Increasing numbers of farmers are finding it will cost thousands of dollars more to shear their sheep this season than they will earn from wool revenue.
The financial equation has worsened this year with valuations for full ewe fleece from $1/kg not uncommon. The sector is being squeezed between a 4.4% increase in shearing costs and a global wool glut after demand from China slowed while the country focused on eliminating covid.
Beef + Lamb New Zealand chief economist Andrew Burtt said the average shearing cost per farm this year is estimated at $28,200, up 4.4% on last season. For most farm classes the average revenue from wool sales exceeds the average cost of shearing.
The scenario is worse for North Island crossbred farmers, with average wool revenue estimated at $17,100 for 2022-23, while shearing costs for the same period are estimated at $23,200.
Andy Caughey, the chief executive of Wool Impact, a collaboration between the government and sheep sector partners under the Sustainable Food & Fibre Futures fund, acknowledged the difficulties but said there is reason for optimism.
“I understand the challenging situation farmers face at the moment and the last thing we want to do is give false hope,” Caughey said. “But the reasons for our optimism are fact-based.
“We’ve been in market and seen quantifiable changes that are real and were shown to us by influential people and companies in the marketplace.”
Caughey said that innovation includes the development of wool acoustic tiles, a global shift to natural products, and pending legislation in Europe and the United Kingdom requiring manufacturers, from 2025, to be responsible for products that have reached the end of their life.
That will be especially telling on synthetic products.
Caughey said the covid lockdown highlighted for people the noise from wood floors that are predominant in homes overseas, which has created interest in acoustic tiles to soften sound.
Manufacturers are also investigating using wool in duvets, pillows, furniture, mattresses and felting.
The other strategy is for NZ exporters and processes to work alongside manufacturers and their brands to promote the attributes of wool.
“We need to work with brands and build a desirable value proposition around wool being a natural fibre, its length, strength and colour,” said Caughey.
Phil Holden, the executive director of the Shearing Contractors Association, said the association last year recommended shearing and woolhandling rates increases to reflect inflation and to help retain workers.
It was left to each business to decide whether to lift their rates.
“Shearers are the meat in the sandwich,” he said. “Demand for wool is low and that is the pressure point.”
Farmers generally understand the cost of shearing, and many have reduced the number of shed hands to reduce costs, but until prices improve, he said, it is a cost that will be questioned.
“On the whole, they are generally understanding of the cold hard reality of the current situation.”
Burtt said in addition to falling demand from China, global stocks of strong wool are high.
“Wool is still a low-cost commodity with considerable supply worldwide, especially in stronger categories, so sustained price upside is still unlikely with economic uncertainty in China mainly and worldwide,” said Burtt.
It is a different story for fine wool, where returns on average remain ahead of costs.
About 30% of fine wool farmers’ total gross revenue is from fine wool but the shearing bill reflects greater sheep numbers, averaging $117,000 to $126,000/farm over the past few seasons.
BLNZ figures show fine crossbred export prices were $2983/t in July 2021, $3711/t in July 2022 and $3612/t in November last year.
Strong wool export prices were $2938/t in July 2021, $3532/t in July 2022 and $3695/t in November last year.
Fine wool export prices were $19,984/t in July 2021, $13,592/t a year later and $19,613/t last November.
