable receiver were slowly disconnected and scrapped and the fax reined supreme until the development of this new fangled computer method of communication called the Internet. R.H. Lindsay adapted by becoming a desk top newsletter publisher when we acquired “The Commercial Bulletin” from Marine Guide Publishing in the late 1980s… We put it online and had nearly 200 subscribers around the world paying for our e-mail news letter.

Parallel to these daily technical developments the wool textile industry was going through a series of transitions and disasters that would change who we were and who we would serve, although surprisingly a few key pieces of our original business model still are a basis for who we are today.

When I started we’d buy Medium greasy wool that would make our #91 Domestic Medium Top for $1./lb and sell the scoured wool for $2.10 and the top was $3.25 or so. The Australian Wool Commission (AWC) was operating a price support program supporting wool prices by buying at a price level where many growers could make a little money or break even while the less efficient players would lose money, although not as much as if the market were left to go down further. They were so successful they raised the support level, which at the time looked very appropriate. China was in its infancy in terms of developing industrial capacity and that meant textiles. Russia was still a force and it had to keep its army warm. Europe and North American mills were still serving local clothing sewing operations and wool use was growing.

The AWC in it’s infinite wisdom at that point made a fateful decision that essentially led to the situation we’re in today, with less sheep on the world than at anytime in the last 100 years. It raised the support price a second time. This time any Joker (Aussie term) with a mob of sheep was guaranteed to make money if the market died and the AWC had to buy wool. So what do farmers do who are guaranteed a profit? They over produce of course. And up went world wool production.

Then, the Soviet Union failed and we had Tianamin Square in China and the two biggest wool customers disappeared. The AWC spent all it’s money and all it could borrow for a couple of years until the jig was up and it suspended the price scheme. It took them nearly 20 years to sell off all the backlog and wool prices were flat for all of the 1990s and the first decade of the 21st century.

Meanwhile in the United States we had a Price Support Scheme for wool growers as well. It was called the Incentive Program and it would subsidize the price to a level where growers would get as much as 200 or 300% of their receipts in additional payments from the government. Funded by duties from imported fabric, it had a marvelous effect of insulating American wool mills from outside competition as they had a cheap raw product on hand. They could pay what it took to beat international competition and growers would get the difference from the Incentive. Well Al Gore’s big effort to reform the USDA only had impact on two farm commodities, honey and wool. They were both eliminated.

Through the ending of the U.S. Incentive and with piles of cheap (the same price for everyone) wool world wide it was only a matter of a few years before U.S. mills began to close up or move offshore to Mexico or China. We went from using 190 million pounds in the U.S.A in 1996 to barely 50 million in 2001… Welcome to the 21st Century.

We hunkered down and went part time. We had some areas that we still trade industrial volumes and we had our little craft business. Initiated in the 1980s, the craft business had always been a steady source of day to day cash and we always loved the folks we dealt with. Eventually we set up a web site for craft wool and since then we’ve stabilized quite a bit and even grown over the past few years. We’ve been putting more time and resources into this business expanding our line and working on better sourcing and handling of our product to increase our quality and reliability.

Now it would appear we’re going to be raising our prices fairly soon. The price of Merino style (15-24.5 micron) wool has skyrocketed to levels not seen before. This is the second market run since the AWC stockpile burst and the first one back in 2010 got us more interested in developing our business. After all it doesn’t feel great to be paying less than what it cost to shear a sheep for the wool obtained by shearing. It is hardly a sustainable deal long term and watching some growers become meat farmers exclusively has a sense to it that has us shaking our head. So while it may test our bank balance when we buy wool, we’re happy to see prices rising and hope it is sustained to a point where we all think it’s normal.

We haven’t had to raise our prices yet, but we’d watch out for raises in our Merino and fine style wool offerings. We expect even our Number one item our #91 Domestic Medium top will see a raise back to last year’s price sometime later this spring or summer.

So for our artisans and craft folks who rely on our low prices, please consider the source and the fact that a lot of the wool we’ve been selling has been coming at a cost by wool growers. Don’t be surprised when our prices are up later this year and remember the higher price will hopefully spark more wool production.

As Merchants we’ve always tried to support growers and get them as much as possible, although we’re not immune to the reality of the market. Now that prices are headed up, we’ll see how immune we can be in terms of holding our prices down for as long as we can. Meanwhile forgive us if we don’t have any racy sales or promotions. We’re trying to keep our prices in line for the folks we hear from again and again so they can make more of their product. Seeing these operations succeed has been the most gratifying part of our business these past twenty years and hopefully we’ve got another twenty or so to go as the wool industry evolves into it’s next phase.

So thanks for being there and we hope to keep hearing from all of you soon!

Phil Lindsay

President, R.H. Lindsay Company