Rising wool prices

[alden]

An important message:

I visited some cloth manufacturers and distributors recently in Italy and the UK. I asked them the reason for the 25%+ increase in raw materials prices. As many of you will know, wool is sold at auction. It seems that the Chinese are buying almost everything available and paying a very high price to do so. This is leading to a scarcity of quality wool on the market and the need for some weavers to spec buy at very high prices. There is also a problem getting the highest quality wools because the Chinese are keen for these materials to be mixed with their own less fine qualities to make more wool available.

There is no end in sight to this situation so fabrics prices will continue to go up.

I may be a good idea to get your cloth now.

Cheers

Michael Alden

[J.S. Groot]

Putain. Maybe it'll soon be cheaper for the CC to produce cashmere cloths than woolens?

[Simon A]

The participation of Chinese buyers in aggressively cornering key fibre commodities will be followed not long after by the Indians and the Middle East attempting to do the same. This trend can only continue.

Farm gate wool prices have increased by around 50% in the past year, but a year ago the farm gate wool price was well below break-even for farmers. This shows the trend in the Wool Eastern Market Indicator over time.



While the mills may be screaming about increased fibre cost, it is worth considering what has been happening at the farm gate for wool growers over the past 20 years.The world's biggest wool exporter, Australia, has had severe drought for roughly 15 out of the past 20 years, which has crippled farm profitability. At the same time, wool prices at farm gate (greasy wool) have barely increased over the past twenty years, while production costs on-farm have more than doubled. Prices of 19 micron and 21 micron wool over 15 years are shown.



The result is that wool production in Australia has dived by over 60% in the past two decades, as farmers move to more profitable ventures than woolgrowing.



Now demand is finally proving somewhat robust again, and it is natural that some farmers will rebuild their flocks to take advantage, but this takes years. Accounting for weather-related and market risk, and the high price of livestock after a drought breaks, it is risky for a farmer to move back into woolgrowing unless the farm gate price is HIGHER than it currently is. So catching up with demand will be a slow process, and demand in China is increasing by double digits each year.

It is worth considering that we buy good quality fabric for around $100-200/kg as a finished product, be it from Cloth Club or other merchants. The farmer is only receiving $11/kg at farm gate. Of course, fleeces are divided for different purposes, there are losses during scouring and processing, and processing, transport and marketing all cost money. But the robust competition in the wholesale wool market is not being reflected in the farm gate price.

The conclusion is: buy more woollen fabric while you can, as the market signals at farm level are not yet pronounced enough to draw producers back into this sector

[Cufflink79]

It doesn't matter what the product is, it will always go up. Alden shoes have just recently gone up $20 across the board.

Best Regards,

Cufflink79

[alden]

http://www.lefigaro.fr/conso/2011/02/10 ... et-ete.php

For those of you who read French. Cotton prices have tripled since March 2010, wool is up 38% and silk has doubled in price. The article suggests another overall increase of 15% by this summer.

Michael

[Badden]

The director of Grandi & Rubinelli told me much the same a few weeks ago. Their prices for shirtings have gone up meaningfully due to raw cotton price increases, and they expect the trend to continue.

[MTM]

I wonder if/when people will go back to raising sheep for wool in the US. Rambler's Way, founded by the Tom's of Maine family, raises them in Maine and Montana, but they're pretty small. Was there ever large-scale wool production in the US?

[Simon A]

Decisions on which crop or variety of livestock to raise in the US or EU are driven as much by subsidies and quotas as by market forces, so who knows? With American wool production almost extinct, the skills and equipment would have to be imported to run the industry properly. I believe there are only ten wool mills left in the US, all of them quite small. The 900 pound gorilla of wool production is Australia (25% of the world clip), with China a close second (but of vastly lower quality fibre). New Zealand mostly produces carpet wool, but some finewool also. South Africa, Argentina and Uruguay are the next biggest producers, none above 2% of the world clip.

[MTM]

^Interesting. Thank you.