Wednesday, May 09, 2012

The Economics of Wool

     I have managed to run afoul of the world of hobby spinners: I dared to criticize. Publicly.
     This is the exchange that took place on a spinning-related discussion board on the popular fiber arts website, Ravelry (I'm changing the respondents' names):

Me (in response to a beautiful picture of a washed Blue-Faced Leicester (BFL) lock): love (1,000). My new mantra: I am NOT buying a BFL fleece at Black Sheep...I am NOT buying a BFL fleece at Black Sheep...

Respondent #1: You totally will.... Don't lie like that!

Respondent #2: I would never make such a foolish statement... :-)

Me: It's easier than you might think: I look at the price per pound for a really good fleece, and once I've picked myself back up off the floor, I'm able to walk away. I'm waiting for the price of BFL to fall through the floor the way alpaca has in the past year. Meanwhile, I've got merino, cormo, merino-corrie, corrie, and my beloved Border Leicester/Corriedale/Merino fleeces to keep my busy. ETA:...along with a Romney, a Border Leicester, a Cotswold, and a Jacob I really should spin, just to get the boxes of fleece emptied out...

Respondent #3: If the price falls through the floor, some of our dear shepherds will be forced out of the fleece business. That makes me too sad to think about!

Me: Those "dear shepherds" that go out of business because the price adjusts to market pressure on the supply side should probably reconsider agriculture as an occupation. It's a business, just like selling anything else, and is subject to the laws of supply and demand.

     There it is, in black and white: I had the unmitigated gall to suggest that the price of something might be subject to the laws of supply and demand. I quickly had a mailbox full of flaming responses, accusing me of nearly everything except killing puppies and kittens, and questioning my expertise as a spinner. The general theme seems to be that: a) I have no idea what I'm talking about because buying raw fleece is always better than buying commercially-processed top; b) that without the financial support of handspinners paying a fortune for raw fleeces, spinners' flocks (those flocks raised specifically for the handspinning market) will disappear; and c) I am evil for even suggesting that the price for the fleece off a dear little BFL might be too expensive.
     OK, time for an economics lesson. The basic rules of supply of demand:
1. As price goes down, demand goes up. This is normally plotted on a demand curve as a line that goes down as it moves to the right.
2. As price goes up, supply goes up. This is normally plotted on a demand curve as a line that goes up as it moves to the right.
3. The price point where supply meets demand is known as the "equilibrium price."
     The way the free market works, price is always trying to meet that equilibrium price. Individual sellers that set a price too high are losing money because they have excess supply; sellers that set a price too low are losing money because their demand is outstripping their supply. That's how the free market system functions.
     Right now, the equilibrium price for skirted raw fleece is $12-20 per pound, unwashed weight. It has been at that price for nearly five years, primarily because that's the price where demand seems to meet supply. The primary reason for this is the total cost to the buyer of the fiber. In 2009, I purchased a gloriously beautiful blue ribbon-winning black merino fleece. The raw fleece tipped the scales at 7.4 pounds and cost me $133.20. I sent this fleece out for processing into roving: about $10 to mail the fleece to the processor and about $100 to have the fleece washed, carded, and turned into pin-draft. The total weight of the pin-draft I got back was 4.4 pounds. Total cost for this fleece: $243.20, or $55.27 a pound. I don't begrudge a penny of the money I spent--it's wonderful fiber and I'm getting many hours of entertainment and pleasure out of spinning it. I merely am using this fleece to illustrate why many farmers aren't able to get more than about $20 a pound for raw fleece.
     At that price, a high-quality merino fleece (which typically weighs about 8-12 pounds) is worth from $96-240, depending on quality, color, and size. If the average merino sheep costs about $100-125 a year to keep, getting a really nice, big fleece off the critter will turn a tidy profit for the farmer. By comparison, a BFL is a little sheep: a typical fleece is only a couple pounds. At $75 a year for upkeep, farmers lose money on every single fleece. Their alternatives: charge more than the market can bear for the fleece with the hope of recouping more of their costs and run the risk of decreasing demand; cover the production costs in other ways, from diversifying to other crops (raise other kinds of sheep, animals, or crops) to teaching spinning and weaving classes; or breed bigger sheep that throw bigger, high-quality fleeces. Perhaps a bit more attention to sheep genetics (which is already being done by several woolgrowers in the West) can make the economics of wool pencil out a bit better.