March 2017

EXCHANGE RATE:
AUD/USD 0.76

Market Outlook

Australian Wool Growers Welcomes
Strong Start to New Year 

Recent wool prices have been a welcome start to the 2017 calendar year, with the EMI (Eastern Market Indicator) reaching well above 1400 ac clean/kg. The market has been marked by record highs and even ‘peak’ wool values, yet it is important to understand the previous times wool has achieved these values. This month we place some historical context around the current market and explore supply versus demand.

It has been great to see the current wool market give such a well-deserved return for Merino given that cardings, when combined with skirtings, make up to 25% of a grower’s wool clip.

It is clear that it is not just the fleece wools that are now attractive to buyers, the whole clip is sought after. Prices have been increasing gradually and consistently since 2012 and production has stabilised.

January 2017 the supply of wool continues to be tight, but there is no doubt that demand is largely driving this improved market and has been for about six years as seen in the chart below. The overseas teams that AWI/Woolmark has in key markets take particular interest in what appears on catwalks and can report large amounts of wool coming down runways.

These conceptual shows manifest themselves in retail stores 12 months after being first sighted in fashion shows. In context, the 2017 prices should give some confidence to growers given these levels have not yet exhausted previous highs, and there is further capacity to build on the prices locally, especially when expressed in US dollar terms (the currency wool is bought in). Given the historically high forward markets for wool, the short to medium term future for wool appears optimistic for woolgrowers.

Source: AWI


 

Corn Takes Leadership Role

The 2017 American Sheep Industry Annual Convention wrapped up on Saturday, Jan. 28, with the election of New Mexico sheep producer Mike Corn as the organization’s new president. Benny Cox (Texas) was voted to serve as vice president and Susan Shultz (Ohio) will serve as secretary/treasurer. 

Corn’s son, Bronson, nominated his father for the top position by saying, “My dad has worked his entire life for the betterment of this industry and I know that he will do a great job as your president.”

Corn said he is humbled to lead the organization and that “It is an honor to be selected to lead the industry that my family has worked in for four generations. We have a great opportunity in the coming year to make some changes for this industry. I feel that there are positive things ahead for us and we have a great executive team in place that is up to the challenge.”

The Corn family has been raising sheep in the Roswell area since the 1880s. He owns and operates his own ranch and raises white-faced, fine-wool sheep, mainly a merino cross. Corn is also the majority owner of the Roswell Wool Warehouse. 

ASI executive board regional elections resulted in the selection of Don Kniffen (N.J.), Region I; Jimmy Parker (Ala.), Region II; John Dvorak (Minn.), Region III; Jeff Ebert (Kan.), Region IV; Bob Buchholz (Texas), Region V; Steve Osguthorpe (Utah), Region VI; Ken Wixom (Idaho), Region VII; Reed Anderson (Ore.), Region VIII and Steve Schreier (Minn.), Lamb Feeder Representative.

Source: Sheep Industry News

In The News

China drives cost higher for Superfine wool

There are two key reasons why prices for superfine wool will be strong this season says Robert Wang AWI China Manager.  Mills in China believe that there is not enough available. ‘The Chinese domestic market is expected to be busy for at least the next two years in relation to finer wools and woolen mills building up their stocks’.

‘We are talking about fine and superfine wool at 19.5 micron and finer, apparel fleece. Looking at production forecasts and marrying this to the potential increase in demand processors in China believe that there is insufficient superfine wool to supply to requirements for the next 12 months.’

The demand in China is being driven by the renewal of uniform tenders and an increased demand by the Chinese consumer for garments made in lighter fabrics.

Mr Wang further commented that based on wool testing data alone testing of superfine wool has increased dramatically since December, but production has not. This will see wool prices strong for the foreseeable future. ‘We are only two months into the new year and prices are already very firm,’ he says.

20-24 micron wool will also be firm to very firm he says. Again this is due to limited supply. But at least in this range there are other grower countries that can supply, including Argentina, South Africa, and Uruguay.

‘Even the cheap end of the supply market, such as skirtings, will also be firm as topmakers look for cheaper wools to blend.’

The same cannot be said for coarser wools that are really struggling at present due to luke warm demand. But a colder than usual winter in Europe and the USA should help clear stock and encourage demand.

Another thing to watch in China this year that will affect the domestic market, in particular, is the 19th Party Congress. This Congress will decide the economic direction for the next 5 years and is expected to make a major shift from its anti-corruption focus to encourage faster economic development.

‘This focus will boost the domestic economy and the Congress will also spell out how it plans to deal with the Trump administration and any trade wars with the USA,’ he says.

- See more at: http://www.woolnews.net/news/china-drives-cost-higher-for-superfine-wool/#sthash.NANMnEgy.dpuf
 

American Sheep Industry conveys priorities
to new Trump Administration

In preparation for the New Year and new administration, the American Sheep Industry Association, on behalf of the nation’s 88,000 sheep producers, provided the Trump Administration a list of priorities they hope will be considered for immediate action. Burton Pfliger, ASI President and North Dakota sheep producer said America’s sheep producers are struggling amidst the last eight years of regulatory rampage.

“It is no secret that all of agriculture has been over-burdened with regulation and that has had a significant impact on our ability to compete globally,” said Pfliger. “From the current administration’s ‘waters of the United States’ rule to the restrictions on grazing permits in bighorn sheep habitat without compensation, there are a number of issues ripe for the new administration to tackle.”

America’s sheep producers are asking the Trump administration to look at ways the Department of Agriculture, the Department of Interior and the Department of Labor can immediately take action to stabilize the rural economy. These actions include robust Wildlife Services predation management, supporting the work of the U.S. Sheep Experiment Station and delisting wolves and grizzly bears under the Endangered Species Act. Additionally, protecting the health of the domestic herd by withdrawing rules allowing imports from countries with a known history of Foot and Mouth Disease and publishing the final rule on scrapie in sheep and goats are top priorities.

“The specific issues outlined in our letter are commonsense requests that would immediately benefit sheep producers and the local communities they support,” said Pfliger. “In addition to regulatory reform, we are hopeful President-elect Trump’s administration will focus on fair trade and re-opening markets lost to U.S. lamb. Japan remains closed to our producers and the United Kingdom and European Union maintain significant barriers to lamb trade. Prioritizing open access and free trade will expand our opportunities for export and allow our producers to capitalize on growing markets.”

ASI is hopeful the new administration will recognize the role of America’s sheep ranchers in managing private land and federal allotments to preserve habitat and natural resources to benefit wildlife and rural economies.

ASI is an equal opportunity employer. It is the national trade organization supported by 45 state sheep associations, benefiting the interests of more than 88,000 sheep producers.

Source: ASI Sheep Industry News

Protecting Ag and Your Ranch

Protecting your operation from anti-ag activists is an increasing concern. The Animal Agriculture Alliance offers information and assistance through its website and phone app at security.animalagalliance.org
Here they offer some practical advice.
 

Vigilance is Key -

Take these simple steps to strengthen facility security

Activists operating as undercover employees, computer system sabotage, website hacking, destruction of property, vandalism, “liberation” of animals, and threats of poisoning food products in grocery stores are hallmarks of radical animal rights efforts to stop your company from doing what it’s supposed to do – sell products.

Here are a few measures you can take to be vigilant:
- Train your long time employees to be your “eyes and ears” for these kinds of behaviors and inform them they need to report potentially suspicious behavior or conversations to management. They can be your key to recognizing a plant and preventing your company from being the next victim of animal rights set-ups.
 
- Pay attention to cafeteria or break room discussions about new hires who “don’t fit in” or those who seem to be overly curious about the company for a temp or short-timer. “Plants” may even hang out with employees off hours, again usually trying to find out more about the company and how it operates.
 
- Also important - train your employees and inform them it is their duty and responsibility to report any mistreatment or mismanagement of animals to management. Any acts of cruelty should be stopped and prevented if possible, and all such acts should be reported.
 
- Lastly, periodically operate your own undercover operation to ensure animals are being handled properly and company policies are being implemented.
 
Mike's Advice:
     “Most importantly, know who is on your place and watch for suspicious behavior. Also, be very careful with strangers that want to take pictures or videos. Animal welfare is fundamental to the work we do as farmers and ranchers. It’s an ethical responsibility – for the animal and the safety of our food supply.” 

1. Do the right thing.
Implement scientifically-verified animal care programs. Conduct training, as well as in-house and third-party audits to ensure all policies are being followed at all times and by all employees. Act swiftly to correct any problems.
2. Be cautious.
Thoroughly vet any new hires. Require that all employees, starting with new hires, sign an animal care code of conduct. Train your longtime employees to watch for suspicious behavior.
3. Plan ahead.
Build relationships with your community, local law enforcement, and media. Create a crisis management plan in advance in the event that you become a target of an activist group.

Three more things to keep in mind:

- Trucks parked at plants or behind offices overnight are favorite targets for spray-painting, sand/sugar in gas tanks or vandalized engines.
- Routinely back up your computer files. Add extra firewalls to your website and computer system. Store backup files for your system in a fireproof area.
- If mail or packages appear suspicious, return them to the post office, unopened. Take precaution in opening all mail – some animal businesses have been targeted with razor blades hidden in envelopes.

Don’t be paranoid, be vigilant.

Mike's Corner

I trust this newsletter finds everyone healthy and happy. I’m glad to see the rains in California have finally come, the drought’s broken, and we’re excited that you guys are going to have some green grass out there.
 
I also want to let everyone know, and thank everyone, and ensure everyone that my new position with ASI is not going to affect my performance in marketing your wool. You guys are my customers and friends. You mean the world to me, and I will make sure that your wool will get all the exposure it deserves and achieves the best prices possible.
 
As my motto says, “My integrity is my reputation.”
 
There’s been a lot of news in publications around the country talking about the wool market the past couple to three weeks, that the wool market’s higher and higher, it’s looking better and better, and it is. I want to make that perfectly clear. We definitely have a better market than we did this time last year.
 
However, there are things you need to be aware of. That is this is the first year in several years that the micron of your wool is more important than it has been in the past. For example, 19-20 micron wools this year as of right now will bring anywhere from 15-20 percent more than they did this time last year, but 21-23 micron wools are just 5-10 percent higher than last year on today’s market. And if you move courser, to the 25 micron type wools, those wools, and courser, are actually even to 5 percent less than last year.
 
So, I just stress that micron grade this year is much more important. You’re even actually going to see a case possibly where some guys that pull their short wools this year, their short wool may actually outsell their main line, because nine times out of ten those short wools are finer than their main line and could bring more money just because of the grade. So keep that in mind.
 
Also, our dates for our Spring Sales this year are March 23 and our second sale will be April 25-26.
 
Keeping in mind the finer wools are bringing more money, I would encourage everyone while they’re shearing to do a better job of pulling the course wool off the bottom end of your clip. In other words, fine it up a little bit by getting out some of that courser wool. I’m not saying going after the finer wool. I’m saying get the courser wools out. Try to fine it up from the bottom up and I think you’ll be much better off.
 
We’re definitely seeing more interest from buyers this year. Buyers are calling; they’re wanting to buy wool. They have orders for as much wool as they can get their hands on. And that’s just completely opposite from what we had this time last year. Last year I could sell a load here and a load there. Soon as a guy got his load filled, then the buyers were done. They didn’t want any more, or if it was under 23 micron they didn’t want it anymore. So, it’s a little different atmosphere this year, particularly due to China. The Chinese are back in the market for the first time in two or three years, so, that’s a pleasant sight to have.
 
It also goes without saying, that when wool buyers start showing up at your doorstep it’s usually because they’re trying to buy your wool before the wool prices go any higher, especially when they leave you a greasy price with no core results. This tells me that they have plenty of room and they have a comfort level that the market’s not going to go any lower; it’s going to go higher. That’s the reason they leave these greasy prices laying around.
 
So, I just caution you there to keep your eyes open.
 
Roswell Wool prides itself in offering your wool to the most buyers in the country that are available. In a year like this is when our auction system shines the best. We get the most competition and it’s convenient for the buyers, particularly the foreign buyers, to come to our facility that we have there at Bakersfield. They can load the wool and take it straight overseas. Our Calcot facility there in Bakersfield is becoming an export facility for the entire United States. Buyers are sending their wool there as well to comingle their purchases from other areas. It’s become a very valuable asset, not only for Roswell Wool, but for the California producers and the western half of the country.
 
So, with that, I’ll close and say “Thank You very much” for your friendships, and I look forward to seeing you later in the spring.
 
Thank You.
 
Mike Corn

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