Published 8:15 am Thursday, May 25, 2023
This spring, Capital Press got a question from a reader who raises Rambouillet and Merino sheep in Eastern Oregon: “Why are wool prices so low?”
The answer is both simple and complex. The simple answer is the global wool market faces oversupply and sagging demand.
But the complex piece is how the industry got to that point. Many factors — long-term trends and recent developments — have created the current market conditions.
Farmers are worried about wool prices, calling the market “dismal,” “on a downbound trajectory” and “borderline alarming.” Producers of medium, coarse and black wools are especially suffering.
“It’s hard,” said Maria Rooney, who raises Coopworth, Romney and horned Dorset sheep in Silverton, Ore.
Rooney has been in the industry for nearly 35 years and has faced challenging times, but she said the past few years have been so difficult she questions whether she can remain in business.
In 2022, the average price paid for wool nationally was $1.53 per pound, according to USDA’s National Agricultural Statistics Service, down 19% from the 2019 average of $1.89 per pound.
Pricing varies significantly based on the breed, quality, amount of vegetable matter and micron, meaning the wool diameter.
In recent months, experts say producers of medium wool have commonly been paid 20 cents per pound — not even enough to cover shearing costs and at least 60% below pre-2019 pricing.
How did we get here?
The wool industry has been in decline for decades, said Diego Paullier, general manager of Chargeurs Wool USA, a South Carolina woolen mill.
The advent of synthetic fiber in the 20th century led to downturns in the wool and cotton industries, especially after polyester clothing flooded the market in 1951, said Brent Roeder, an extension specialist on range sheep production at Montana State University.
The rate at which people buy and dispose of clothes has also changed.
“Wool products are beautiful, and they last forever,” said Paullier, of the mill. “Nowadays, it’s fast fashion. People feel they have to buy new clothes every year.”
Lisa Surber, a wool consultant with LM Livestock Services LLC, echoed Paullier: “Young people are wearing more disposable clothes.”
Surber said cultural changes have also played a part. Americans dress more simply than in decades past, ditching high-end woolen coats and suits.
“We’re way more casual than we have been even 10, 20 years ago,” said Surber.
Another long-term trend has been declining manufacturing capacity in the U.S., where environmental and labor standards make wool processing expensive, said Roeder, of Montana State. As a result, manufacturers have been offshoring wool processing for many years.
Roeder said that while these trends have been gradually reshaping the wool market for decades, more recent events have changed it at warp speed.
In 2019, as part of a trade spat, China imposed a 25% tariff on imported American wool. The move was devastating to U.S. sheep farmers who relied on the Chinese market.
“It kind of killed that market,” said Daniel “Dan” Gutzman, wool buyer for Pendleton Woolen Mills in Eastern Oregon.
Gutzman estimated that before 2019, China was buying about 75% of the world’s wool. Pre-tariff, China was a major buyer of America’s black, coarse and contaminated wools.
“That’s why we’re seeing absolutely no market for black and contaminated wool,” said Roeder, of Montana State.
Experts say although producers of finer wools also have legitimate reasons for concern, their market is more stable. Will Griggs, manager of the Utah Wool Marketing Association, said over the past few years, finer wools have suffered price-wise but remained marketable.
“There is still a pretty good home for those (smaller-micron wools),” agreed Gutzman, of Pendleton.
Some exporters have bypassed China’s tariff through waivers or by retaining ownership of the wool through the entire supply chain. Overall, however, the tariff continues to hurt U.S. producers.
After the tariff came an event that further devastated the industry: the pandemic.
“The trade war with China was the first thing that really hampered our exports. We rolled right from that into COVID,” said Peter Orwick, executive director of the American Wool Council.
The global shutdown sparked by the COVID-19 pandemic dramatically cut wool demand.
People working from home and attending Zoom meetings did not buy as many suits and coats made from fine wool. The suit market, said Roeder of Montana State, “disappeared overnight.”
Snarled supply chains, high freight costs and difficulty securing truckers and shippers made matters worse, said Griggs, of the Utah Wool Marketing Association.
“We’d arrange a truck, agree to a price that made us sick to our stomachs just to move the wool, then the driver would not show up,” said Griggs.
Although the supply chain has since improved, the backup led to an oversupply of wool.
The pandemic also disrupted specialty markets for high-quality wool used by crafters. For example, trade shows shut down, and some have not resumed. Rooney, the Silverton farmer, said she is sorry to have lost wool shows that were a marketing avenue.
Finally, COVID left its mark on woolen mills. At the height of the outbreak, mills worldwide were shut for weeks or months. When they started up again, many workers had retired or found other jobs, leaving a generational knowledge gap and labor shortage that persists three years later.
The other effect of the mill slowdowns was a global processing backlog. Roeder, of Montana State, and Orwick, of the American Wool Council, said producers in the U.S., United Kingdom, New Zealand and elsewhere are sitting on warehouses full of wool.
The oversupply, combined with lower consumer demand, is a recipe for low pricing.
Although mills are gradually rebuilding capacity, experts say returning to “normal” won’t be easy.
“Once you stop a train like this, it’s hard to get it started again,” said Griggs, of the Utah Wool Marketing Association. “They’re just starting to get back on track.”
The slowdowns especially hurt one market: wool growers’ contracts with the U.S. military.
For decades, the U.S. military has been the No. 1 buyer of American wool, said Orwick, of the wool council. The military has chosen wool for its apparel because of its properties as a flame-resistant, durable, odor-resistant, fast-drying and breathable material.
Even before the pandemic, sheep ranchers were troubled by the government’s decision to discontinue wool for a few military apparel lines. For example, a few years ago, the U.S. Navy halted its wool peacoat program and switched to synthetic parkas.
When COVID hit, the military wool market got worse. Some mills, due to shutdowns or slowdowns, were unable to meet military contract timelines, said Orwick, of the wool council. He estimated the industry got a 1 1/2 years behind on military quotas. In response, the military dropped some contracts.
“Military contracts are beginning to pick up again, but we’re definitely not to the level that we were,” said Roeder, of Montana State.
Future military demand is unknown. Although the military remains the largest buyer of domestic wool, Orwick and Surber said recruitment is down, which could impact future demand.
U.S. consumers facing inflation have less disposable income to spend on wool clothing, said Gutzman, Surber and Griggs.
Gutzman said that in an economic downturn, one of the first things consumers cut back on buying is apparel, and in an uptick, it is one of the first things they resume.
“It’s like a bellwether of the economy,” he said.
Meanwhile, Europe has traditionally been a major destination for high-fashion woolen clothing, but as Europeans have faced the war in Ukraine, high inflation and soaring energy costs, consumers have become more cautious about spending, said Paullier, of South Carolina.
Some producers and sheep associations are asking the federal government for more aid.
In the past few years, many struggling producers have used a USDA program called the wool and mohair loan deficiency program. The program can double what a qualifying producer makes, up to 40 cents per pound.
“It’s not huge, but it helps,” said Rooney, the Oregon sheep farmer.
Although some industry leaders are talking with the farm bill’s authors in Congress about how to support wool producers with federal funds, others see innovation as the wool industry’s best hope.
Some wool markets remain fairly strong, including the sock market, said Paullier and Orwick.
Rooney, the Oregon farmer, said there is also still an opportunity to make a good profit by selling premium fleeces at wool shows or to niche mills and hand spinners. The problem, she said, is that while the price per pound is high, the volume sold is typically low.
Experts say there is room for innovation in wool marketing.
“I think there’s opportunity, but it’s gonna come with innovation,” said Gutzman, of Pendleton.
Gutzman said Pendleton Woolen Mills is innovating by refining its washable product lines, investing in energy-efficient equipment that gives fabrics a special feel and exploring new apparel styles and patterns.
Beyond Pendleton, Gutzman said he sees many potential opportunities for innovation: turning low-value wool into garden products, making recyclable packaging to replace bubble wrap and blending wool with cotton to make jeans, for instance.
Roeder, of Montana State, said some companies are innovating by becoming more vertically integrated, such as Duckworth Co., a wool clothing company owned by a sheep farming family.
Surber, the wool consultant, said she believes coarser wools could be used in more tennis shoes, upholstery, insulation and other products. She said low-value wool could be useful for roadside reclamation or erosion control.
Another opportunity lies in the gardening sector. Several universities have conducted studies showing that dirty scrap wool — such as from a sheep’s belly or tail — can be a useful fertilizer because of the high nitrogen and nutrient properties.
Albert Wilde, a Utah sheep producer with about 2,600 sheep, is exploring this use. He stumbled into this work when he put waste wool around his wife’s plants to hold water, which worked well. When he later learned wool is also an effective fertilizer, he bought a pellet mill and started making wool pellets under the brand name Wild Valley Farms, selling them to gardeners as fertilizer. His business is growing, and he recently signed a contract with Lowe’s to test the product in stores in 2024.
“We are excited about the growth,” said Wilde.
“We’ve got a lot of high hopes resting in what (Wilde is) doing,” said Griggs, of Utah Wool Marketing Association.
Many wool experts say the sheep industry can do a better job of educating consumers about wool’s sustainability, which could help wool regain some of the market share it lost to synthetics.
According to the International Wool Textile Organisation, based in Belgium, one of wool’s greatest properties as a sustainable material is its biodegradability, in contrast to fabrics made from plastics derived from fossil fuels.
Globally, according to the European Environment Agency, between 16% to 35% of all microplastics released in oceans annually come from synthetic fibers.
Wool industry leaders say it doesn’t make sense that consumers talk about saving the planet yet continue to buy synthetic clothes instead of natural fibers.
“I do think there’s opportunity for education,” said Rooney, the sheep farmer.
Surber, the wool consultant, agreed. Although wool producers have faced a few tough years, she still has hope for the industry as producers embrace innovation and education.
“If we want to tell our story, now’s the time,” she said.
