The 2017 shearing season is gaining momentum, with contractors shearing dry hoggets in greater numbers and making a start on ewes. However, farmers selling their wool are disappointed by another significant downturn in the trade. Wool merchants are reporting open-season quotes of 60c/kg and are pessimistic on the likelihood of any upward movement during the summer months.

Merchants blame continued poor demand from China as the main driver of the price fall. Some merchants report very poor interest from Chinese buyers, who, at this stage of the year, would normally have completed some forward contracts with sellers. The merchants say very little in the way of business has been completed to date, which is adding more uncertainty into an already fragile market.

Yesterday’s British Wool Marketing Board sale also recorded a weaker sale than that held at the start of April. The average price reduced 10p/kg to £1.16/kg, which is the equivalent of €1.25/kg at 85p to the euro. Note, the seller receives an average price over the sales season minus costs for handling, marketing, etc. The sale report points to relatively good demand, but this didn’t stem the clearance rate falling from 94% in the previous sale to 78% of 2.02m kg of wool offered.

Negative returns

The lower price is a reduction of 30c/kg to 35c/kg from the same time last year, when the trade opened at 90c/kg to €1.00/kg. This also represented a sharp drop of 40c/kg to 50c/kg on 2015 returns.

It leaves sheep farmers entering into negative returns where a contractor is being hired to shear. Table 1 details the varying performance of wool sales since 2009 and typical returns from a 60-ewe flock taking a standard wool clip of 2.4kg per ewe and shearing cost of €2.15/ewe, which is low in many cases, with costs ranging from €2/ewe for large numbers to €2.40/kg to €2.50/kg for smaller numbers.

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