Wool Market Reports - Archives
Wool Market & Business Update Fall 2014
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International Wool Market
The wool market in 2014 has recorded very mixed results compared to the previous wool selling season. Fine wools around the world have struggled due to over-production whereas medium crossbred and coarser micron wools have fared better as the year has progressed.
China continues to be the most dominant country in the world in terms of being a producer, processor, exporter and consumer of textile fibers. Although the Chinese economy is still quite robust at around 7% annual growth, they are facing many new challenges. The Chinese government is transitioning the economy away from the “old normal” which was based on high investment to build capacity, cheap labour and exports, to the “new normal” which will feature developing domestic consumption, focusing on quality, brands and technology with a shift from production orientation to service orientation in their economy. One aspect of this transition has been a tightening of access to credit and this is having an impact on many wool textile mills in China and their ability to conclude new business because of cash flow issues. As a result China’s wool imports are down over 12% compared to the previous year. Another concern for the wool textile industry in China is the new environmental regulations that are being introduced. This will require significant investment to develop effluent control systems that will meet these new standards. As a result, this is taking away some capital from wool purchasing as factories invest to upgrade their recycling and disposal methods to comply with the new regulations.
China is still by far the world’s largest wool importer, processor and exporter of wool products, however Vietnam’s importance to the wool supply chain continues to grow. This has been due to good conditions for wool apparel manufacturing, a strong export reputation and the ongoing Trans-Pacific Partnership (TPP) agreement negotiations. Wool demand improvement continues to be contingent on the Chinese economy, their export market and on global economic recovery. Although key economic indicators for Europe and USA have been encouraging, other global events such as the Ukraine crisis, ongoing tensions in the Middle East and the Ebola epidemic will not be helpful for the wool business and could undermine achieving global economic stability. Despite competition from other fibres, raw wool demand is expected to improve in the coming months as the economies of major wool consuming countries continues to make positive progress, albeit at a slow pace. World wide wool production will drop again this year in most major wool producing countries. In Australia wool production is predicted to fall by 3.7% in the 2014/15 season due to on going drought conditions and the resulting reduction in sheep numbers. A similar situation is also occurring in New Zealand although sheep numbers there appear to be stable at present. This continued low level of world wool production will assist in supporting wool prices to a degree, but is not a healthy situation for the long term viability of the wool industry if it continues.
Last month I attended the Nanjing Wool Market Conference and Trade Show which was held in Nanjing, China with over 500 processors, exporters and brokers from 26 countries attending. This conference is the premier trade event on the international wool calendar. It is an excellent forum to obtain current wool market information as well as the forecast for future prospects of the wool business. There is no where else in the world that we can display our wool in front of so many prospective buyers. Overall the mood of the conference was generally positive and most wool exporters were able to negotiate and write some new business. In general, the consensus was that business conditions and orders are better than last year at this time. This is an encouraging sign for raw wool demand going forward.
Domestic Wool Market
Our wool volume for 2014 is stable compared to 2013 and we are currently in a well sold position for this years wool clip with a number of contracts to fulfill by year end. In addition to our traditional wool markets which consists of China, USA, India and domestically, we have also successfully marketed Canadian wool this year to a large combing mill in Czech Republic. This gives us an excellent opportunity to offer our graded and objectively measured wools to a wide range of potential buyers in different countries. We continue to upgrade our wool handling equipment to improve our overall efficiency. Another new high density wool press with automatic conveyor feed will be installed at our Carleton Place wool grading facility later this fall, replacing an older baler that has now become redundant. In terms of wool grading, Jim McNeely our long time Wool Superintendant continues to train Pat Lamothe and Nathan Pappas-Barabe as our apprentice wool graders and they are making good progress.
In other news we are pleased to be a supporter of the Campaign for Wool (www.campaignforwool.org) which came to Canada for the first time in 2014. It is hoped that this wool promotion will become an annual event and we look forward to participating. The purpose of the campaign is to encourage collaboration between an international community of woolgrowers, major fashion designers, retailers, manufacturers, artisans and interior designers.
Our retail business continues to grow and thrive, this is very important to the overall well being of the company. During the past year major renovations were completed at CCWG Livestock Supplies and Equestrian Centre at Carleton Place as well as at our Quebec branch, Premier Choix Agricole in St. Hyacinthe. In order to expand our ecommerce business, two new user friendly websites have been developed www.premier-choix.ca and www.realwoolshop.ca to compliment our main website www.wool.ca. In western Canada we welcome new staff members that have joined manager Brian Shaw at our Lethbridge branch following the retirement of long time employee’s, Jim and Val Shields. A new team under the leadership of Jacob Morin is also now well established at our Quebec division, Premier Choix Agricole.
The successful results that our business has recorded could not be achieved without a loyal and dedicated staff and Board of Directors, for which we extend our sincere thanks and appreciation. Our organization looks forward to continuing our service to agriculture and the sheep industry and to the challenges of completing new projects in the coming year.
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There has been only moderate improvement in the wool market in 2013 compared to the very difficult trading conditions that prevailed throughout most of 2012, none the less this is good news and hopefully the market has turned the corner. World wool prices slipped throughout 2012 because of continuing poor demand within the textile industry, a direct result of difficult economic and retail conditions around the globe. Although economic conditions in the major wool consuming countries continues to present challenges for the wool industry, there are signs of improvement beginning to emerge. Particularly in the USA, Japan, the UK and the Euro zone but growth in retail sales still remains relatively weak.
Economic growth continues to be the key driver for improving raw wool demand and confidence in the market place, with the end result being increased purchasing of consumer goods. Wool prices are also influenced by wool supply and historically low global wool supplies and production could be helpful in lifting wool prices at some stage when real demand increases. The forecast is that global wool production in the coming year is not expected to increase and may actually decrease slightly.
Although growth in China slowed to 7.5% in 2013, it remains a major global market for wool with over 50% of the New Zealand wool clip and upwards of 75% of the Australian wool clip exported to China. The situation is much the same for most other wool exporting countries. Significant change is taking place in China as it transitions from a low cost exporting nation into the world’s largest affluent domestic economy. In addition to rapidly rising Chinese labour costs, the Chinese government is pushing industry reform with the main focus on restructuring and upgrading existing facilities, introducing new technologies, reducing overcapacity and improving environmental performance with energy conservation and reduction of emissions.
To assist in offsetting some of the associated costs of reform the Chinese government is supporting textile exports by reducing costs for a number of measures, including customs clearance, tax reduction and financial support. Their austerity program has resulted in the delay of some government contracts such as uniforms etc but it is expected that after evaluation these will be tendered in the near future and will give a boost to the Chinese textile industry.
The outlook going forward is cautiously optimistic for wool trading and demand over the next 12 months with current sentiment definitely being more positive than a year ago. According to Dr Paul Swan of AWI, a key opportunity to improve the demand and price for wool in a competitive market will be the new emerging economies of Asia, Brazil and Russia where sales of premium goods will increase considerably as 320 million consumers move from lower economic income to middle and high income levels.
Domestic Wool Market
We are in a well sold position for the 2013 Canadian wool clip and our main buyers continue to be China and USA. For marketing the Canadian wool clip, we will continue our practice of a carefully calculated and disciplined wool marketing approach. This will consist of a combination of forward contracts and spot sales at opportune times throughout the year, of our fully graded and objectively measured wools, to our established wool markets. As well, we will manage our foreign exchange risk with a hedging strategy that utilizes option dated currency contracts. In order to better serve our producers we have continued to expand our network of wool collection depots across the country and this initiative will be continued where it is practical. Wool handling equipment is also being updated on an ongoing basis to improve efficiencies.
Briefly highlighted, some 2013 CCWG activities are as follows.
- Participated at the 25th International Wool Trade Fair and Information Conference which was held in Suzhou, China Sept 14th – 16th, 2013. Canadian wool was on display at the trade fair and we successfully negotiated a number of contracts for delivery through to February 2014. The event was attended by 500 delegates from the Chinese and International wool trade. It was very informative and a great venue to promote Canadian wool to a wide range of potential buyers. Traveled before and after the conference with CCWG agents in China to promote and market, graded and objectively measured Canadian wool.
- For the fiscal year ending February 28, 2013 the co-operative recorded gross sales of $8,688,513 which represents an 8% increase from the previous year. Sales have increased almost 28% over the past three years. The Board of Directors authorized a dividend payment of 7% to the shareholders of record date December 31, 2012 and 5 cents per pound to the Shareholder Wool Shipper Loyalty Reward Program (SWSLRP). Full details on these programs can be found on the company website www.wool.ca. Wool volume increased by 8.2% in 2011 and 8.6% in 2012 but slipped by 6.5% in 2013, due mainly to a reduction in wool consignments from Quebec.
- The CCWG Board of Directors approved managements proposal to renovate the Carleton Place Stockman Supply Store.
- The project involves demolishing and renovating the existing Stockman Supply Store which is contained within the warehouse and is comprised of an area of approximately 7,500 square feet. The original stone walls of our CPR roundhouse will be sandblasted to highlight the beautiful architecture of the building which was built in the 1800’s. As well, fifteen large heritage style windows will be installed.
- The current store and inventory has been relocated into our new warehouse building until the project is completed (estimated 10 – 12 weeks). During this time frame the new storage building will not be used for storage of graded wool bales.
- The design-build contractor for the project will be Cornerstone Builders Ltd from Belleville, ON. (see www.wool.ca/Renovation for a slide show of the renovation in progress)
- An older model wool baler at the Carleton Place wool grading facility has recently been replaced with a new high density wool press that was purchased from a USA manufacturer.
- Major sponsor for numerous sheep related events during the year across the country.
- Working closely with ear tag manufacturers, the CSF and provincial sheep organizations in support of the CSIP. Renewed contracts and distribution agreements for the upcoming year.
- CCWG websites, www.wool.ca, www.premier-choix.ca have been upgraded along with new user friendly e-commerce in English and French.
- CCWG promotional materials have been updated and a new French Livestock Supplies Catalogue is now available from Premier Choix Agricole.
- Helped organize and supported shearing schools in western and eastern Canada in 2013.
- New staff appointments have been made at CCWG branches in Lethbridge, AB, Saint-Hyacinthe, QC and Carleton Place, ON.
- Sponsored a research project undertaken by Dalhousie University to investigate the feasibility of wool value chain development.
Our retail business continues to grow and is a very important source of revenue for the company. It enables us to present a strong balance sheet for operating the business and for financing future expansion, capital expenditures, as well as our ongoing support and commitment as a sheep industry partner
Appreciation is extended to all CCWG staff and Directors for the successful results that have been achieved during the past fiscal year. We also thank our loyal customers for their continued support and patronage.
Eric Bjergso, CCWG General Manager attended the 25th China International Wool Trade Fair
and Information Conference which was recently held in Suzhou, China from September 14th – 16th 2013.
Canadian wool was on display at the trade fair and we successfully negotiated a number of
contracts for delivery through to February 2014.
Eric Bjergso, CCWG General Manager addresses the conference delegation
with an update on the Canadian sheep and wool industry.
Eric Bjergso, CCWG General Manager examines Canadian wool with visitors
from Uruguay, D’Jalma Puppo and Margarita Cortabarría of Estancia Puppo SA.