Can wool save sheep?

Aotearoa New Zealand, once said to be living off the sheep’s back, is now struggling with a wool industry in deep manure unless it can reclaim old markets, develop new ones, and capitalise on the global shift from plastic to sustainable natural fibres.

While our sheep meat is fetching top dollar, flock numbers are in freefall with most wool clip profit garnered beyond the farm gate, leaving many growers wondering why they bother. 

It’s late in the game but wool advocates – with Hawke’s Bay in the vanguard – are finally pushing back against the trend to breeds with no fleece and suggestions the industry is broken, unsustainable or bad for the environment. 

Crossbred growers mainly used in carpets until synthetics pulled the wool out from under them, produce 80% of our output with fine wool making up the balance, fetching up to $26 per kg in good years. 

Craig Hickson founder of Hastings-based Progressive Meats says average lamb returns have increased dramatically from $13 per ewe in 1987 to $130 today, while strong or crossbred wool has remained about $3 per kilo for 34 years. At the time of writing, it was under $2kg. 

“It’s gone nowhere, the return is less than the cost of shearing and it’s making no contribution to your overall farming costs,” says Hickson. 

He says farmers are shearing less frequently and sheep are ending up at the works with longer fleeces than any time in the past. 

For the past two decades fine Merino wool, used in high-end garments such as suits, sportswear and outdoor clothing, has far outshone its coarser cousin, but WoolWorks CEO Nigel Hales says New Zealand is “riding on the coat tails” of the Australian Merino business. 

He says they made massive investment in that market and are driving global prices while most Kiwi fine wool ‘hero’ brands are now owned offshore. 

And he says, 20% of New Zealand wool is exported without any added value, including the majority of the Merino clip. 

Although major efforts are now underway to rescue our crossbred strong wool, including a merger of big players and government and industry led initiatives, Hales is convinced we also need to ramp up local demand and production. 

“In the days when we had 50 million sheep and three million people we used about 22% of that wool volume ourselves. However, we forgot that our grandmothers told us wool is a natural and durable fibre and were happy to buy plastic.” 

Hales says getting internal wool use back to 20-25% and manufacturing some of those products ourselves would change the game. “With 5 million people and a lot more houses using wool on the floor and in the ceiling and walls it would not only be warm but a flame retardant.” 

In 2020, Agriculture minister Damien O’Connor convened a series of working groups that morphed into the Strong Wool Action Group (SWAG), which has received government and industry funding to revitalise the market. 

The goal is a more connected and coordinated sector, partnering with global experts, farmers and the supply chain, increased investment and rebuilding capability through training, R&D and stronger governance. 

In a separate move, a NZ National Standard for Wool was established in May with 15 new wool companies signing up for an assurance of integrity, traceability, biosecurity, food safety, environmental sustainability and animal health and welfare. 

Hawke’s Bay owes much of its past prosperity from the late 1840s to the rapid expansion of sheep farming. Wool was our major export until the 1970s (eventually overtaken by frozen meat exports, which began in the 1880s), making up around half of farm incomes. 

Sheep farmers began switching to dairy in the 1980s and by 1987 urban sprawl, increased diversification, including viticulture and plantation forestry, contributed to a 40-year decline in the strong wool industry. 

In 1982, ‘peak sheep’ year, we had 70 million sheep dotting our paddocks. By June 2020, according to Statistics NZ, we were down to 26 million with 6.5 million shorn off that number in the past decade. 

Hawke’s Bay was hit hard with sheep numbers falling 12% (346,000) in 2020 from 2019, partly through the convergence of drought and Covid, leaving us with an estimated 2.5 million sheep. 

Synthetics deliver blow 

A near fatal blow to our quality carpet and clothing production was delivered by synthetics, which almost completely owned the market around 1996. 

Since synthetics became the dominant floor covering we’ve had decades of bumbling along without a strategic comeback plan, partly due to internal politics without a levy or subsidy to fund a new strategy. 

The New Zealand Wool Board was disestablished in 2001 with the industry essentially held together by a fragmented jigsaw of grower-owned businesses and brokers each looking after their own interests. 

The big obstacle to restoring the fortunes of wool is that growers need to make a reasonable return for their effort so they can more confidently compete for land use and export opportunities. 

One proposed remedy is the imminent merger of two farmer-owned entities, Hawke’s Bay-based Primary Wool Co-operative (PWC) with 1,400 owners, and Wools of New Zealand (WNZ) based in Christchurch with 780 shareholders. 

Between them PWC and WNZ handle 37% of the wool clip. The rest is served by PGG Wrightson, Carfield Primary Wool and other brokers in the wider wool ecosystem. 

Until now there’s not been a strong enough body to capture the value before its absorbed further down the chain, says PWC director Hamish de Lautour.

The merged group proposes a fully integrated supply chain with sufficient clout to deal directly with manufacturers and deliver better returns to growers rather than shipping raw wool clip in a race to the bottom. 

“The only way to get your story to the consumer is to own the brand as close to the consumer as you can,” says de Lautour. 

Hamish’s father was one of the founding directors of the East Coast Wool Co-operative set up in 1974 which morphed into PWC after underwriting the Dannevirke spinning mill. 

PWC joint venture partners include Just Shorn luxury wool carpets, Hushaberry soft furnishings and rugs and Christchurch-based NZ Yarn which makes high quality spun yarns for the world’s carpet industry. 

PWC recently acquired full ownership of Hastings-based broker and wool handler CP Wool and rescued the country’s last spinning company, Christchurch-based New Zealand Natural Fibres, from receivership in 2014.

Reboot strategy 

Key to the strong wool reboot will be the ability of the merged entity to capture value for a range of wool, including crossbred clip, Merino and mid-micron wool from Corriedale sheep, and bulk supply several “woollen floor covering” manufacturers to create a more competitive product. 

One of those pending export deals is with a carpet tile manufacturer. “Carpet tiles are the floor covering of choice in the commercial environment, and in the UK that’s a massive £240m market,” says de Lautour. 

Craig Hickson say claiming back the traditional carpet market is a logical place to start, with Bremworth targeting “discerning buyers at the high end” and WNZ manufacturing carpet in Turkey, to compete with “solution dyed nylon” carpets. 

However, getting beyond carpet will require “a multi-faceted approach across a broad range of products and market segments that can be consumed by a large number of people,” says Hickson, a founding director of WNZ and member of PWC. 

And there’s no quick fix. He says it could take 10 years to transition to the point where demand exceeds supply.

Philippa Wright has 45 years in the wool industry and reckons the big shift will come with changing consumer attitudes and better appreciation of “the relevance of wool as a natural, sustainable fibre which can help the planet”.

The Waipukurau-based wool broker doesn’t believe collective dealing with bulk wool will suddenly change the market, challenge the major manufacturers or bring the price down. 

You can’t really compete on price “so Joe Blogg can buy a carpet again” when you are dealing with a quality product. She asks, what happens when the price of wool goes up? “To me it would be better to have an absolute premium product because there are people who can afford that.” 

You can’t really compete on price “so Joe Blogg can buy a carpet again” when you are dealing with a quality product. She asks, what happens when the price of wool goes up? “To me it would be better to have an absolute premium product because there are people who can afford that.” 

Scouring the options 

An essential part of preparing most raw clip for export is the wool scourer who separates, processes, dries, presses, packs, stores and distributes.

Up until 1976 there were 28 scourers, but through mergers, acquisitions and financial failures there’s only one left; Napier-based New Zealand Wool Scouring with plants at Clive, Awatoto and Timaru. 

After a drawn out Commerce Commission process, its monopoly status was approved, and a year ago its operating name became WoolWorks, signalling to the market it was time for a change. 

“We couldn’t just sit around, waiting to see what’s happening we had to make some changes ourselves,” says CEO Nigel Hales. 

WoolWorks is endeavouring to lead by example, adopting leading edge technology and global ‘best practice’, investing in R&D for wool by-products with international partners and improving carbon emissions and environmental sustainability. 

Hales says the company is internationally competitive; even in highly subsidised countries, offers scouring tariffs three times lower than in England, and is geared for growth. “We’ve proven it can be done if your business is set up right,” says Hales. 

Made in NZ myth 

Hales insists a brighter wool future depends on improved exports, local demand and a return to local manufacturing.

The significantly lower cost of manufacturing offshore has mesmerised the industry in the past but Covid-induced chaos in the global distribution network has exposed harsh realities.

China’s production is at half-mast and the Americas and Europe are only slowly re-opening. Hales drops a bombshell: the cost of a container from China has just gone from $5,000 to over $10,000. 

He says wool is bulky and hard to transport in a manufactured form and international shipping prices aren’t helping. “Exporters are having a hell of a time … I always wondered when the wheel would turn and we were forced to look at manufacturing back here in New Zealand.” 

The majority of wool manufacturing is done at scale in Asian countries which comb, spin and produce yarn for Europe, America and New Zealand, which is partly why ‘New Zealand-made’ wool product remains so costly. 

Philippa Wright isn’t sure local manufacture will make a difference. “Everything is so much more expensive here, including our wages and compliance costs.” 

She agrees we need to consider new niche applications and get wool back into homes “architecture, buildings … it only takes three bales of wool to carpet one big house”.

There are lots of “wonderful new ideas” but the best of them may require big financial investment and ideally stronger government support. That, she suggests, may be a problem, if key people think the industry doesn’t have a long-term future. 

Filters and fertiliser 

Her own innovation is “bouncy and soft” luxury pillows made in Christchurch for the home and hospitality industry filled with wool, crimped and carded into tiny balls or knobs like those in a bean bag. 

She’s also 50% shareholder in a US business where a machine transforms our raw product into pillow fillings so they can say ‘made in the USA’.

Her other business dries, crushes and processes daggy wool into fertiliser tablets for companies like Tui to create pellets that retain moisture in the garden. 

The list of wool innovations is impressive and goes well beyond clothing, bags, socks, rugs, hats and insulation. 

Lanaco produces high-quality wool-fibre filters for medical, industrial and special purpose masks, home ventilation, air filters and vacuum cleaners. 

It produced 70,000 reusable wool face masks for the New Zealand Olympic team and last year won a contract to supply NASA with wool filters for manned missions to the Moon and Mars.

Kiwi inventor Logan Williams developed biodegradable pellets, combining coarse wool with polylactic acid from corn starch, to replace plastic in injection moulding. 

His company Keravos is working with the New Zealand Merino Company and Kiwi firms Action Plastics and Maisey Group making furniture, pots, crockery and other products.

And then there’s VIP Beds in Porangahau and KiwiWool based in Havelock North, both making customised wool pet beds, and the latter insulation products for commercial and domestic clients as well. 

Profit from sheep grease 

One lucrative by-product from WoolWorks scouring operation is wool 

grease, which is in high demand as a component in hair shampoo, make-up and pharmaceuticals. 

It’s known as lanolin and they’re supplying a major cosmetic manufacturer in France who uses it in lipstick because it protects and hydrates the skin. 

“New Zealand crossbred wool produces the world’s highest levels of cholesterol which our customers convert into natural vitamin D powder and crystals in different grades. It’s a carrier in medicines and one of the drugs you should be taking if you’re worried about Covid.”

Hales says food companies like MyFoodBag.co.nz are now using wool instead of polystyrene in their packaging. 

He cites an Australian company that swapped out polystyrene boxes for New Zealand wool-lined cardboard boxes to send fish between cities. They grew their business 30% because the frozen fish lasted longer and could travel further.

Craig Hickson believes there’s plenty of room for expansion into traditional areas like quilts, bed toppers, tanned sheepskin for babies and children to sleep on and for medical use in hospitals.

Setting an example is Hawke’s Bay’s Big Save Furniture which purchased four beef and sheep farms, to ensure natural fibre for its products. 

The company pays more than double the current strong wool price for what becomes lining, coverings and filler for its beds and sofas because it’s flame retardant, biodegradable and ultimately reduces the environmental impact at landfills. 

It recently imported specalised equipment to manufacture locally. Owning the supply chain and dealing directly with farmers means it can absorb extra cost rather than passing it to consumers.

More or less sheep 

The recent Godfrey Hirst legal challenge to Bremworth Cavalier (30% owner of WoolWorks) claimed its wool carpet campaign failed to inform customers of the environmental damage of livestock farming, wool scouring and the chemicals used. 

A counter argument might be that Godfrey Hirst also makes wool carpet and increased its take of Kiwi wool this year. It’s claimed sheep farming can be as sustainable and beneficial to the environment as forestry and an important part of land use diversity.

“Wool and its co-products need to play their part alongside beef and lamb to give a return that makes pastoral farming competitive with forestry in the hill country where most of our sheep are, and where tractors can’t go,” says Craig Hickson.

“It’s not sensible to think of our hill country completely covered in trees and the plains all covered in horticulture and viticulture or apples, crops and grapes.” 

Hickson insists sheep stimulate growth and sequester carbon through photosynthesis by continually chewing pasture. “Wool stores carbon, it’s biodegradable unlike plastic and has relatively long life in carpets so a sheep would be the equivalent of a tree once its harvested.” 

While meat prices are expected to remain high, he says great opportunity lies in the “massive shift in attitudes toward wool and natural fibre” and our national flock may need to increase. 

Philippa Wright doesn’t want fewer sheep on our paddocks and, like others, is concerned at the trend toward genetic breeds that shed wool, or crossbreeds with black fibre. 

She says it’s important we don’t lose our advantage as one of the best strong wool producers in the world.

When the wool revival hits, Hamish de Lautour says breeders with no wool will wonder what hit them. “That’s an income stream they’re not going to have … its second only in stupidity to pine trees when it comes to destroying rural communities.”

Sheep are dual-purpose animals, says Hickson, and it’s unwise for farmers to believe lamb prices will continue to grow fast enough to sustain land use against other options.

Matter of survival 

Increased demand from carpet manufacturers, the proposed farmer-owned supply chain and other efforts to restore wool’s lost lustre are a matter of survival for woolgrowers struggling with a flaccid growth curve. 

Like Hickson says, meat growers need wool to be strong so farmers and the industry can benefit from both.

While recent challenges including Covid have been “a hell of a shock”, Philippa Wright is cautious about claims the wool industry is broken or dying. 

Despite not having an overarching representative body, she says wool is working well and simply needs the missing pieces that now seem to be fitting into place. 

“We’ve had wool sales for 150 plus years and rarely have farmers not been paid. We have a testing regime and can sell and get paid through a global trading system with no major issues. That’s not broken.”

However, she agrees the pressure is now on and while the industry has got used to being in the doldrums, says “we have to pick ourselves up again”.