British Wool pricing update
A British Wool statement issued on 5 June said that as it ‘enters its 70th year of operation the UK, and indeed the world, faces the most severe recession in its history due to the Covid-19 epidemic. The global market for cross bred wool has been shut since February and remains closed. February to May is normally the busiest selling period of the year. As a result we have circa 9m kgs of unsold stock out of a total 2019/20 clip of 27m kgs.
Given the situation we find ourselves in we have had to place a value on this unsold stock which is at a significant discount to the last prices sold. As a result the average price paid to producers for the 2019/20 clip will be 32p/kg. Balances are being paid as normal upon receipt of this season’s wool. It is important to remember this is an average price for all wool grades in the UK, with some mountain wools achieving 15p/kg and some finer white wools more than 70p/kg. By way of historical comparison this year’s payment is in line with those paid in the late 2000s at the time of the financial crisis. If we sell the 2019/20 unsold stock at a higher price than our assumed value we will make a further payment later this year in relation to the 2019/20 clip, depending on the economic outlook at the time.
The hard fact is that the global cross bred wool market will be extremely challenging for the foreseeable future. In light of the huge and unprecedented valuation uncertainty in the market, and wishing to remain on a safe and sound financial footing, we will not be making an advance against 2020/21 clip wool and instead will make full payment for 2020/21 clips from May 2021 onwards once we have sold the clip and have valuation certainty. Should the market happen to improve somewhat in the next 12 months from the trough it is in at the moment, the price returned to you would see the benefit of this improvement.
We are asking producers to support us through this very difficult season by bringing their wool into us so that we can preserve the volume use of British wool downstream, further develop our new British wool rich product ranges and emerge from the Covid-19 slump ready to exploit a strengthening market. Without the consolidation of wool into commercial volumes through British Wool and our continuing to market it more and more effectively, the prospect will be for lower prices indefinitely. Remember in the Republic of Ireland and Europe, where only spot buying exists, prices have historically been less than half of those paid to British Wool producers.
Producers marketing their wool through British Wool, their organisation, represents the only realistic prospect of improved prices on a national scale in the medium and long term. Wool producers can be assured that British Wool, as a trusted partner, will be at the forefront of leading the growth and renewal of wool values, but this will take time. We will emerge stronger from this period, so long as UK wool producers stay together and continue to back their organisation, British Wool.