After decades of low wool prices, Canada’s 10,000 sheep producers are warming up to the perfect storm of high prices and low world supplies. “We expect much-improved wool prices for the upcoming year for both finer and coarse micron wools,” says Eric Bjergson, manager of the Canadian Co-operative of Wool Growers in Ottawa.
For years, shearing was often done in Canada more for the health of the flock than out of any hope of a quick dollar. Wool revenues didn’t even cover the shearing costs.
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Now, Bjergson is optimistic about near and longer-term returns for wool. Prices for Australian 21-micron wool (a benchmark for U.S. wool) rose by 50 per cent between July 2010 and early March.
“For flocks that produce finer wools — mostly range flocks in Western Canada — they can make about 20 per cent of their net income from wool today and for coarser wool, five to 10 per cent,” he says.
Like most Canadian sheep farmers, Bernadette and Rod Nikkel at Barrhead, Alta., don’t have fine wool breeds so the better wool prices will basically cover this spring’s shearing bill of $4.50 per sheep (includes pressing). The wool from their 360-ewe flock fetches the initial payment of 40 cents per pound plus 15 to 20 cents per pound for the second payment.
Although that’s half again what they could get last year, it will only net about an extra $100 for their whole flock. “I’m happy that it’s going to cover shearing costs but it isn’t going to make much change to our bottom line,” says Bernadette.
According to Statistics Canada, Canada produced about 3.1 million pounds of wool valued at $1.2 million in 2005. By 2009, with the effects of the recession, the average price of wool had sunk to 28.6 cents per pound, so Canadian farmers reaped only $755,000 for 2.5 million pounds.
The comparison makes today’s prices look good. Even so, for most producers in Canada, the wool price increase is just a bonus to already strong lamb price and demand.
In 2000, the market lamb price averaged $132.83 per hundredweight. Last year it soared to $172.19. Now, the potential of $300 lambs is stirring an expansion after years of shrinkage.
According to Statistics Canada, the number of sheep on Canadian farms increased about one per cent last year to 813,600 head as of January 1, 2011. Mennonites and Hutterite colonies have been on the forefront of this expansion. In Alberta, about 60 Hutterite colonies have flocks supplying 20 per cent of the province’s market lambs.
The Nikkels added sheep to their cow-calf farm three years ago. It started as a hobby. Bernadette grew up raising sheep and had always wanted to learn how to work sheep with border collies. The dogs came first, then some clinics and before they knew it they bought a neighbour’s flock.
They find sheep work well with their operation of rotational pasturing and calving/lambing on grass. The Nikkels pasture the species separately. Compared to their bred-to-be-efficient cows, the sheep take more management, including shearing, having guard dogs, and pasture selection. Additionally, the
repercussions of diseases and predators are more serious and immediate with sheep than cattle.
“There are better margins with sheep than cows right now but there are more management issues,” says Bernadette.
Like the Nikkels, the majority of Canadian sheep farmers view wool simply as a byproduct of meat production. Breeds are selected for carcass quality, not the value of their wool.
Bjergson hopes the price of wool will entice some farmers to also select rams with better yields of superior quality wool.
Wool quality is basically rated by fibre diameter, ranging from 15 microns for the finest to 40 microns for coarser wool. (By comparison, a human hair is about 100 microns.)
“Wool produced in Canada ranges from 23 to 40 microns, with the bulk being greater than 30 microns,” says Bjergson.
One of Canada’s oldest co-operatives, the CCWG collects, grades, presses and tests wool from across Canada and then markets it around the world. Prices are pooled and members get initial and final payments. Sometimes the co-op also offers forward contracts and sells livestock supplies.
There’s virtually no wool processing in this country. Only 10 per cent of Canada’s production is sold here into local niche markets. The world’s textile industry has moved to Asia, and the Canadian co-operative now has four agents in China working on its behalf.
Canada’s three million pounds of production is a mere drop in the bucket of world wool supply, which is dominated by high-quality finer-fibre wool from Australia, New Zealand and South Africa.
The global wool industry has shrunk steadily in the past two decades due to competition from cotton and polyester and now accounts for less than two per cent of the textile market.
In the last year, competitive textiles have increased in price, driving up wool demand. Cotton prices jumped 180 per cent in the last year due to floods in Pakistan, lower production in China and export restrictions imposed by India. Polyester is made with and tracks oil prices.
Oil prices over $110 per barrel make wool competitive with synthetics.
“The wool market is more sensitive to recessionary pressures,” says Bjergson. High global prices in the wool market are usually followed by a sharp fall, but this time supply is at a 50 year low.
Ewe numbers and lambs kept for breeding are up 1.1 and 7.6 per cent respectively from a year ago. Conversely, slaughter supply is being limited by this move to expand flock numbers, and declined nearly five per cent in the second half of 2010 from the same period a year ago.CG
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“ In the green scheme of things, natural fibres look good.”
— Eric Bjergson
