|ASI’s International Wool Program Benefiting Producers
By AMY TRINIDAD
Sheep Industry News Editor
(November 1, 2010) Over the past two years, the international wool market has done a complete 180. At the beginning of the worldwide economic downturn just two years ago, international wool trade came to a virtual standstill and even the cancellation of existing orders occurred; however, this past spring, wool producers witnessed the highest prices for wool since 1989. This dramatic turnaround may not have occurred so quickly for U.S. producers without the existence of the American Sheep Industry Association’s (ASI) international wool marketing program. By maintaining a diversity of markets (both domestic and international), customers and the types of wool marketed – the fundamentals behind the international wool program – the U.S. wool market fared better than many other supplier countries after the economic downturn.
This market development is the second time in as recent as a decade that ASI’s international wool marketing program proved to be an essential component in the upswing of wool prices for producers. The previous example occurred in the late 1990s when the domestic wool mills began to struggle as financial problems emerged from the growing number of wool-garment imports to the United States in addition to cheap foreign labor.
ASI began building the international program for U.S. wool in 1989 with funding assistance from the U.S. Department of Agriculture’s Foreign Agriculture Service (FAS), wool exporters and warehouses. By combining FAS and ASI funds, ASI has been able to put programs in place to redirect wool purchases overseas and develop new customers. While domestic wool customers are very important to the wool market, unfortunately the domestic textile industry does not use all the wool that is produced in the United States.
“With the availability of the FAS programs, ASI began the groundwork to develop international markets, making them available at a crucial time in the industry,” explains Rita Kourlis Samuelson, wool marketing director for ASI. “In the late 90s, we knew the domestic wool market wasn’t as stable as it had been in the past and we changed our international marketing program. We had surveyed the world trying to find opportunities in which to match the needs of the U.S. wool industry in the 1990s and focused our marketing program in 1998.”
By combining FAS and ASI funds, ASI has been able to put programs in place to redirect wool purchases overseas and develop new customers. Over recent years, exports accounted for up to 75 percent of U.S. wool production, and grease wool exports have grown, proportionally, five to seven times over the last 15 years.
Due to the fact the United States has a limited volume of wool available each year, the international wool marketing program is comprised of a niche marketing strategy that seeks buyers for specific wool types and matches U.S. supplies precisely to buyer needs. Some of these tactics include:
- U.S. suppliers’ mission to target markets during the off season to familiarize U.S.
companies with market opportunities and requirements.
- International buyer missions to major U.S. wool centers from March through June to
enable potential customers to see U.S. wool potential for themselves.
- Assistance with technical processing trials that focus on showing target companies
optimum blending procedures to get the desired product.
- The establishment of on-ground presence with a representative to assist U.S. exports and international buyers to expand U.S. wool purchases in key expanding markets such as China and India.
Despite the global wool market downturn that occurred in late 2008 and early 2009, these international wool marketing tactics helped expand foreign market access for U.S. wool. The key has been maintaining a diverse market which minimized the effects of the financial condition by keeping markets open in a variety of countries, not just China, the largest wool buyer.
China started taking over the majority of the worldwide wool purchases in the early 2000s from Europe. Although China’s low-cost base in wool-textile processing and manufacturing continues to strengthen, ASI is also looking to India as it is shaping up to become a major player in the wool-textile manufacturing industry. In fact, the United States sent almost a quarter of its exports in 2009 to India, making it the second-largest importer of U.S. wool behind China. Looking toward the future, Samuelson will continue to explore future opportunities in countries like Vietnam to play larger roles as importers of U.S. wool.
The FAS program has not only helped with the exporting of wool, but U.S. pelts have also benefited from the funds with exports shifting away from Turkey and now going to China as well.
The growing export market hasn’t come without its share of challenges, explains Samuelson.
“There are a number of factors that play a more important role in today’s wool market than in the 90s,” she says. “The U.S. wool market is now more sensitive to worldwide exchange rates and trade issues and barriers, and more importantly than ever, the U.S. wool industry must be cognizant of its reputation regarding wool quality.”
By showing international buyers that the United States does produce quality wool, ASI is able to open new markets and expand sales resulting in:
- retaining half of the approximately 30 customers cultivated in the past seven years as regular customers;
- the number of U.S. companies exporting wool is three times what it was in years prior;
- U.S. exporters ability to locate and take advantage of the best market prices available as opposed to having to accept the best price from a limited range of market options; and
- a smaller price gap between Australian wool and similar U.S. wool.
The infrastructure of the U.S. wool industry has played a significant role in the success of the international wool program, explains Samuelson. “Without the warehouses and exporters opening their doors to host international visitors, the trade missions would not have resulted in sales. ASI relies on their efforts in helping to improve the U.S. industry’s export expertise.”
The one thing that is certain in the international wool market is change. ASI is continually seeking opportunities in new markets as the change in the location of wool-manufacturing entities occurs globally and in the United States. This adaptability to market changes is crucial for the survival of the U.S. raw-wool industry but it all hinges on the production of a quality wool clip.