Wool Market Reports - Archives
Wool Market & Business Update Fall 2012
Submitted by Eric Bjergso, General Manager
Unfortunately the much improved wool market conditions of 2011 have not carried through into 2012. The global economic downturn has affected all major wool consuming countries and the situation is not expected to improve before the second half of 2013. Weak demand and lack of orders has resulted in difficult marketing conditions with wool prices falling in excess of 30% on a global basis during the past six months. China remains the major purchaser and processor of wool from all origins, but many mills are now operating at less than 50% capacity with minimal export business being concluded. We will need to see China buying wool for export orders before there will be any significant improvement in wool prices. World wool production is not expected to increase in the coming year and this will help support wool prices to a degree.
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.
Briefly highlighted, some 2012 CCWG activities are as follows:
- Participated at the 24th International Wool Trade Fair and Information Conference with a Canadian wool display. Held in Sanya, China Sept 12th – 14th, 2012 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 after the conference with CCWG agents in China to promote and market graded and objectively measured Canadian wool.
- For the fiscal year ending February 29, 2012 the co-operative recorded gross sales of $8,000,824 which represents a 10.6% increase from the previous year. Sales have increased almost 20% over the past two years. The Board of Directors authorized a dividend payment of 7% to the shareholders 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 8.6% in 2012 and 8.2% in 2011.
- A new storage warehouse at Carleton Place has been completed and the official ribbon cutting ceremony took place during the AGM on August 11th. It will be utilized as an efficient storage and shipping area for graded wool bales as well as storage for our rapidly expanding livestock supplies business.
- Major sponsor for several sheep related events during the year across the country.
- Implementing on going instructions from the Board of Directors on the CCWG Long-term Strategy Plan.
- 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.
- Labour saving material handling equipment has been purchased for CCWG branch locations. Hired two apprentice wool graders to be trained at the Carleton Place, ON wool grading facility.
- Opened a new satellite store in Waterloo, ON at the OLEX Auction and Farmers Market.
- Plans are underway for extensive renovations to take place at CCWG Livestock Supplies and Equestrian Centre, Carleton Place during the coming year.
- CCWG website www.wool.ca is currently being upgraded along with new user friendly e-commerce.
- CCWG promotional materials have been updated and a new French Livestock Supplies Catalogue will be available by November 2012.
Notice of Annual General Meeting
The 95th Annual General Meeting of the Canadian Co-operative Wool Growers Limited
will be held in Saint-Hyacinthe, QC October 19th 2013 at 2:30 pm
CCWG Director Elections 2012
The following Canadian Co-operative Wool Growers Limited directors term of office will expire in 2012. Any shareholder interested in a director position is required to file a nomination ballot supported by three shareholders from the provincial sub district in which they reside, at least 60 days prior to the provincial shareholders meeting. Copies of our corporate bylaws and nomination ballots are available upon request from any branch of the Canadian Co-operative Wool Growers Limited. All nomination ballots must be received at Head Office by August 31, 2012.
British Columbia - Ken H. Mallinson (acclaimed 2 year term 2013/14)
Alberta South - John D. Balderson (acclaimed 2 year term 2013/14)
Saskatchewan South - Ward Harden (acclaimed 2 year term 2013/14)
Ontario East - Dwayne C. Acres (acclaimed 2 year term 2013/14)
Québec - David Mastine (acclaimed 2 year term 2013/14)
NOTICE OF MOTION
– Constitution Amendment / CCWG Director Representation
It was moved by Marg Zillig, seconded by John Woodburn and carried that an elected and voting Board of 10 Directors should continue to be maintained and that this number of directors should not be exceeded. However, the current makeup of the board should be reconstructed or realigned to provide for 2 elected directors from the province of Québec in view of their sheep numbers and wool production (25% in 2011/12). Consideration might be given to appointing non voting board advisers or associates from time to time as may be required.
An amendment to the motion was made by Ken Mallinson, seconded by John Balderson and carried that one director position from the province of Saskatchewan be eliminated.
Note: this notice of motion will be discussed at the 2012/13 provincial shareholder meetings. It will then be voted on by the CCWG board of directors at next years AGM which will be held in Saint-Hyacinthe, QC on October 19, 2013. Shareholders are encouraged to contact your director representative on the CCWG board to express your views.
CCWG Wool Market and China Update – Fall 2012
In September I traveled to China again this year to participate in the Nanjing Wool Market Trade Fair and Information Conference with a Canadian wool display. Approximately 500 delegates registered for the conference from China as well as internationally. It was very informative and a great venue to promote Canadian wool to a wide range of potential buyers.
The wool market has been slipping since spring 2012 and at the time of this writing prices worldwide have dropped in excess of 30%. Weak demand and lack of orders because of the global economic down turn has resulted in most Chinese mills operating at less than 50% capacity. Greasy wool stocks in China remain low but inventories of fabric, wool yarn and top are building. Wool price competiveness relative to other fibres remains high in terms of historical comparisons. Cotton prices have dropped dramatically from a year ago and stocks are up by 47%. Market prices for man made fibres such as polyester and rayon which are petroleum based have also dropped in line with crude oil prices and reduced demand. It is projected that wool market improvement is not likely to occur until the second half of 2013 at the earliest due to global economic prospects and the current slow down in the major economies. The Chinese government plans to boost their economy by creating 130 million new jobs by 2015, which will help to improve domestic consumption. In terms of global wool production for 2012/13 a slight decrease is forecasted due mainly to alternative farming practices such as dairy, sheep meat and food crop production.
Following the conference I travelled with one of our agents to visit a number of mill customers in southern China. We managed to conclude contracts for fall 2012 delivery with 5 buyers for a total of 13 containers of graded and objectively measured Canadian wool, which was much better than I had originally anticipated.
Nanjing Wool Market Conference and Trade Fair in Sanya, China
September 12th – 14th, 2012
Wen Qingnan, President Tianya Wool Industry Co., Ltd (the largest wool combing mill in China)
Eric Bjergso, General Manager CCWG
|Eric Bjergso, CCWG General Manager discusses Canadian wool with a visitor to the CCWG booth during the Wool Trade Fair|
Future of Wool Industry Lies in Cooperation
Almost 500 representatives from more than 20 countries around the world attended the 24th International Wool Trade Fair and Information Conference held in China’s beautiful coastal city Sanya, September 12th – 14th, 2012
Where will wool prices go? What will enterprises do to cope with the current difficult situation? How to realize sustainable development of wool industry? Almost 500 representatives from more than 20 countries around the world attended the 24th International Wool Trade Fair and Information Conference held in China’s beautiful coastal city Sanya, to discuss those topics.
This conference was organized by China Wool Textile Association and China SDIC International Trade Co., Ltd., and executive organized by Nanjing Wool Market. Leaders from Department of Foreign Trade, Administration of Quality Supervision & Inspection and Quarantine, China National Textile and Apparel Council, Consulate General of the United States in Guangzhou, Uruguay Embassy in China, Australian Embassy in China, International Wool Textile Organization and so on attended the conference. CWTA also released 2011-2012 Wooltop Mill Competitiveness Top 10 Award.
Traditional wool textile industry has confronted with unprecedented difficulties since the beginning of 2012. Increasingly higher labor cost and restrained high level of wool prices lead to greater material cost and high risky financing cost. All of them depress the business of industry, weaken their competitiveness and it is inevitable for lower benefits. In the first half of 2012, the total profit of 1123 above-designated-scale enterprises is 4.18 billion RMB, 2.2% higher year on year. Polarization among companies becomes more serious, the proportion of loss-incurring enterprises reaches 24.13%, and their deficit is even 92.33%. Ms. Peng Yanli, President of CWTA, said that the situation of wool textile industry is rigorous and it is hard to overcome those difficulties at a short time. The industry should strengthen confidence, and pay more attention to industry readjustment and collaborate to fight.
In 2011/12, wool prices surged, then demand weakened, and finally prices fell back. Gloomy world economy makes wool prices start to go downwards. But just before the conference opening, wool prices rebounded. At the mean time, America announced to a third round of quantitative easing, or QE3. According to Ms. Yang Xiaoxiong, General Manager of Nanjing Wool Market, the future wool price is depended on the balance between demand and production. Demand is the major factor that influences wool prices. Where to find and how to create demand is always an issue for our wool people.
Life Cycle Analysis or short LCA is being increasingly used by global companies such as Marks & Spencer based in the UK, VF Corporation based in the US or the giant Inditex in Spain to help reduce their overall environmental burdens across the whole life cycle of their goods and services. As for the current LCA data, wool is bad and recycled polyester is good. IWTO has set up a working group that has looked at existing LCA data. The working group initially made up of the grower nations has defined a strategy on how to change wool’s environmental credentials. IWTO will be seeking further funding from not only the grower nations but the key global processing nations of wool.
During the conference, China-Australia Joint Working Group on Wool held the signing ceremony of General Terms and Conditions Governing the Purchase of Australian Greasy, Scoured and Carbonized Wool, Wool Top and all other Types of Wool Fibres. Ms. Peng Yanli (representing China), President of CWTA and Mr. Robert Ryan (representing Australia), President of FAWO, has signed on the contract. China is the largest wool buyer, and Australia is the largest wool producer in the world. China’s annual imports of Australian wool account for almost 80% of Australian wool exports. China-Australia Joint Working Group on Wool has reached agreements on establishing effective channels of communication between the two countries’ wool industry organizations, on dialogue mechanism to solve disputes, on maintaining mutual benefits, and on promoting wool trade.
Mr. Xu Wenying, Vice President of CNTAC said that the signing ceremony of General Terms & Conditions is a major milestone on bilateral wool business between the two countries, which is much easier to understand, operate and protect both sides’ interest. Besides, the new contract is in line with china’s reality, close to IWTO’s terms, and is favorable to spread to China’s other wool suppliers. Hope China and Australia will strengthen cooperation in the future by learning, promoting, updating and making full use of the new contract, and promote a healthy and sustainable development of wool textile industry.
Thank you for your support and looking forward to seeing you next September!
Nanjing Wool Market
21st September, 2012