Global wool market crisis brings challenges to UK trade
At present the global market for cross bred wool has been shut since February and remains closed.
February to May is normally the busiest selling period of the year and as a result British Wool have circa 9m kgs of unsold stock out of a total 2019/20 clip of 27m kgs.
A spokesman said: "Given the situation we find ourselves in we have had to place a value on this unsold stock which is at a significant discount to the last prices sold.
"As a result the average price paid to producers for the 2019/20 clip will be 32p/kg.
"Balances are being paid as normal upon receipt of this season’s wool.
"It is important to remember this is an average price for all wool grades in the UK, with some mountain wools achieving 15p/kg and some finer white wools more than 70p/kg.
"By way of historical comparison this year’s payment is in line with those paid in the late 2000s at the time of the financial crisis.
"If we sell the 2019/20 unsold stock at a higher price than our assumed value we will make a further payment later this year in relation to the 2019/20 clip, depending on the economic outlook at the time.
"The hard fact is that the global cross bred wool market will be extremely challenging for the foreseeable future.
"In light of the huge and unprecedented valuation uncertainty in the market, and wishing to remain on a safe and sound financial footing, we will not be making an advance against 2020/21 clip wool and instead will make full payment for 2020/21 clips from May 2021 onwards once we have sold the clip and have valuation certainty.
"Should the market happen to improve somewhat in the next 12 months from the trough it is in at the moment, the price returned to you would see the benefit of this improvement.
"We are asking producers to support us through this very difficult season by bringing their wool into us so that we can preserve the volume use of British wool downstream, further develop our new British wool rich product ranges and emerge from the Covid-19 slump ready to exploit a strengthening market.
"Without the consolidation of wool into commercial volumes through British Wool and our continuing to market it more and more effectively, the prospect will be for lower prices indefinitely."
In response National Sheep Association (NSA) chief executive Phil Stocker said: “It’s not fully clear how the reduced value of the remainder of the 2019/20 clip will affect the overall value of a farmers wool delivered last year, but it would be easy to assume total fleece values might be down by 50 per cent.
"Cash flows will be affected, and many farmers will be faced with a bill from their shearing contractors but with no income to offset that.
"Although there are plenty of sheep farmers who do get real value from their wool most will at least expect it to cover shearing and wool handling costs.
"A fall of 50per cent of total value would, for most, mean total income not clearing costs.”
“NSA is very disappointed although we understand fully the reasons behind this situation.
"A lot of work has gone into increasing demand and values for wool and this will set things back.
"We are disappointed that British Wool, being treated as a Government Arm’s Length Body, has reportedly been unable to access the Governments Covid-19 support schemes and this will have had a big bearing on British Wool’s decisions.”
