CCWG Wool Market and Business Update-2017

Written by CCWG
Tuesday, January 2, 2018 — No Comments Yet

CCWG Wool Market and Business Update – Fall 2017

During the 2016/17 wool marketing season there has been a very significant contrast comparing the fine and coarse wool markets. Fine wool has experienced solid global demand and record prices have been achieved for many wool types 22 micron and finer.  A number of factors can be attributed to this success including the positive international branding of Merino wool.  As well, new and innovative wool products such as double faced and fake fur fabrics being manufactured in China have created new consumers for wool and these products require significant quantities of fine wool to produce.  
The specifications for Chinese government uniforms including military, railway and postal etc have recently been changed to favour more fine wool content and huge quantities of wool are required for these contracts.  In China mills are currently focused on increasing productivity and product quality, they have also made significant capital investment in order to comply with new stringent government environmental regulations. 

The broader crossbred wool market has struggled the past 18 months and to this point in time has not been able to ride the coat tails of the rising fine wool market.  The main driver of price trends continues to be China, which in 2016/17 accounted for 63% of exports from the five major wool exporting countries.  Excess stocks of coarse wool products that had built up in China throughout the supply chain, from greasy wool through to finished fabric are slowly being consumed.  Current projections are a little more positive with predictions that demand and market prices for crossbred wool will soon start to improve.

The wool trade seems to be firmly committed to the need for further industry programs within the education, promotion and innovation fields.  The International Campaign for Wool is an excellent example of collaboration between all members of the supply chain including farmers, retailers, designers, manufacturers and consumers.  The objective of this organization is to promote the incredible benefits and versatility of wool which in turn supports many small businesses and farmers whose livelihoods depends on the wool industry.  The Dumfries House Wool Declaration is a 10 point declaration that has been developed whereby the global wool industry commits to protect the environment, to care about the welfare of sheep and to uphold the best possible practices in growing, trading, manufacturing and marketing wool fiber and its related textiles. 

In Canada our wool volume has slipped after many years of marginal growth, we hope that this is only a temporary situation.  This can be directly attributed to lower sheep numbers which may be mainly due to drought conditions and expensive feed in some provinces the previous year.  We continue our practice of orderly wool marketing throughout the year of our graded, value added, and objectively measured wool types.  Due to the recent weaker demand from China for coarser wool types we have reached out to develop new market opportunities for Canadian wool in Europe and the Middle East.  In addition to our wool sales in Canada, export destinations for Canadian wool currently include China, USA, Czech Republic, Egypt, Bulgaria and India.  Canadian wool enjoys an excellent reputation in these markets due to our consistent quality deliveries which is a credit to our wool grading staff.  Our Shareholder Wool Shipper Loyalty Reward Program (SWSLRP) continues again this year at the rate of 7 cents per pound to our shareholder / wool shipper consigners.  The annual dividend will be 7% for shareholders of record date December 31, 2016.

In September I again travelled to China along with Ontario Board member Gary Fox to participate in the Nanjing Wool Market Conference and International Trade Fair. Over 600 delegates participated which gave us an excellent opportunity to display Canadian Wool to the global wool trade.  Prior to the conference we travelled with our agent and visited numerous customers, successfully selling several containers of graded Canadian wool for prompt and forward shipment.

Retail Business

The retail division of CCWG continues to be a cornerstone of our business and now accounts for approximately 70% of our sales revenue.  It has been a good marriage between our wool and retail business since we began this diversification strategy a number of years ago.  Very positive results have enabled the company to record a profit that is ultimately used to grow our business and finance capital assets.  It is a testament to our staff ability and effort when you consider the highly competitive consumer market place that we operate within for both livestock supplies and clothing.  New product research and development along with improved website and ecommerce platforms are ongoing initiatives that we are committed to implementing.  In our livestock supplies division we currently face a situation whereby numerous pharmaceutical items are becoming restricted for veterinary only distribution.  This will be a challenge for our company to find replacement products and we will have to adapt to changing times.  I have no doubt that our management team are up to the task at hand and will find solutions to ensure our continued success.  The staff profit sharing plan that the company developed several years ago continues to achieve the desired results.  It instills a sense of ownership with our employees who can control their own destiny with the right effort and attitude.  Our objective has always been to create a positive working environment and to supply all the necessary tools so that success can be achieved with the appropriate performance.  Offering excellent customer service and going the extra mile is how we separate our business from the competition.  In any event, we are proving with this business model that everyone wins – our customers, the employee’s and the company.

Earlier today we celebrated the official grand opening of our new facility in Broxburn Business Park, Lethbridge County.  Our old property at 918-1st Avenue South in Lethbridge which has been sold had served us well since 1950, but the time was right to explore new opportunities.  We are really excited about growing our business in this new environment and our Lethbridge team is eager to get the job done at the earliest opportunity.  Expectations are high and we wish them every success.  

From a financial point of view we are pleased to report that the company has no debt on our balance sheet for any of the capital projects that have been undertaken and completed in recent years.  In addition to the Lethbridge project some of these include store renovations at Premier Choix Agricole, Real Wool Shop, CCWG Livestock Supplies and Equestrian Centre, and our satellite store at Kitchener/Waterloo.  A new storage warehouse was built at Carleton Place about five years to accommodate graded wool bales and our expanding Livestock Supplies business.  This has been achieved by making carefully calculated business decisions and adhering to a disciplined financial plan.  

Our sincere thanks again to all CCWG staff and directors for your efforts that are contributing to the success of our organization.  In 2018 we look forward to reaching a major milestone, 100 years in business and we thank our many loyal customers for their continued patronage.

Respectfully Submitted,

Eric Bjergso
General Manager

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