5
The U.S. Wool Industry

The United States was the world’s fifth largest wool-producing nation in the 1940s. At the time, wool was considered to be the primary product of sheep production with lamb and mutton as byproducts of wool production. As the fortunes of the U.S. sheep industry declined over the years, so did the relative return to wool production. As a consequence, sheep producers and researchers have turned their attention to improving lamb and mutton production. Today, the United States accounts for < 1 percent of the world’s wool production (Anderson et al., 2007). This chapter reviews the current status of the U.S. wool industry, with a particular focus on the challenges and future opportunities facing the industry. After reviewing the production, marketing, use, pricing, trade, and government policies related to wool, the chapter concludes by offering some insight on the future course of the industry.

WOOL PRODUCTION

The production of wool is a continuous, year-round process influenced by a large number of factors, including genetics, nutritional status, lactation, and other stress factors. The majority of U.S. sheep are shorn in the late winter and early spring months each year, although some producers shear in the fall. In the western range states, producers normally shear prior to the onset of the lambing season. Exceptions include many producers that lamb on the range in the fall or winter where climate risks result in shearing at or close to lamb weaning time in the spring. Some range producers that lamb in the winter in sheds shear prior to lambing. Another source of wool is



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5 The U.S. Wool Industry T he United States was the world’s fifth largest wool-producing nation in the 1940s. At the time, wool was considered to be the primary product of sheep production with lamb and mutton as byproducts of wool production. As the fortunes of the U.S. sheep industry declined over the years, so did the relative return to wool production. As a consequence, sheep producers and researchers have turned their attention to improving lamb and mutton production. Today, the United States accounts for < 1 percent of the world’s wool production (Anderson et al., 2007). This chap- ter reviews the current status of the U.S. wool industry, with a particular focus on the challenges and future opportunities facing the industry. After reviewing the production, marketing, use, pricing, trade, and government policies related to wool, the chapter concludes by offering some insight on the future course of the industry. WOOL PRODUCTION The production of wool is a continuous, year-round process influenced by a large number of factors, including genetics, nutritional status, lactation, and other stress factors. The majority of U.S. sheep are shorn in the late winter and early spring months each year, although some producers shear in the fall. In the western range states, producers normally shear prior to the onset of the lambing season. Exceptions include many producers that lamb on the range in the fall or winter where climate risks result in shearing at or close to lamb weaning time in the spring. Some range producers that lamb in the winter in sheds shear prior to lambing. Another source of wool is 

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 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES from feeder lambs. Lamb feeders in higher rainfall climates shear lambs to be feedlot finished, and also do so in regions with hot summer periods when the lambs enter the feedlots. An estimated 70 percent of the lambs finished in feedlots are shorn (McDonnell, personal communication, 2007). In 2006, the 14 western range and intermountain states accounted for 72 percent of sheep and lamb inventories but produced 77 percent of the U.S. wool clip and received 88 percent of the income from wool sales (USDA, 2007). The production cost and return budgets presented in Chap- ter 2 (Tables 2-3 and 2-4), for example, show that wool provided 14.5 per- cent of the income in Nevada public land range sheep production systems in 2006 and < 2 percent of the income in a 50-ewe farm flock operation, barely covering shearing costs. A frequent debate in the U.S. sheep industry is whether wool is a liability or an important economic component of sheep production that is often neglected. Wool may be a liability to sheep produc- ers in one of three situations: • High-rainfall production areas. Wool breeds of sheep are not well adapted to high rainfall conditions. For this reason, there is growing inter- est in the hair breeds of sheep in the subtropical regions of southeastern states. • Farm flock production systems that emphasize lamb production. These operations generally utilize medium wool breeds or crossbreds that produce lower-quality fleeces that often do not generate enough income to pay for shearing costs. • Remoteness of wool markets. In this case, producers often have difficulty finding qualified shearers and market outlets for wool, providing some incentive to shift to hair breeds. Wool is an important component of sheep production systems in other situations: • Range sheep production systems where arid rangelands limit the po- tential for increased lamb production. The best adapted range maternal ewe breeds all include some Merino genetics in their origin, from 100 percent in the Rambouillet and Merino to 75 percent in the Targhee and 50 percent in the Columbia. These breeds are all good wool producers. • Marketing of wool ersus marketing of meat and milk products. Because wool is an easily stored commodity, producers can delay the mar- keting of wool, but must sell their meat and milk products more quickly. Some producers store their wool for a year or more for financial or market considerations. • Remoteness of lamb markets. The distance of their continent from major world lamb markets together with the storability of wool are pri-

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 THE U.S. WOOL INDUSTRY mary reasons that Australian sheep producers historically have emphasized wool production and have become the dominant suppliers to world wool markets. • Aailability of niche markets. Some producers, particularly those with smaller flocks, have become specialty producers of wools, merchandis- ing to hand spinners and weavers. These may be longer and coarser wools for easier spinning or unique colored wools. With aggressive marketing strategies, these producers may earn from $100 to $150 in wool income per sheep in the flock. WOOL MARKETING Wool producers use one of three primary market preparation methods at shearing (original bag, bellies out and the fleeces not tied individually, and table skirted and classed), and one of four primary sales mechanisms (wool warehouses, wool cooperatives, wool pools, and private treaties). Worsted and Woolen Systems Worsted and woolen are the two basic systems used to process wool from the clean, scoured state through to yarn. The wools flowing through each system are, thus, determined by their characteristics. The worsted system utilizes longer staple and finer grades of wool for higher-quality cloth and finished fabrics. Worsted yarn is spun from fibers that have been carded and combed, resulting in relatively parallel fibers and a smooth yarn. The woolen system utilizes coarser grades of wool for yarn production that ranges in end uses from heavier fabrics for outerwear to drapes, upholstery, and carpets. Woolen yarns are spun from fibers that have been carded but not combed. As a result, the fibers are randomly arranged, yielding a rela- tively rough yarn. Other wools may be used for felt, insulation, batting, and as adsorbents and filters (ASI, 2002). The physical characteristics of wool as sold by producers are deter- mined by several objective measurements determined on full-length staples removed from random positions in the bale. These characteristics include fiber diameter, variability of fiber diameter, clean wool yield, staple length, staple strength, quantity and type of vegetable matter, and number of black fibers present. Objective measurements are obtained from core samples of bales/sale-lots of wool and determined by internationally approved machine and laboratory analyses. Subjective measurements may include color or stains, condition of staple tips, crimp, and style or handle.

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0 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Fiber Diameter All international wool markets describe fiber diameter in microns, with superfine wool as low as 14–17 microns up to coarser wool from 27–35 mi- crons. Staple wools < 26 microns are generally used in the worsted system, with quality of fabric increasing in the lower micron ranges. Variability of fiber diameter is important both within a fiber and within a fleece. As the fiber diameter decreases, market value generally increases. Premiums often are paid for wool with low average fiber diameter and low variability of fiber diameter. Yield Yield is the percentage of clean wool in a grease wool sample, usually adjusted to 12 percent moisture, 1.5 percent alcohol extractives (oil), and 0.5 percent mineral content. The wool trade often refers to this situation as “clean wool fibers present” (CWFP). Yield in the U.S. wool clip may vary from 40 to 70 percent. Fleece density, or number of fibers per area of skin, and staple length are the principal genetic factors influencing yield. Yield also can be affected by management practices, such as where the animals are managed (pasture, range, croplands, drylot), moisture content of fleece at shearing, and cleanliness of shearing area. Clean wool yield can have a major influence on grease wool market price. A wool clip with a 60 percent yield has 50 percent more clean wool than a clip with a 40 percent yield. Staple Length Length is important to both yield and the system in which the fiber will be used. For example, finer wools < 22 microns must be ≥ 70-mm staple for combing and spinning to yarn in the worsted system. Coarser wools from 23 to 26 microns must have a minimum 76-mm staple length. Because wool grows in length every day, disease and/or nutritional stress may cause weaker (tender) fibers or breaks in the staple length and decrease its use and value. Position of the break in the staple is also critical to determining staple length. Another concern regarding staple length is second cuts in the shearing process. Shearers may miss cutting part of the staple and then cut a second time to present a smooth appearance when finished. Second cuts, if left in the staple length fleece, are considered a contaminant. Staple strength is critical in processing wools to finished yarns and fabrics, and measurement of strength is becoming a standard objective measurement for international wool marketing. Staple strength is inherited and can also be affected by nutrition, animal health, and other management practices.

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 THE U.S. WOOL INDUSTRY Vegetable Matter Contaminants such as dirt and oils can be washed out of raw wool in the scouring process. However, vegetable matter, such as burrs and stems, generally cling to the wool fibers and must be removed during mechanical processing (carding and combing). Increasing levels of vegetable matter reduce clean wool yield and increase the cost of processing. Other contami- nants of concern include polypropylene twine, usually from hay baler twine that is very difficult to remove from the fleece; use of nonscourable branding paint (scourable paints are readily available); and black fibers and kemp or medullated fibers in a white fleece. Wool Market Preparation Methods Used by Growers Wool is generally bagged for market in one of three different methods: (1) original bag (OB) method in which bellies, stained wool, and other inferior fleece portions are not removed from the fleece and no table skirt- ing occurs; (2) bellies out and fleeces not tied individually (BOU) method in which some producers may do some fleece skirting to remove short and more contaminated fleeces but no table skirting occurs; and (3) table skirted and classed (TSC) method, which is the recommended method for inter- national and premium domestic wool markets. In the TSC method, bellies typically are removed from the fleece by the shearer and the wool-handling crew removes most of the manure tags and urine-stained wool as it is shorn. The fleece is then thrown open on a slatted table to allow skirting to remove any vegetable matter, stained wool, second cuts, and shorter or off-grade parts of the fleece—normally around the head and lower parts of the leg area of the fleece. A qualified classer then estimates fiber diameter, staple length, and strength of the fleece to determine the grade of the fleece to sort into separate bins. Short (less than staple) fleeces and tender fleeces generally are packaged separately. When a sheep is properly shorn, the fleece can be laid out on a table or floor and be seen as one piece. Skirting is the process of removing from fleeces the stained or inferior wool that grows on the belly and legs of the sheep (Lupton et al., 1992). Table skirting is simply placing the fleece on a table and finishing the skirting process. Classing is the preliminary sorting of the fleece according to its estimated physical properties. Australia is the largest producer of wool and sets the international stan- dard in the marketing of wools through preparation and class. In Australia, most wool is skirted and then subjectively classed by spinning quality num- ber (fiber diameter or fineness range), staple length, color, condition, style, and soundness. Classers produce as few lines as possible from a wool clip while maintaining uniformity within a line and eliminating contamination

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 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES TABLE 5-1 Percentage of Wool Prepared by Growers for Sale to Major Wool Warehouses Using One of the Three Major Preparation Methods, 2007 Wool Clip Market Preparation Method (%) OB BOU TSC Market Roswell Wool Co., Roswell, NM 5–7 60–65* 30–35 Sonora Wool & Mohair, Co., Sonora, TX 10–15 75* 10–15 Eden Wool & Mohair Co., Eden, TX 15–20 75* 5–10 Producers Marketing Cooperative, Inc. (PMCI), Mertzon, TX 10 60* 30 Utah Wool Marketing Cooperative, Tooele, UT 10 40 50 Center of the Nation Wool, Inc., Belle Fourche, SD 15 45 40 *Several warehouses reported that, even though the BOU wool is not TSC, an increasing number of producers are doing some sorting of their BOU wool on the basis of grade, staple length, level of contaminants, and/or color. Source: Survey of major warehouses by authors. of the clip with stained, pigmented fibers and all foreign material (Lupton et al., 1996). Subsequently, most lots are objectively measured (prior to sale) for clean yield, vegetable matter content, average fiber diameter (and vari- ability), staple length, staple strength, and color (Lupton et al., 1989). Most wool in the United States continues to be sold as OB wool (bagged without any further processing) (Table 5-1). A recent telephone survey of major wool-marketing warehouses in the western states by the authors indi- cates some trend toward further preparation of wools by producers. The six warehouses1 surveyed merchandise approximately 50 percent of the wool produced in the western states (Table 5-1). The survey suggests that grow- ers increasingly recognize the importance of wool preparation for market. Producers Marketing Cooperative, Inc. (PMCI), a grower-owned marketing cooperative, handles approximately 20 percent of the Texas wool clip, with approximately one third of their wool from growers that are owner/mem- bers of the co-op. All owner/member wool clips are TSC by co-op staff and normally sell at a 15 percent to 25 percent premium. Warehouse managers in the survey agree that the highest-selling wool clips are those that have been using TSC for several years, establishing predictable reputation clips. With the 2007 wool clip selling at near-record prices, TSC has been an important method of preparation for growers of better wool clips. The warehouse managers also indicate that 20–30 percent of the OB 1Roswell Wool Co., Roswell, NM; Sonora Wool & Mohair, Co., Sonora, TX; Eden Wool & Mohair Co., Eden, TX; Producers Marketing Cooperative, Inc. (PMCI), Mertzon, TX; Utah Wool Marketing Cooperative, Tooele, UT; Center of the Nation Wool, Inc., Belle Fourche, SD.

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 THE U.S. WOOL INDUSTRY and BOU wool sold through their warehouses is purchased by a major U.S. wool buyer and moved to its private warehouse for TSC and then merchan- dised to major U.S. and international wool market outlets. This observation suggests that producers not preparing their wool clip using TSC are selling at a substantial discount, since buyers clearly expect a cost-plus-profit return on investment for the further processing. Wool Marketing Mechanisms In the United States, wool is generally marketed through one of four different marketing mechanisms: (1) warehouse system, (2) marketing cooperatives, (3) pools, and (4) private treaties. Sales options within each mechanism have become fewer with the decline in sheep numbers. The primary objective of all four marketing mechanisms is to provide wool buyers adequate volumes of wool that can be purchased with confidence that their uniformity is accurately represented. All TSC and most BOU wool sold in the United States is core tested with the results available to buyers. Most buyers know the specifications of their orders for wool and are not interested in purchasing wools that do not meet their requirements. The importance of meeting international standards to realize potential market values has increased as exports of U.S. wool have grown. Wool Warehouse System Major U.S. wool-producing regions have access to one or more com- mercial wool warehouses. Growers consign their wool to the warehouse that has the major lines or classes within a clip core tested for the previ- ously described objective measurements. Warehouses may then sell their wool consignments by either (1) sealed bids from and/or direct negotiations with buyers or (2) public auctions with adequate volume to attract major national and international buyers. Reputation wool clips may be sold sepa- rately within TSC grades. Smaller wool clips may be combined with other clips to achieve adequate volume within grades to attract buyers. Growers may instruct warehouse managers to obtain predetermined minimum bids as their agents, or they may trust the manager to get the best available price for their wool. Wool Marketing Cooperatives Many areas of the United States are too remote from wool warehouses and have inadequate volume to attract a commercial warehouse. The larg- est wool-marketing cooperative is Mid States Wool Growers Cooperative with assembly warehouses at its headquarters in Canal Winchester, Ohio,

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 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES and in Kansas City, Missouri. Mid States also has assembly stations in sev- eral locations throughout the Midwest and the East for grower delivery to minimize freight costs for smaller clips. Wool delivered from each grower to their central warehouses is then sorted into grades and wool types and pooled with other clips to obtain adequate volumes in the various grades and types to attract buyers. Mid States provides an important service to farm flock producers remote from traditional wool markets, and provides an assembly service for buyers. Although California Wool Growers Mar- keting Cooperative is the primary wool market outlet for California grow- ers, the cooperative has contracted with Roswell Wool to sell its wool to obtain greater market access. Producers’ Marketing Coop., Inc. (PMCI) in Mertzon, Texas, may be a model for future cooperatives of growers that produce higher-quality wool in the major wool producing areas. Wool Pools Growers in several regions, particularly in the Northwest and North Central states, have used a variation of the cooperative system called wool pools. Montana, for example, continues to operate a number of such pools. A group of growers that produce similar sheep and wool will combine their clips and offer them for sale at a central shipping point. The more progres- sive wool pools provide objective measurement information on the wool offered for sale. The pools provide an opportunity for smaller growers to pool with other growers with similar wool in 11,340- to 13,608-kg truck- load lots. Wool pool members may jointly own a wool baler and may use a common shearing crew. Private Treaty Direct sales were a traditional method growers utilized to sell their wool clip. Growers with larger reputation clips would contact buyers and negotiate a sale price. Although some private treaty sales continue in the major wool-producing states, this sale method has declined for at least three reasons: (1) the use of objective measurements, (2) recognition by growers that buyers were generally more knowledgeable of the wool market than growers, and (3) the desire of major buyers to bid on larger quantities assembled at a central location with known specifications and objective measurements. There continue to be reputable buyers in the North Central and eastern states that provide a market outlet for farm flock producers and lamb feeders. Producers with small flocks that produce lower-quality wool may give the wool to the shearer as partial payment for shearing costs. Most niche market wools are merchandised by growers as individual fleeces or smaller amounts or as natural hand-spun yarns.

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 THE U.S. WOOL INDUSTRY WOOL PROCESSING Once raw wool is purchased, several steps are required before it is pro- cessed into end products. As stated previously, most fabrics for clothing are produced from finer wools (< 26 microns) in the worsted system. Carpets, rugs, heavier blankets, and some upholstery products are generally produced from longer staple, coarser wools primarily using the woolen system; how- ever, an increasing percentage of carpet and blanket yarns are produced on a modified or semiworsted system. With the exception of a limited number of producers of blankets, the woolen system is almost nonexistent in the United States. China, India, Turkey, and, to a lesser extent, some Eastern European nations, now dominate carpet, rug, and heavier blanket production from the woolen system. Since the worsted system is the primary use of wool in the U.S. textile industry, brief description of the steps from raw wool to retail products is appropriate. A more detailed description is presented in the SID Sheep Production Handbook (ASI, 2002). • Scouring. Scouring is the removal of impurities from grease wool using water, detergent, and sometimes a mild alkali. Lanolin is the primary grease base in wool, and it is removed as a merchantable byproduct. Water and other materials, such as dirt and vegetable matter, that are removed in the scouring process can be treated in conventional sewage processes. • Carbonizing. Wool clips contaminated with excessive and hard- er-to-remove vegetable matter, such as burrs and thorny branch segments, are carbonized using an aqueous sulfuric acid treatment to carbonize the cellulosic vegetable matter and followed by heating to convert the defec- tive material into carbon. The carbon is then crushed and shaken from the wool. The acid base is then neutralized and the wool rescoured to complete the process. Carbonizing is expensive, often resulting in shorter and weaker wool fibers. In addition, the wastewater must be treated separately to meet environmental quality requirements. No specific data are available, but only a minor portion of the U.S. wool clip requires carbonizing. The TSC process should remove these types of vegetable matter contaminants from the fleece. • Drying. The wet scoured wool is then dried. The wool is first me- chanically squeezed, then deposited on conveyers at uniform depths to pass through continuous flow heated air dryers. • Carding. Carding disentangles and orients the fibers uniformly for further processing, and is achieved by passing the wool through cylinders and rollers covered with short wires varying from 500 to 2000 wires per square centimeter, depending on the type of wool and end-use objectives. • Combing. Combing removes vegetable matter and short and tangled fibers and orients the longer fibers in a more or less linear configuration. The fibers are combined to form a continuous combed rope or sliver that is then

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 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES fed into rollers for further combing, and then coiled into cans or bundles for delivery. • Top-finishing. Further blending of the combed fibers into a uniform weight and thickness per unit of length and winding into a ball known as top is accomplished by combining (drafting) several combed slivers that are drawn (drafted) together to provide more uniform material. For some yarns destined to be woven into multicolored fabric patterns, dyeing may occur at the top-finishing stage. • Roing, spinning, winding, and twisting. Roving, a process similar to spinning, reduces the top to a more uniform size or thickness prior to spinning. Spinning is the final drawing to the desired yarn fiber count or thickness and includes a predetermined amount of twist and delivery of the yarn to an appropriate package. Wrapping two or more yarns together to form a multiply yarn is called twisting or plying. • Weaing. Weaving interlaces two sets of yarn to form fabric, with warp yarns running lengthwise and weft yarns crosswise. A modern loom is computerized to control multiple functions to including speed, specific weave, and color functions. The woven cloth moves to a roller synchronized with warp speed in a continuous operation and holds the cloth to a speci- fied width. • Knitting. Knitting interlaces yarn in a series of connected loops by needles to control a fabric. Specialty yarns may be produced for hand knit- ting, whereas mechanized commercial knitting machines are very rapid and require stronger yarns. Warp knitting machines produce flat fabric similar to woven cloth, while specialized machines may knit socks, gloves, and fully fashioned garment patterns. • Finishing. Technically, everything that happens to wool fabric after leaving the loom until it is ready for the cutter is regarded as finishing. This may include inspecting for defects, scouring, dyeing, and other chemical treatments to increase flame resistance, reduce shrinkage, improve breath- ability, and increase comfort. The finished cloth is then ready for textile manufacturers to prepare finished products for consumers. • Wool felts. Not covered in the above process is the production of wool felt textiles. Felt is characterized by the densely matted fibers of the wool used. Felts are produced by the combined actions of mechanical work, chemical reactions, moisture, and heat. Although current felt production records are not available, U.S. consumption of wool fibers in felts in 1986 was nearly 4 million kilograms in terms of clean wool. Current Status of U.S. Wool Processing Industry The wool processing industry has shrunk significantly in the United States in the last 20 years and is discussed in depth in the following section

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 THE U.S. WOOL INDUSTRY on wool demand. The majority of wool processing in the United States is located in North Carolina and South Carolina and other southeastern U.S. states along the eastern seaboard, and in the Northeast. The global shift in the textile industry is largely attributed to low wages in China, India, and other developing nations, but this shift is also due to rapid modernization of wool processing plants, particularly in China and India (WOOLNEWS. net, 2007). The surviving textile mills in the United States have largely modernized to utilize new technologies and tailor their products to specific consumer needs, such as the U.S. military (ASI, 2007a). Many of the steps in wool processing require chemicals and create byproducts that result in substantial expense to comply with environmental regulations, while environmental regulations are considerably less in China, India, and other developing nations. Other issues of concern to the U.S. wool processing industry include the removal of textile tariffs and quotas, and the claim that China has artificially kept its currency at a low value relative to the U.S. dollar. Another concern often mentioned is the decline in U.S. sheep and wool production. However, demand for wool apparel goods has increased in the United States in the last 10 years, and export of the U.S. wool clip has increased from traditional levels of approximately 33 to 70 percent of the wool clip in fiscal year 2007. In fact, China now consumes more U.S. raw wool than the domestic wool processing industry (ASI, 2007b). WOOL DEMAND Clean, graded, scoured wool is used primarily for processing into ap- parel and carpets. Wool used for carpets is mostly imported and is shorter, coarser, and less uniform than wool used for apparel. While some apparel wool is produced domestically, the majority (about 88 percent) is imported (ASI, 2007a). Apparel wool is used primarily for clothing such as tweeds, flannels, and knits for blankets. At the mill level, wool competes with a large number of both natural fibers, including cotton, flax, and silk, and synthetic fibers, such as nylon, rayon, acrylic, and polyester. However, wool can function in a complementary role with other fibers in the production of fiber-blend textile goods. The same is the case at the retail level. While wool textiles compete with other fiber textiles for the consumer dollar, wool complements the demand for other fiber textiles in many blended fiber textiles. Domestic Mill Demand The dominant fibers in textile processing are cotton and synthetic fi- bers. From 1995 through 2005, synthetic fibers accounted for an average of 69.9 percent of all fibers used by U.S. mills, with cotton accounting for

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 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Major Accomplishments of the U.S. Wool Industry • Increases in wool preparation to international standards. The An- derson et al. (2007) hedonic wool price analysis reported that from 1992 to 2002, an average of 26 percent of the wool was marketed as OB, 56 percent as BOU, and 21 percent as TSC. The 2007 survey of major wool warehouses as presented in Table 5-1 reported that most warehouses received < 15 per- cent of their wool from growers as OB, 40 to 75 percent as BOU, and 30 to 50 percent as TSC. Several of the warehouses also reported that a significant portion of the wool in the BOU category had some of the tags, skirts, and vegetable matter removed even though it was not TSC. These data clearly indicate grower response to market premiums for improved preparation and from producer education programs sponsored by the American Wool Trust. • New research and product deelopments. Industry support for collaborative research with funding from the American Wool Trust, U.S. military research laboratories, other federal research grants, and private industry have resulted in fabrics and garments that are machine washable, more breathable, and less prickly when worn against the skin; shrinkproof; and flame resistant. Research has also demonstrated the value of wool blends with cotton and certain synthetic fabrics (ASI, 2007c). Major Opportunities and Challenges Facing the U.S. Wool Industry To get a sense of the opportunities and challenges facing the wool in- dustry from an industry perspective, a questionnaire was sent to several key leaders in the wool industry, including market analysts, wool warehouse and wool pool managers, major wool buyers for domestic and international markets, key wool research scientists and extension specialists, and key pro- ducers. While the sample was by no means representative of all participants in the wool industry at all levels in terms of demographics or other charac- teristics, those who responded to the survey are among the most knowledge- able in the wool industry about how the industry functions and where it is headed.4 According to the survey respondents, the following are among the most important opportunities currently facing the U.S. wool industry: 4The following 10 people responded to a questionnaire on challenges and opportunities for the future of the wool industry: (1) Ronald L. Cole, USDA AMS Livestock & Grain Market News, Greely, CO; (2) Mike Corn, manager and co-owner, Roswell Wool, Roswell, NM; (3) Glen Fisher, wool warehouseman (Ret.) and industry leader, Sonora, TX; (4) Dr. Rodney Kott, extension sheep and wool specialist, Montana State University, Bozeman, MT; (5) Dr. Chris Lupton, wool research scientist, San Angelo Research and Extension Center, Texas A&M Uni- versity; (6) Tom McDonnel, McDonnel & Associates, Douglas, WY; (7) Ron Pope, manager, PMCI Wool Marketing, Mertzon, TX; (8) Larry Prager, Manager, Center of the Nation Wool, Belle Fouche, SD; (9) Dr. Robert Stobart, sheep and wool scientist, University of Wyoming,

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 THE U.S. WOOL INDUSTRY • International demand growth. Growth in the wool textile industries in China and other developing countries is also helping spur growth in income and purchasing power in these countries and a growing internal demand for wool apparel goods. International market development activi- ties could help widen the market for U.S. wool textiles in these growing markets. As incomes increase in these countries, the demand for apparel and other wool textiles could well outstrip their ability to both export and fill their growing internal demand. Market development activities could ef- fectively introduce a broader array of consumers in those markets to U.S. wool textiles through the efforts of the American Wool Trust with funding through the USDA Foreign Agriculture Service, along with the efforts of other groups to attract additional foreign buyers and provide technical as- sistance and training to U.S. wool producers, marketing organizations, and textile manufacturers. • Grower price premiums from improed wool clip preparation. Al- though the percentage of U.S. wool that is prepared for market according to international market standards has increased, a tremendous opportunity exists for producers to significantly enhance their returns to wool produc- tion by dedicating more time and effort to further preparing their wool. Research presented here suggests that producers can receive an 8 percent or higher price premium by table skirting and classing their wool, rather than marketing it as OB wool. Some reputation clips that have been using TSC for ≥ 5 years are receiving 25 percent or higher premiums for their wool. • New research deelopments. A number of new research develop- ments provide some promise of greater competitiveness and profitability in the wool industry, including the Kroy superwash process and enzyme research, which has produced machine-washable wool fabrics that are shrinkproof and more user friendly and can encapsulate wool with resins to develop breathable, waterproof, stain-repellant, machine-washable gar- ments for the U.S. military. Other promising research results include refined wool-carded battings for use as sound absorption in automobiles and new wool products for the U.S. military in collaboration with U.S. military re- search laboratories. • Retail wool adertising. Important opportunities may exist for ad- ditional advertising of wool at the retail level that emphasizes that wool is a natural product and renewable resource from sheep that can be used to enhance the environment through targeted or prescribed grazing practices to control invasive nonnative plant species. Other strengths of wool fabrics, such as their flame resistance and their use in blends to enhance synthetic fiber products, could be effective as well. • Niche market growth. Although not potentially as great as emerging Laramie, WY; and (10) Don Van Nostran, general manager, Mid States Wool Growers Coop- erative, Canal Winchester, OH.

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 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES ethnic lamb markets, specialty wools for hand spinners, yarn for weav- ers and knitters, and other wools such as naturally colored wools have a small but growing market. Emphasis in this market is on natural products with increasing interest in organically grown wools. Wool may be sold as individual fleeces, yarn, fabric, or finished products. Mini-mills, ranging in one-time capacity of 20 to 100 tonnes clean wool, with products from yarn to fabric or finished products such as sweaters, blankets, and other apparel goods, represent a growing new market for wool (see Chapter 7). The industry also faces many challenges for the future, among which are the following suggested by the survey respondents: • Re-inigorating the industry. The decline in sheep numbers over the last several decades has been accompanied by reductions in wool marketing entities and related infrastructure. The result has been fragmented selling systems, fewer domestic wool buyers, distance-to-market challenges for producers, reduced numbers of buyers, and greater concentration of the wool processing industry. If the industry is to avoid further downsizing and to achieve some growth, either new market opportunities will need to be found or effective means of enticing current consumers to purchase more lamb and wool (or some of both) will be necessary. • Easing the shortage of qualified sheep shearers and wool classers. A worldwide shortage of qualified sheep shearers is becoming a limiting factor for many producers wishing to implement or expand their sheep enterprises. Proper shearing and wool classing by trained professionals is critical to achieving maximum value from a wool fleece. The sharp decline in U.S. sheep numbers, however, has also drastically reduced the number of shearers and discouraged many from learning the trade. The industry has compensated over the years by bringing in qualified shearers from Austra- lia and elsewhere in their off-season to harvest the wool from U.S. sheep. However, this practice has become less common in recent years because of a growing shortage of shearers in those countries and the difficulty of obtain- ing the necessary work visas in a timely manner for foreign sheep shearers in the post-9/11 era. New requirements and delays in obtaining work visas for sheep shearers and H2A visas for sheep herders are a major challenge for producers and shearing crew operators. Australia and New Zealand have developed coordinated training and certification programs for shearers to improve or maintain the quality and value of the wool fiber harvested from their sheep. For example, AWI is spending about $13 million over 3 years to improve the training of shearers and develop better shearing technology in a bid to stop a massive shearer shortage in that country. While various shearer training programs are also available in this country, a major chal- lenge is enticing people to become wool harvesting professionals through

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 THE U.S. WOOL INDUSTRY enhanced promotion and training of sheep shearing and wool classing as occupations with financial support to trainees and producer hosts of training programs. • Encouraging growers to prepare their wool to international market standards. The income earned from wool by sheep producers currently ranges from < 5 percent to 30 percent of their gross income from sheep production. Although many progressive producers are committed to pro- ducing a quality wool clip, most generally view wool as a byproduct and are more committed to increasing lamb production since this is their major income source. Increasingly in the future, competing in international mar- kets and obtaining competitive prices for wool will require U.S. growers to produce, harvest, prepare, and market their wool to international standards. Encouraging growers in this direction is one of the primary educational chal- lenges for the industry leadership and organizations. Effective educational programs would emphasize the price determinant factors most critical to wool clip value and the ASI Code of Practices for Wool Clip Preparation. • Reducing the contamination from hair sheep breeds. As some grow- ers turn from wool breeds to hair breeds, a continuing challenge for the wool clip is contamination with hair, kemp, and colored fibers in the process of grading up from traditional breeds to hair sheep breeds through mating hair breed males to traditional wool breed females, which normally requires three to four generations (e.g., ½, ¾, etc.). • Increasing support for wool research and deelopment. As national sheep inventories have declined, research support for the industry has de- clined and focused increasingly on lamb rather than wool production and marketing. Additional research support is critically needed in a number of areas in the wool industry, including (1) genetic improvement of the range maternal breeds for increased production of both wool and lamb; (2) im- provements in marketing standards to enhance the competitiveness of U.S. wools with those of Australia and other major wool producing countries; (3) new wool product development to meet changing consumer needs and growing challenges from competing fibers; (4) collaboration with military research and product development programs; (5) the use of bioclip chemical defleecing as an alternative to shearing in the United States; and (6) research focusing on own-price, cross-price, and income elasticities for wool both domestically and internationally to support pricing, promotion, policy, and other strategic decision making in the industry. Demand analyses involving wool, cotton, and synthetic fibers are necessary at both the mill and retail levels. Survey respondents also suggested that several other issues will continue to challenge the future growth and development of the U.S. wool industry, including changing practices and regulations relative to public land sheep grazing permits, the impact of increasing private land market prices on sheep

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 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES production, and the decline in support for sheep research, education, and extension programs at the land-grant universities and federal agencies. REFERENCES Anderson, D. P., O. Capps, Jr., E. E. Davis, and S. D. Hager. 2007. Wool Price Differences by Preparation in the United States. Consumer and Product Research Report No. CP-02-07, Texas Agribusiness Market Research Center, Texas A&M University, College Station. June. ASI (American Sheep Industry Association). 2002. SID Sheep Production Handbook: Wool Chapter. Englewood, CO: American Sheep Industry Association. ASI. 2007a. Wool Marketing. Online at: http://www.sheepusa.org/index.phtml?page=site/ text&nav_id=b5cd92c158e527a90be72c1ce8be84a2. Accessed August 23, 2007. ASI. 2007b. China dominates U.S. wool export market. December 14 edition, weekly newslet- ter. Englewood, CO. Online at: http://www.sheepindustrynews.org. ASI. 2007c. American Wool Trust Annual Report to Congress. Englewood, CO: American Sheep Industry Association. ATMI (American Textile Manufacturers Institute). 2003. The China threat to world textile and apparel trade. Washington, DC. Online at: http://www.ncto.org/textilecrisis/china. pdf. Accessed August 23, 2007. Babula, R. A. 1996. An empirical examination of U.S. lamb-related import and domestic mar- ket relationships near the farmgate. J. Int. Food Agr. Marketing 8(2):65–82. Capps, Jr., O. and G. W. Williams. 2006. The Economic Effectiveness of the Cotton Checkoff Program. Commodity Market Research Report No. CM-02-06, Texas Agribusiness Mar- ket Research Center, Texas A&M University, College Station. November. Capps, Jr., O., D. A. Bessler, G. C. Davis, J. P. Nichols, C. G. Anderson, and E. G. Smith. 1997. Economic Evaluation of the Cotton Checkoff Program. Department Technical Report 97- 2, Department of Agricultural Economics, Texas A&M University, College Station. Clements, K. W., and Y. Lan. 2001. World fibers demand. J. Agric. Appl. Econ. 33:1–23. Dickerson, K. 1999. Textiles and Apparel in the Global Economy, Third Edition. Englewood Cliffs, NJ: Prentice-Hall. Donald, J. R., F. Lowenstein, and M. S. Simon. 1963. The Demand for Textiles in the United States. Technical Bulletin No. 1301, Economic Research Service, U.S. Department of Agriculture, Washington, DC. Dudley, G. E. 1974. U.S. Textiles Fiber Demand: Price Elasticities in Major End-user Markets. Technical Bulletin No. 1500, Economic Research Service, U.S. Department of Agriculture, Washington, DC. Hager, S. D. 2003. Determining price differences among different classes of wool from the United States and Australia. MS Thesis. Department of Agricultural Economics, Texas A&M University, College Station. December. Hyson, C. D. 1947. Maladjustments in the wool industry and need for new policy. J. Farm Econ. 29:425–456. Kott, R. 1997. Wool: What is it worth? Sheep Ind. J. 1:15. Lowenstein, F. 1952. Factors affecting the domestic mill consumption of cotton. Agric. Econ. Rev. 4:44–51. Lupton, C. J., F. A. Pfeiffer, and N. E. Blakeman. 1989. Optimizing the value of grease wool through preparation and marketing. SID Res. J. 5:1–20. Lupton, C. J., F. A. Pfeiffer, N. E. Blakeman, D. N. Ueckert, and J. E. Huston. 1992. Effects of skirting on yield, fineness, and value of wool from fine-wool range ewes. J. Anim. Sci. 70:2657–3664.

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 THE U.S. WOOL INDUSTRY Lupton, C. J., F. A. Pfeiffer, and N. E. Blakeman. 1993. Economic impact of pre-sale fiber measurements on prices paid for wool. Sheep Goat Res. J. 9:35–37. Lupton, C. J., F. A. Pfeiffer, and S. Byrns. 1996. Adding value to wool clips by fleece skirting and classing. Research Reports: Sheep and Goat, Wool and Mohair 57:51–52. MacDonald, S., and T. Vollrath. 2005. The Forces Shaping World Cotton Consumption after the Multifiber Arrangement. Report No. CWS-05c-01. Electronic Outlook Report. Eco- nomic Research Service. U.S. Department of Agriculture. Washington, DC. April. Online at: http://www.ers.usda.gov/publications/cws/apr05/cws05c01/cws05c01.pdf. Accessed August 22, 2007. Murray, B. C., R. H. Beach, W. J. White, C. Viator, N. Piggott, and M. Wohlgenant. 2001. An Economic Analysis of the Cotton Research and Promotion Program. Project No. 8024. Research Triangle Institute Intenational, Research Triangle Park, NC. National Wool Growers Association. 1965. Men, Sheep and 100 Years. The National Wool Grower: Special Publication. Salt Lake City, UT. NCTO (National Council of Textile Organizations). 2007. Trade and jobs. Online at: http:// www.ncto.org/tradejobs/. Accessed August 23, 2007. Pan, S., and S. Mohanty. 2005. Technical documentation of the world fiber model. Cotton Economics Research Institute, Department of Agricultural and Applied Economics. Texas Tech University. Lubbock. Pfeiffer, F. A., and C. J. Lupton. 1999. Results of skirting and classing on the value of wool from fine-wool range ewes. J. Anim. Sci. 77(Suppl. 1):245 (Abstr.). Shui, S., J. C. Beghin, and M. Wohlgenant. 1993. The impact of technical change, scale effects, and forward ordering on U.S. fiber demands. Am. J. Agric. Econ. 75:632–641. Stennis, E. A., M. Pinar, and A. J. Allen. 1983. The futures market and price discovery in the textile industry. Am. J. Agric. Econ. 65:308–310. USDA (U.S. Department of Agriculture). 1999. Economic Impact of the Elimination of the National Wool Act. Economic Research Service. Report prepared for the U.S. House of Representatives Committee on Appropriations, as requested in House report 105–588, page 16 (1998). Online at: http://www.ers.usda.gov/Briefing/Sheep/WoolActStudy.pdf. Accessed November 10, 2007. USDA. 2004. Wool and Mohair Marketing Assistance Loan and Loan Deficiency Payment Program. Program Fact Sheets. Farm Service Agency. Washington, DC., December. Online at: http://www.fsa.usda.gov/FSA/webapp?area=home&subject=prsu&topic=col-nl-wm. Accessed May 5, 2008. USDA. 2006. Cotton and Wool Situation and Outlook Yearbook. November. Economic Re- search Service. Washington, DC. USDA. 2007. Quick Stats. National Agricultural Statistics Service. Online at: http://www.nass. usda.gov/Data_and_Statistics/Quick_Stats/index.asp. Accessed August 8, 2007. USDC (U.S. Department of Commerce). 2007. Adjustment of import limits for certain cotton, wool, man-made fiber, silk blend and other vegetable fiber textiles and textile prod- ucts produced or manufactured in the People’s Republic of China. Committee for the Implementation of Textile Agreements, Office of Textiles and Apparel, Washington, DC, August. Online at: http://www.otexa.ita.doc.gov/fr2006/chin13(07-07).htm. Accessed May 5, 2008. Whipple, G. D., and D. J. Menkhaus. 1990. Welfare implications of the Wool Act. Western J. Agric. Econ. 15:33–44. Wilcox, C. 2007. Woolmark, Inc. report on the economic status of wool production, market- ing, manufacturing and consumer demand. Presented at the ASI annual meeting in San Antonio, TX, January. WOOLNEWS.net. 2007. Monthly Newsletter. January through June. Online at: http://www. woolnews.net.

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0 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES APPENDIX The Hedonic Wool Price Model The statistical model employed in the analysis is given by the following equation: log U.S. Clean Price it = α0 + α1January + α2February + α3March + α4April + α5May + α6June + α7July + α8August + α9October + α10November + α11December + α12YR1993 + α13YR1994 + α14YR1995 + α15YR1996 + α16YR1998 + α17YR1999 + α18YR2000 + α19YR2001 + α20YR2002 + α21WESTERN + α22EASTERN + α23log AFDit + α24log GWit + α25OU + α26TSC + α27WT MAINLINE + α28WTTENDERORSHORT LINE + α29WTBELLIES + α30WTPIECES + α31WTSTAINS + α32WTLOCKS + α33WTCLOTHING + α34WTMAINLINELAMB + α35WTMBMAINLINE + α36WTMBBELLIES + α37WTOBMBWHITEFACE + α38WTOBMBBLACK FACE + α39WTOBHAIRORCROSS BRED + α40WTOBWOOLBREEDLAMB + α41WTOBMEATBREEDLAMB + α42 WTOBBLACK + εi where the variables in the model include the following: January, February, etc. Seasonal dummy or indicator variables YRyyyy Dummy variables corresponding to year yyyy WESTERN, EASTERN Regional indicator variables BOU, TSC Level of preparation indicator variables AFD Average fiber diameter (microns) GW Grease weight of the lot (pounds) Wool-type indicator variables (wool breed (types from BOU and TSC), namely Main Line; Tender or Short Line; Bellies; Pieces; Stains; Locks; Clothing; and Main Line Lamb; Meat Breed, namely Main Line and Bellies; and Wool types from OB, namely Meat Breeds (White Face); Meat Breeds (Black Face); Hair or Cross Bred; Wool Bred Lamb; Meat Breed Lamb; and Black). The base year and month for the analysis were chosen to be 1997 and September, respectively. The Central region was chosen to be the base re- gion. The reference categories for level of preparation and wool type were Original Bag and Original Bag Wool Breeds. Original Bag corresponds to the lowest level of preparation and the Original Bag Wool Breed corresponds to the highest quality wool for the OB level of preparation. U.S. clean prices are hypothesized to be the highest in the third quarter

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 THE U.S. WOOL INDUSTRY of the year when wool supply is less abundant. The majority of the world wool production is clipped and sold during the first and fourth quarters of the year. A large proportion of U.S. wool is clipped in April and May. U.S. wool prices are expected to be higher in 1995 and 1997 relative to other years. Prices in the Eastern and Western regions of the United States are expected to be lower compared to prices in the Central region. Marketing outlets for wool in the Central region have been well established relative to those of other regions. Also, more uniform wool in terms of quality, style, and quantity generally is produced in the Central region relative to other regions. Importantly, BOU and TSC prepared wools are expected, a priori, to command a premium to OB wool. As well, BOU and TSC Main Line wool and BOU and TSC Tender or Short Line wool are expected to command a premium over wool types from OB. Further, average fiber diameter (AFD) is hypothesized to be inversely related to U.S. clean price. Finally, the lot size as measured by grease weight is expected to be positively related to U.S. clean price. The closer a lot is to a truckload, the less money buyers spend on transportation per kilogram. The model was used to examine price differences for U.S. wools by preparation and by type using data collected from warehouses and pool sales across the United States over the period 1993 to 2002. The goal was to determine premiums/discounts in wool prices by preparation and type, controlling for season, year, region, average fiber diameter, and lot size. The hedonic price model explains about 83 percent of the variation in U.S. wool prices (Table 5A-1). The estimated coefficients and their associated p- values are provided in Table 5A-1). The level of significance chosen for this analysis to conduct statistical tests is 0.01, given the rather sizeable sample of 8,533 observations. Given that the dependent variable is the logarithm of U.S. clean price, the interpretation of the estimated coefficients for each of the qualitative variables (season, year, region, level of preparation, and wool type) is in terms of percentage changes. To calculate the premium/dis- count or the percentage difference relative to the base or reference category for each of the qualitative variables, the transformation exp(> i-1)*100% can be used, where > i is the estimated coefficient associated with the ith indicator variable. Also, note that the U.S. clean price, AFD, and grease weight (GW) of the lot size are expressed in terms of logarithms. Consequently, the estimated coefficient of AFD and of GW in the hedonic price model represent elas- ticities, the percentage change in U.S. clean price due to a unit percentage change in AFD and GW, respectively. The model explained about 83 percent of the variation in U.S. wool prices over the study period. Seasonality in U.S. clean wool prices was evident. Wool prices received by producers from January to March as well

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 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES TABLE 5A-1 Estimated Coefficients and P-Values in the Hedonic Price Model Estimated Premium/Discount Coefficients Relative to Base P-value January –0.1913 –17.4 <0.001 Month February –0.0789 –7.6 <0.001 March –0.0608 –5.9 <0.001 April –0.0156 –1.5 0.212 May 0.0065 0.6 0.532 June 0.0779 8.1 <0.001 July 0.0039 0.5 0.756 August –0.0240 –2.4 0.081 September Base Base Base October –0.0624 –6.0 <0.001 November –0.1154 –10.9 <0.001 December –0.1267 –11.9 <0.001 1993 –0.4947 –39.0 <0.001 Year 1994 –0.1922 –17.5 <0.001 1995 0.1629 17.7 <0.001 1996 –0.1260 –11.8 <0.001 1997 Base Base Base 1998 –0.2702 –23.7 <0.001 1999 –0.7013 –50.4 <0.001 2000 –0.7379 –52.2 <0.001 2001 –0.6249 –46.5 <0.001 2002 –0.2921 –25.3 <0.001 Original Bag Base Base Base Leel of Bellies Out Untied 0.0209 2.1 0.270 Preparation Table Skirted Classed 0.0811 8.4 <0.001 Central Base Base Base Region Western –0.1036 –9.8 <0.001 Eastern –0.0823 –7.9 <0.001 Main Line 0.2114 23.5 <0.001 Wool Breed Tender/Short Line 0.0551 5.7 0.013 (Wool Types Bellies –0.2903 –25.2 <0.001 from BOU Pieces –0.4179 –34.2 <0.001 and TSC) Stains –0.6808 –49.4 <0.001 Locks –0.9894 –62.8 <0.001 Clothing 0.1986 22.0 <0.001 Main Line Lamb 0.1432 15.4 <0.001 Main Line 0.0394 4.0 0.174 Meat Breed Bellies –0.1288 –12.1 0.545 Wool Breed Base Base Base Wool Types Meat Breed (White Face) –0.2325 –20.7 <0.001 from OB Meat Breeds (Black Face) –0.3826 –31.8 <0.001 Hair or Cross Bred –0.3226 –27.6 <0.001 Wool Breed Lamb –0.1790 –16.4 <0.001 Meat Breed Lamb –0.6988 –50.3 <0.00l Black –1.1606 –68.7 <0.001 –1.4160 <0.001 Log of Aerage Fiber Diameter 0.0162 <0.001 Log of Grease Weight 4.8090 <0.001 Constant RP2 = 0.8303 P

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 THE U.S. WOOL INDUSTRY as from October to December were significantly lower from 5.9 percent to 17.4 percent than prices in September. Wool prices in June were roughly 8 percent higher than those of September. As expected, U.S. clean wool prices were highest in 1995 and 1997. Prices in remaining years from 1993 to 2002 were significantly lower, from 11.8 percent to 52.2 percent relative to the base year of 1997. Further, U.S. clean wool prices were discounted by 7.9 percent and 9.8 percent, respectively, in the Eastern and Western regions of the United States relative to the Central region. In line with prior research, prices of TSC wool were significantly higher than OB wool by slightly more than 8 percent. Significant differences among wool types also were evident. In particular, U.S. clean prices of TSC and BOU Main Line Wool were higher by 23.5 percent over the OB wool breed. Significant differences were noted as well among wool types from OB. Among wool types, the premiums/discounts relative to OB wool breed type were quite large in magnitude. U.S. clean wool prices were found to be highly sensitive to changes in AFD. The elasticity of the clean wool price with respect to AFD was estimated to be about –1.42. Lot size, as measured by GW, also positively affected U.S. clean prices. The elasticity of clean price with respect to lot size was estimated at 0.16.

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