Wool and Mohair
Demand for U.S. raw wool and tops from Mexico and many Asian markets dropped precipitously in the first part of 1999. However, Korea has demonstrated incredible growth in demand for U.S. raw wool and tops in 1999. Strong demand from South Africa and the United Kingdom are helping to resuscitate mohair exports after a slump in 1998.
World Production & Trade Overview
World markets for wool and mohair suffered through 1998, one of the toughest years in recent history for natural fibers and textiles. Estimates for total international exports in 1999 do not offer much hope for respite from the low prices facing wool and mohair. Several factors contributed to the rough times witnessed in 1998 and 1999. Among them, world surpluses in both wool and mohair (adult), and lower demand for natural fibers caused by competition from synthetics, figure most prominently. However, innovation and diversification of end product use as well as a commitment to developing new markets provide hope for expanded overseas trade.
Wool Production in the United States
|Sheep/lambs shorn||6,960,000||6,426,000||- 8|
|Shorn wool production (lbs.)||53,578,000||49,239,000||- 8|
|Price per pound ($)||0.84||0.60||- 29|
|Total value ($)||44,909,000||29,406,000||- 35|
* Price = average price paid for wool across all wool classes including marketing charges for commissions, coring and grading
In the United States, wool production, the number of sheep shorn, price per pound for wool, and total value of this market all dropped markedly through 1998 in response to the world market situation. A superabundance of wool and low demand worldwide accounts for the decline in wool prices. Combined price and production drops in the United States precipitated a 35 percent decline in the total value of U.S. wool production, dropping from 1997's $44.9 million to $29.4 million total value in 1998. U.S. wool production has also responded to the elimination of government payments in 1996.
International Wool-Producing Powerhouses
The United States is a small producer and a net importer of wool. Primary competitors on the international wool market are Australia and New Zealand, with U.S. and New Zealand wool being roughly comparable in quality. Most recent figures indicate that Australia, from October - September 1997-1998, exported approximately 550,000 tons (actual weight) of wool; New Zealand wool exports (actual weight) for this same time period reached nearly 200,000 tons. Of the five chief raw wool exporting countries, Australia and New Zealand typically account for more than 90 percent of total exports (based on data from 1992-1998). The United States accounts for less than 1 percent of total annual trade in raw wool and tops.
The International Wool Crisis and Implications for U.S. Wool Exports
A market crash in wool demand in two of the most significant destination markets for U.S. wool, and an oversupply situation created in the early 1990s, continue to plague exports of U.S. wool. Low demand and a consequent stockpile of U.S. wool is intimately linked to massive Australian supplies of wool. Several years ago, Australia instituted a price guarantee mechanism (the reserve price scheme) to set a minimal price for wool. Instead of creating a price floor for wool, however, this program propped up premium prices for wool. High prices gave Australian producers an incentive to overproduce, and while the reserve price scheme was dismantled in 1990, the damage had already been wrought. Pressure on wool prices, brought about by superabundant supplies, intensified when import demand for wool in Russia and China, the two most significant export markets for U.S. wool, slowed to a trickle in 1990-1991. A restructuring of the Russian government in the early 1990s caused previously state-sponsored demand for wool to plummet. Import demand for wool during the early 1990s in China, the world's largest wool processor, declined in response to Russia's depressed demand for woolen goods.
Current Trends in U.S. Wool Exports
For the past 10 years, U.S. wool producers have battled high worldwide supplies of wool brought about by the Australian stockpile and the demise of the Russian wool market. In addition, continued diminished demand for wool goods from consumers worldwide has exacerbated the international wool crisis. China rebounded from the 1990 wool crash, with demand for U.S. wool reaching a zenith in 1995 with sales of approximately $13.5 million (excluding wool yarns and fabrics). China maintained its demand for wool and remained the largest importer of U.S. wool until 1997. At this point, Mexican imports of U.S. wool (not including yarns and fabrics) outpaced Chinese demand with sales of nearly $11.3 million to Mexico in 1997. However, sales to Mexico declined 35 percent in 1998 to $7.3 million. Based on data from the first 7 months of 1999 compared to exports for the same time frame in 1998, total sales to Mexico in 1999 will approach $3.3 million. Recent declines in Mexican demand for wool likely reflect an abundance of stockpiled raw wool and tops. Lowered demand from China may also have influenced demand for wool that would be processed in Mexico. However, the downward spiral in demand for wool goods by consumers in all countries appears to be the real culprit behind reduced exports of U.S. wool to Mexico and other markets.
Asian demand for raw wool (i.e., wool products not including yarns and fabrics) fell precipitously in 1998, with this trend continuing through the first part of 1999. Sales of raw wool and tops to China dropped 43 percent from 1997 to 1998, and sales for the first 7 months of 1999 dropped 100 percent compared to this same time period in 1998. Exports of U.S. wool to Hong Kong, which serves as a conduit for wool goods to China, have similarly dropped about 98 percent in the first few months of 1999 compared to the same period in 1998. In addition to the depressed international demand for wool, as well as the overabundant stockpiles of raw wool and tops, recent restructuring in the Chinese wool industry contributed to the drop in exports of U.S. raw wool and tops to this market in 1998 and 1999. Chinese import demand plummeted as the government reduced top production capacity from 295,000 tons in 1997 to 180,000 tons in 1998. Part of the reduction in tops production was brought about by the merger of China's 8 largest state-owned top production companies into two companies. During this consolidation, it was estimated that 80 percent of the labor force in these 8 companies was laid off (industry sources).
Demand is also down in India, Japan, and Singapore. However, Korea has emerged as a major importer of semi-finished U.S. wool; within the first few months of 1999, sales to Korea reached nearly $4.4 million, outstripping total 1998 sales to China. Korea surpassed even Mexico to emerge as 1999's most important export destination for raw U.S. wool and tops. Taiwan also presents a bright spot in the horizon for sales of U.S. wool to Asia, with total 1999 sales projected at approximately $110,000.
U.S. Mohair Production
|Sheep/lambs shorn||936,000||705,000||- 25|
|Shorn wool production (lbs.)||6,849,000||5,089,000||- 26|
|Price per pound ($)||2.25||2.48||110|
|Total value ($)||15,411,000||12,623,000||- 18|
* Price = average price paid for wool across all wool classes including marketing charges for commissions, coring and grading
Mohair experienced production declines similar to those for wool during 1998. Total value for U.S. mohair also dropped, down 18 percent from 1997. However, the average price of mohair increased 110 percent, from $2.25 in 1997 to $2.48 in 1998. This price change reflects a greater proportion of kid and fine mohair having been sold in 1998 than in previous years. Although difficult to measure, the fashion industry's increased, albeit tentative, demand for mohair in 1998 may have contributed to the higher selling price for this fiber.
Competition in World Mohair Production
South Africa stands out as the international competitor of note in mohair production. Together, South Africa and the United States account for approximately 95 percent of world mohair production. Whereas U.S. mohair production has declined steadily since the 1960s, South African annual mohair production grew from approximately 8.8 million pounds in the early 1970s to highs of 22 - 26.5 million pounds between 1986 - 1990.
Since 1993, however, South African production has hovered between 11 - 13.2 million pounds per year. Depressed demand from the fashion industry, brought on in part by ample stockpiles of adult mohair, contributed to the dramatic decline in South African mohair production. In foreign markets, South Africa's lower labor and freight costs generally result in lower prices for South African versus U.S. mohair. Additionally, South Africa benefits from in-country processing facilities, whereas the only U.S. processing facility closed in 1998.
Exports Looking Up for U.S. Mohair
Like wool, demand for mohair has declined over the past ten years while U.S. stockpiles have grown. Low demand, prices and the elimination of the government support program have led U.S. producers to reduce their herd numbers; the angora goat population in the United States dropped from a high near 3.2 million head in 1958 to a current population of approximately three-quarters of a million animals. Mohair production continues to drop every year. However, production declines are expected to have little impact on the flow of trade as ample stores of adult mohair are able to meet demand beyond production. Industry estimates warehouse supplies of adult mohair approached 14 million pounds in 1999. Demand for mohair appears to be picking up, with the U.S. consuming as much mohair as it produced in 1998. U.S. mohair sales to overseas markets are also expanding; exports of U.S. mohair in the first 7 months of 1999 already account for 96 percent of total 1998 exports (which were $8,034,722).
Current Trends in U.S. Mohair Exports
Because raw mohair can no longer be processed in this country, U.S. mohair growers are entirely dependent on exports. South Africa and the United Kingdom represent the largest export markets for U.S. mohair. Exports to these two markets totaled almost $6.3 million in 1998, more than 77 percent of total 1998 exports of U.S. mohair. This year, Belgium stands out as an increasingly important export destination for U.S. mohair. Year-to-date exports to this market have topped total 1998 sales by 111 percent to reach more than $1 million. Sales to Germany are up 107 percent, with total sales in 1999 estimated to be greater than $220,000.
Diversification Leads to Enhanced Opportunities for Mohair Sales
Mohair remains subject to one key constraint: dependence on the fashion industry as the primary outlet for this fiber. It is no wonder that the industry has undergone a substantial decline over the past few years--mohair has not been in fashion since 1992. One common misconception is that mohair, being an expensive fiber, costs too much for it to be used more regularly by the fashion industry. According to the industry, however, opinion among high end manufacturers revealed that mohair's high price is less a factor than its price volatility. Because manufacturers cannot rely on a stable price for mohair, they are unable to maintain a steady demand for this fiber.
Industry leaders recognize the importance of diversifying the mohair end use in order to create a more steady demand and reduce price volatility. One of the most promising developments is the creation of mohair carpet, a high end product that could significantly increase the utilization of mohair and draw from high stockpiles of U.S. adult mohair. Peru has emerged as an important primary destination for U.S. mohair where it is spun into the yarn used in fabricating carpets. Sales of U.S. mohair to Peru are estimated at almost $175,000 for 1999. Yarn samples have also been sent out to European carpet mills to manufacture samples of the carpet. U.S. industry is also exploring the carpet industries of various Eastern European countries to determine that region's capacity to produce fine, quality carpets.
Exports of U.S. wool and mohair have been subject to depressed demand brought about by abundant worldwide supplies and reduced production following the loss of the government farm program and competition from synthetic fibers. Opportunities for these products now seem to emerge from non-traditional markets and uses. Increased exportation of U.S. wool and mohair will depend on continued innovation and diversification for end-product usage as well as the U.S. industries' willingness to invest in marketing to exploit these new opportunities.
For further information, contact Cat Carrales, (202) 720-7264.