Many sheep producers are resigned to getting a lousy return from their wool, especially mid range and coarser micron types which make it hardly worth collecting and selling. This hasn’t always been the case as when I started in Boston in 1980 medium grease wool was worth $1.00/lb. Fine micron wool is now getting a significant price but it hasn’t stimulated any flock expansion. Today, the wooliest folks went to finer micron wool and the meat oriented folks often have switched to hair sheep so they don’t have the Expense of shearing.
Anyway, how did we get to this point where there are less sheep in the world than we’ve seen since we kept track back around 1900 or so. The price of wool has helped drive this decline as any wool 26 micron and coarser is pretty much not worth the cost of shearing, shipping and processing. So it got to this point thanks to the Australian Wool Commission and their greedy moves based on a short span of success that ended up breaking them with the burden of paying too much for over 3 million bales of wool.
The Australian Wool Commission was a quasi-government agency that was part promotion group and part advocate to raise the price of wool. It started in the 1970’s with some grower seed money and the commitment to support the market when it reached a low level. The original choice was to support wool at 504 Australian cents per kilogram clean off the sale floor (roughly $1.75/lb clean). The 504 level turned out to be a good level as the AWC had success supporting the market at that level and as the went further into the 1980’s the Australian Market Indicator was holding firm at 785/kg.
This success led the AWC raise the support price to 645/kg. At the time, we endorsed the move as a conservative and thoughtful move in the face of 10 years of success. What 645 did was make it so 65% of Australian wool growers could break even or make some money, while 35% took a loss but at least knew the risk to start. Wool supported at that level would let the supply adjust downward if things were tough overall. It didn’t stimulate production but tried to keep it balanced.
The price of wool in the 1980’s kept getting better as China was in the early stages of its Textile development and the USSR was a large customer as well. Europe and the US had seen some losses in production capacity but the US was still using 180 million pounds or so each year. This drove the Australian market to high levels over 1000/kg. This drove growers to advocate for a higher support price.
Ultimately the AWC adopted a new level of 870/kg in 1988. We panned the choice and pointed out that any joker with sheep could make money at that level and they would drive up supply without rewarding efficiency. Farmers guaranteed a profit are really good at adding to their production and that’s what happened. Australia set records each year of the late 1980’s and early 1990’s with new record supplies. And then the bottom fell out of the wool market.
1989 saw China retreat after a big explosion of growth thanks to the political side effects we signify as Tianamin Square. Meanwhile the Soviet Union was collapsing as Ronald Reagan chided Gorbachev to “bring down this wall.” So those two events put a big hole in wool demand and the market fell and the AWC started buying increasing percentages of the offering each week (30-50%). Then the west experienced the Reagan Recession and wool demand fell even further forcing the AWC to buy even higher %’s (75%).
With 100-200,000 bales on sale every week it didn’t take long for the AWC to pile up 2 million bales of wool while spending its cash. The Australians realized they were in a bad spot and they tried to adjust. In May 1990 the AWC cut the support level to 700/kg and added a 25% tax to help pay the interest accrued when you own 2.5 million bales of wool. But it was too late. By the end of 1995 the AWC had over 3 million bales and it gave up. The Market Indicator then fell to 550 or so and it stayed in the 600-700 range for TEN YEARS before enough of the 3 million bales was sold off and the wool market started to rise.
From 2005-2015 the price of fine wool made a run at returning to levels not seen since the 1980’s and even medium wool had a glimpse or two at price levels the same as when I started in Boston in 1980. Fine wool still has a vibrant market, but coarse and medium wool trades at levels where consumers pay more for freight and conversion than they pay for the wool.
Over the last 10 years we got a steady stream of emails from all over Europe, Asia and Africa that offered 50,000 kilos of raw wool with the promise of more to come. We imagine a lot of it is still waiting to move. The shadow over medium wool is dark and prospects for higher prices are dim.
Ironically the micron we sell the most of in our business is 29.5 micron medium Fleece wool. It’s probably appropriate as historically R.H. Lindsay operated most in the Fleece States. The Fleece States being the East and Midwest generally inside the Mississippi River watershed. The more we work with medium wool in the mini mill, craft and artisan sector the more we like it. So instead of going thin and flat try going lofty soft with some medium wool.