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Angus Kebbell tackles sheep farming's biggest challenge - what to do with the wool. Merino is finding success, but the other 95% of strong wools needs its own path, one that will need to re-built from the ground up

Rural News
Angus Kebbell tackles sheep farming's biggest challenge - what to do with the wool. Merino is finding success, but the other 95% of strong wools needs its own path, one that will need to re-built from the ground up
6th Jul 20, 4:31pm by Angus Kebbell
Farming's biggest puzzle

The wool market is in the doldrums and wool is out of favour with consumers.

It is supplied into a weak, fragmented and dysfunctional market with little but tradition supporting what is left. There are deep supply chain problems. Consumers aren't buying coarse or strong wool products anymore.

But it is not as though it is a product without passionate suppliers. And at the other end, with a good story well told, there are consumers who seek it out.

The inability to link the two has the product in deep trouble. Farmers are shearing solely for animal health. For many it now costs more to shear than than they get for the product.

This week, we explore how farmers can exit the wool trap. I talk to one farmer who has found a quick way to link her product to consumers. And I talk to another trying to solve the big strong wool problem.

 

The key lessons come from fine wools, especially merino, where there are a number of substantial commercial success stories.

These enterprises have build their own farm-to-consumer supply chain. Much of that success is based on internet selling.

North Canterbury's Sarah Reed, who farms 3500ha stocked with 5500 merino sheep and 400 Angus cattle, has taken a piggyback strategy she hopes to build on. They supply wool to Norwegian company Devold who have an existing end-to-end supply-production-marketing business in Europe supplying high-end clothing.

Reed has convinced them to supply back to her completed clothing with her Grumpy Merino brand, for marketing on this side of the world. Apparently, the farm wool can be shipped to Lithuania (Devold's factory), and the products shipped back here, and they can still compete in upscale markets. Her's is not a price strategy, rather a quality and function strategy. It is a new business and will compete directly with others in this upscale apparel segment. But it is proving, that with the right story and products that perform in a superior way, there is room for more, as the attribute they sell builds a widening market.

The challenge for strong wools is to find its unique story and markets that can be built in scale.

95% of New Zealand's wool crop is strong wool, now a by-product of an increasingly successful sheep-meat business. This successful business needs a solution for strong wools alone, and it almost certainly isn't clothing - or the traditional carpet.

Hawkes Bay farmer Tom O'Sullivan is on a mission to find that solution. At present he and other farmers are waiting on a major MPI strategy study to see if they can get behind that. If not, he proposes a new ten year plan to resurrect the product from crisis.

Wool has a wide range of benefits (natural / renewable / sustainable / biodegradable / part of the carbon system / temperature regulating / insulating / and others) but despite social demand for these features, consumers aren't buying. New products will be needed, new product and provenance stories will be need to be told, new customers introduced.

Wool can't compete as a commodity says O'Sullivan. It has to find a new way forward.

Listen to the podcast to catch the full episode.

Angus Kebbell is the Producer at Tailwind Media. You can contact him here.

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27 Comments

by  Foxglove.  |  6th Jul 20, 5:04pm 1594011856

“an increasingly successful sheep meat industry,” really? Certainly chilled NZ lamb is an excellent product, but the true indicator of any growth and meaningful success, will be when flock numbers increase and processors commence building capacity rather than reducing or closing plants.

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by  Hook  |  6th Jul 20, 7:04pm 1594019059

Fox, processors already have excess ovine capacity due to a shrinking flock hence their downsizing/rightsizing( I truly hate that last word) efforts over the last 5 yrs. The article speaks of getting away from a commodity markets (carpet) to enhance returns. This is a truism however commodity markets do provide some income. Merino has done well due to its desirability in clothing however strong/coarse wool isn't in that space. The industry is very fragmented at the moment, last year it voted down a resolution to increase it's levy to service a marketing campaign. A game changer would be if the Govt mandated the use of wool for building insulation (instead of glass fibre) and espoused the environmental/health benefits thereof.

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by  Stanhay  |  6th Jul 20, 7:47pm 1594021622

Credit where it's due , my memory of lamb prices goes back to around 91/92 . Back then I reckon a 17 or so kilo lamb was $45 . Of that at least a third or more was wool and pelt. Meat companies have many faults but they have genuinely increased the value of lamb in the market.

I think the decline in sheep numbers is actually due to not being able to find a production system to compete with dairy on the good land. This was possibly due to the conditions in the late eighties favouring the conservative and less risk averse farmers.

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by  Andrewj  |  7th Jul 20, 2:29pm 1594088964

I worked on a Station when left school in early 80's. I remember the farmer telling me that as long as his wool cheque was bigger than his lamb cheque he was a happy chap. Those were the days.

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by  Foxglove.  |  7th Jul 20, 3:05pm 1594091115

The wool barons 194/5/60’s. Culverden Downs region for example. I was in a bank overseas dept in the early 60’s. The woolies, ie buyers/brokers used say one bale of fine wool was worth a new Jaguar 3.8? Never believed them. Any old timers there who can confirm or deny?

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by  Andrewj  |  7th Jul 20, 5:59pm 1594101542

there were fortunes made but top tax rate was over %60. My father used to pull wool of fences and pick all the wool off dead sheep, i mean all the wool. A friends father told me in the 50's they got, in today's money, 3 million dollars for wool clip, decent sized farm but still.

Cousins father purchased farm year before, was debt free in two years.

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by  Jack Lumber  |  7th Jul 20, 9:17pm 1594113469

And therein lies the problem with farming today. The land price versus yield is so removed from commercial reality that land can never be paid off. Lots of reasons given why its like that but the numbers never lie or can be beaten.Something has to give in the end and the banks are increasingly looking at yield and cashflow now not capital gain.

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by  Hans Brink  |  8th Jul 20, 9:41pm 1594201264

Yeah I was made to pluck dead sheep in the mid 70's where I was working

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by  Foxglove.  |  7th Jul 20, 9:08am 1594069730

Hook, the column states there is an increasingly successful sheep meat industry. You are saying there is already existing over capacity which aligns with my point that if there was meaningful success, processors would be first filling, then increasing capacity, not the opposite. And then wool is a by product of sheep meat? Not from merinos it isn’t. The breed is too leggy (that’s where the old omega grade mainly came from) and useless for chilled as it yields meat of an extraordinarily high ph. Corriedales and perendales will do likewise, if for example they go through a double wash. The classic meat breeds such as Romney, produce average solid grade wool that used to be in demand for instance, for army uniforms. In that regard it is interesting in that the USA up to WW2 had a sheep flock that provided about 7.5% of its red meat consumption. It is now less than 2%. But the USA nevertheless kept subsidising production well past the sixties. Why? Wool for the cold war uniforms. Come polyester etc, exit wool. But your suggestion, wool for insulation? Surely that is a logical win win proposition for this country.

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by  Hans Brink  |  7th Jul 20, 12:38am 1594039129

To supply wool as a commodity to clothe people today is a dream.There isn't enough sheep in the world to even make a dent in supply of fiber.I have been farming sheep for 40 yrs. Started as shepherd then shearer now own my own farm. Had romneys now have wiltshires which shed their own wool. Meat sheep are the future. Technicians will produce biodegradable fiber in the future from trees and other organic material. No animal welfare issues.

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by  Andrewj  |  7th Jul 20, 5:48pm 1594100929

and synthetic breast milk in Hong kong, you can visit the factory, $10 to look $100 if you want to touch

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by  Foxglove.  |  7th Jul 20, 9:10pm 1594113006

How much to touch, without looking?

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by  Princeofnowhere  |  7th Jul 20, 8:52am 1594068773

It really is odd when you think about it - a natural product, no plastics, no real issues surrounding persistence in the the environment like plastics, low water use when compared to other products - all round a sensible product.
Like many things it is getting this across to the consumer, rather than the cruelty argument surrounding shearing that seems to get airtime. Again, like most things, it comes down to marketing & product development?

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by  spinach1  |  7th Jul 20, 11:25am 1594077958

I shake my head, for the same reason chariots are no longer a big thing, it's over, and your land has little value. A sunset industry for 30 years or more and still they sit and watch it, no lateral thought allowed, "only one type of farming to be done here son". No doubt they will all follow the lead, much as their flocks, down the road of exotic plantings for carbon credit farming. All the way they will decry the sad demise of a once golden goose, the fabulous lifestyle and in complete denial of the simplest rules of supply and demand.

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by  Jack Lumber  |  7th Jul 20, 1:04pm 1594083855

Agree with Spinach - the trend is clear and how much money has already been spent on trying to save the sinking ship. A few wool insulation products and carpets here in NZ wont do the trick Im afraid. Small variable volume going into a bigger world. Some small scale stuff will work for the motivated types keen to go beyond the farm gate and good luck to them. Shearing labour costs are only going to go up - and rightly so its a tough job - so returns need to keep rising to keep pace with that. More jobs gone in rural NZ but its no ones fault. Sheep breeders, apart from Wiltshire types, will be worried as they should be. Land owners are going to have to think outside the normal silo to survive and prosper going forward - hard to attract young ones to this sort of game.

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by  Northern Lights  |  7th Jul 20, 2:46pm 1594089980

I think it is somebody's fault. There needs to be more money spent generally on R & D in New Zealand and there needs to be a plan to enable products to be generated out of that research. Reliance on the market and the invisible hand means that the same old story repeats itself - we don't update the way we get value from our resources.

The farmers are their own worst enemy in this regard. They won't spend money on R & D and they won't let the govt spend money on R & D. They use their political clout to reduce taxes rather than get those taxes put into rural R & D. Once they see something working somewhere else then they'll use it, but they won't 'waste' their resources on putting some money toward future prospects.

If money had been spent in the past on future wool products then solutions would be available now. The same is true for many other industries in New Zealand. Successful small countries with few resources put money into their future and they make plans for the future.

If you want a successful harvest, you prepare the ground, you plant good seed, you ensure the plants get water, you keep the weeds and pests out. You don't just stand next to the field waiting to see if crop plants from last year germinate and leave them to grow and see if they make it to a point where you could get a couple of grains off the plant.

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by  Andrewj  |  7th Jul 20, 3:42pm 1594093325

but we have spent money on marketing, remember the virgin woolmark symbol https://www.woolmark.com/our-story/about-us/

Im over wasting my money when other countries just climb on the bandwagon. China rules in the world of wool

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by  Andrewj  |  7th Jul 20, 2:27pm 1594088823

The market will fix it, everyone I know is talking Wiltshire, wool clip will collapse in a few years. Also a little moth in UK and EU, is destroying wool carpets and clothes. Shift furniture and little white maggots have destroyed carpet. All wool clothes vacuum packed or holes all through.
My brother in law, a hill country sheep farmer just put synthetic carpet right through his house. It is impossible to compete against ever improving and cheaper synthetics.

I just asked my brother in law what he got for his wool this week, been estimated at $1.20 a kg. He's not happy, he has great sheep with top wool

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by  Jack Lumber  |  7th Jul 20, 5:13pm 1594098818

The market is speaking loud and clear but we seem to believe we can beat it. Sheeps a 1 trick pony now like beef. Meats the last cab on the rank now and the extra cost of shearing has to go or reduce margin still further. I would hate to guess how much money farmers have poured into marketing, R&D etc for wool over the years. It’s still being poured into other parts of farming now as well by them and taxpayers. Hopefully this is well targeted.

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by  Foxglove.  |  7th Jul 20, 5:58pm 1594101517

Do the works still run fellmongery? Slipe wool, or has that bitten the dust too?

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by  wee willy winkie  |  7th Jul 20, 5:19pm 1594099151

In the 90's my agent rang me to say that the proceeds from the wool from each sheep we shore would be enough to buy " a jug of beer and a pie " to which I replied that that was OK as I had more than 365 sheep. At $1.20 per kg and 4.5kg per sheep your man would be going hungry and/or thirsty unless his numbers were much greater.

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by  Andrewj  |  7th Jul 20, 5:47pm 1594100825

he's losing $5 a head but it's ok he's got thousands

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by  Andrewj  |  7th Jul 20, 5:47pm 1594100862

he's losing $5 a head but it's ok he's got thousands

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by  Hans Brink  |  8th Jul 20, 9:38pm 1594201086

Good one AJ

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by  Hans Brink  |  8th Jul 20, 9:58pm 1594202335

Another thing to do with wool,my wife just reminded me, remember Wool Equities. Got allocated a few thousand shares, thought I'd keep them to support the wool thing. Awesome move, now they are worth nothing.

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by  Jack Lumber  |  9th Jul 20, 7:17pm 1594279032

What’s the answer for sheep and beef going forward? Can A farm survive on meat alone?

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by  Hans Brink  |  10th Jul 20, 9:34am 1594330475

I guess it comes down to land capability. Some places only graze 4-5 stock units per hectare with parts of the farm at higher capability. So then to survive you need large areas. With large areas come increased costs,weed,pest& fertilizer. Fert doesn't have the same cost benefit on large areas of low fertility country. The answer to whether a farm can survive producing meat alone is quite complex as it depends on debt and lifestyle choice. When it comes to environmental outcomes and income per hectare, low producing areas should be planted with timber trees to compliment higher producing areas. Then comes the conundrum, can it be harvested?. Also some will argue that low production areas are stock breeding grounds. Then we have the emotional side, people don't like change, hence the anti ETS sentiment. But if hill farmers really thought about it and wanted to survive comfortably they would embrace forestry and use it to complement their operations. Partly ETS with a longer term outlook of continues production forest which will provide a much more secure future for generations to come. It's called diversity.

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