Wool Production Continues
Decline In U.S., Worldwide

By Jose G. Peña
Extension economist

The U.S. sheep and wool industry has continued to decline for nine consecutive years. On Jan. 1 of this year, it totaled 7.24 million head, down 7.5 percent from an inventory of 7.825 million head on January 1, 1998, and 36.3 percent below the level for 1990. Sheep and lambs shorn during 1998 declined to 6.43 million head, down eight percent from seven million head shorn during 1997.

According to USDA's latest cotton and wool situation and outlook report, wool production in 1998 is estimated at 27 million pounds clean (49.2 million greasy), down 5.6 percent from 28.6 million pounds produced in 1997. Expected production this year would be the lowest on record and significantly below the early 1990s.

Wool imports in 1998, however, at 80 million pounds clean, were up 4.7 percent from 76.4 million pounds imported in 1997, but down 12.6 percent from 91.7 million pounds imported in 1994. Mill demand in 1998 at 120 million pounds clean was down 16.7 percent from 144 million pounds consumed in 1997 and down 21.7 percent from 153.3 million pounds used in 1994.

After reaching the lowest level in 25 years at the start of the 1998 marketing year, carryover supplies into 1999 are forecast to increase to 46.1 million pounds, up 48.2 percent from a carry-in stock level into the 1998 marketing year of 31.1 million pounds, but down 10.8 percent from an ending stock level of 51.7 million pounds in 1994.

After showing a significant market improvement in 1997, wool markets weakened in 1998. The average price paid in the U.S. for wool sold in 1998 was below 60 cents per pound for a total wool value of $29.4 million, down 35 percent from $44.9 million in 1997. More than half the 1998 clip remains in storage.

The sheep and lamb herd in Texas, after showing a healthy inventory increase on January 1, 1998 to 1.53 million head, dropped 12 percent to 1.35 million head on January 1, 1999. Texas, the largest lamb and wool producing state in the U.S., accounted for 18.6 percent of the total U.S. herd on January 1, 1999, down from 19.7 percent the previous year. Excellent markets for lambs and the improvement in the wool market in 1997 influenced the inventory increase in Texas. Both the lamb and the wool market weakened during 1998, causing additional disillusionment in the industry.

Imports Up

The estimate of imports for 1998 at 80 million pounds clean is up 4.7 percent from 76.4 million pounds imported in 1997 and up 6.1 percent from 76.4 million pounds imported in 1996, but down 9.9 percent from 88.8 million pounds imported in 1995. Imports in 1998 accounted for 47.6 percent of total U.S. supplies, compared to an average of 42 percent from 1944 through 1997.

Total U.S. supplies for 1998 at 168.1 million pounds clean were 6.1 percent below 1997 and the lowest since 1985. Total supplies have steadily decreased for the last four years and are now lower than the level of the late 1970s when the weighted average price for all wool was significantly higher than the 1998 price levels.

Weak Demand

Domestic U.S. raw wool mill consumption during 1998 at 120 million pounds is 16.7 percent below the 144 million pounds used in 1997 and down 15.4 percent from 141.8 million pounds consumed in 1996. Current mill use is the lowest on record. While total supplies are decreasing, mill use is decreasing at a higher rate and will cause ending stocks to increase.

Carry-in stocks into 1999 at 46.1 million pounds are up 48.2 percent from a beginning stock level of 31.1 million pounds, but down 46 percent from 1989 when carryover stocks reached a recent record high of 89.2 million pounds. A huge buildup of carryover stocks that year was a large contributor to the collapse of the market, which bottomed in 1993 and 1996, showed signs of recovery in 1997 and bottomed again in 1998.

With a stock-to-use ratio of 37.8 percent, market analysts contend that this year's wool market outlook appears relatively weak, but manageable. Reduced U.S. production and a gradual decline in huge world stockpiles support more stable market.

Foreign Wool Production Down

Foreign wool production (wool-producing countries other than the U.S.) is experiencing a similar adjustment process as has been occurring in the United States. During the 1998-99 season, foreign wool production fell for the eighth year in a row to 3.131 billion pounds clean, down 1.8 percent from 3.188 billion pounds produced during the 1997-98 season and down 20.3 percent from 3.929 billion pounds produced during the 1991-92 season. World sheep numbers are estimated at one billion head, down nine million head from an inventory of 1.009 billion head during the 1996-97 production year.