Increases in the Price of Wool and How it Affects the Knitting Market

Increases in the Price of Wool and How it Affects the Knitting Market

You may not have realized it yet, but wool prices are on the rise. According to a February 2018 article in the Wall Street Journal, “In Australia, which produces the bulk of merino wool used by major clothing brands, benchmark wool prices were recently around $14 per kilogram in U.S. dollar terms, up 56% from 2016.” Since wool is such a popular material in the knitting and crafting industry, these businesses are bound to be the most impacted by the increase as well. But rising wool prices will affect businesses outside of the craft world, too, influencing more than just your bottom line.   

Why are Wool Prices Increasing?

There are several factors contributing to the current rise in wool prices, which we will break down into three main categories:

  • An increased demand while supply remains virtually unchanged.
  • Changes in consumer habits.
  • Increased tariffs and taxation.

In this post, we’ll take a look at each underlying cause to give you a better understanding. We’ll also examine how your own business could be affected, and what you can do to minimize the impact on your bottom line.

Supply & Demand

The basic economic concept of supply & demand is at the heart of this issue: while the wool supply has essentially stayed the same or decreased over the years while at the same time,  overall demand has drastically grown.

This is partially due to a variety of manufacturers finding new uses wool in their products – for example, the trend towards adding wool to athletic shoes. Additionally, many affluent countries such as China have increased their consumption of wool to manufacture athleisure apparel and other styles that are surging in popularity. Traditionally, China has had a shortage of wool supplies and relies on importing the material from countries like Australia and the United States that have a more plentiful supply.  

Another factor is that supply is actually decreasing some. Prolonged drought conditions in Australia and Africa are causing ranchers to cull their herds to adequately feed those animals they keep. Even if drought conditions improve, it will take ranchers time to increase herds to pre-drought levels.

Changing Consumer Habits

In recent years, many manufacturers and brands have been educating consumers about the benefits of wool in their products. For example, outerwear brand Patagonia highlights the breathability and moisture-wicking properties of the merino wool used in their Baselayer line. Specific to the craft industry, there’s been a noticeable shift towards natural yarns and fibers that are sustainably produced, with many crafters exploring breed-specific wools which are often purchased directly from the producers themselves.

Raising flocks of sheep to produce high-quality wool takes time, and companies who wish to use wool in their products must cultivate relationships with trusted suppliers. Compared to the manufacturing of synthetic fibers, the use of wool fibers in any product requires a bigger investment of time and money. For some, the extra effort to do so simply can’t live up to the bottom line of investing in machinery for making man-made fibers.

Tariffs & Taxation

The United States exports a significant amount of wool to China, and the textile is currently listed on the top tier of commodities that are subject to a 25 percent tariff. Since China is the largest export recipient of American wool, the industry will likely be hit hard by this tariff. Wools and yarns most affected by this tariff include:

  • Greasy shorn wool, not carded or combed.
  • Noiles of wool, not garnetted stock.
  • Yarn of carded wool.
  • Yarn of combed wool.
  • Yarn for retail.
  • Yarn and other fibers mixed with wool.

With high tariffs set to impact most wool products that are exported to China, purveyors of the textile and its products are caught in the political crosshairs. Manufacturers will start to feel the pinch as they see operational costs increase while their bottom line decreases.

How Will This Affect Crafty Businesses?

With so much emphasis on wool in the knitting industry, manufacturers, retailers and consumers alike will soon start to feel the impact. As the fashion and textile industry demands more and more wool for their products, shortages of wool may lead to an inability to meet consumer demand and more price increases within the knitting and craft industry. Businesses that rely on China for inexpensive processing will most likely be forced to raise their prices rather than absorb the costs of tariffs and taxation.

It’s not all doom and gloom, however – this may be a golden opportunity for those who are willing to rethink their business and products and make changes to offset rising wool costs.

For example, while China provides affordable wool processing, many knitters have concerns about the labor and manufacturing processes involved in overseas yarn production. The trend towards sustainable, traceable and domestically-made yarns and fibers suggests that working with domestic growers and mills could be worth considering.

Additionally, exploring the many other natural non-wool fibers available on the market and combining small amounts of wool with these fibers (or not using any wool at all!) could result in some interesting products which otherwise might never cross your mind. Necessity is the mother of invention, after all.

We interviewed Babs Ausherman, founder of Miss Babs Hand-Dyed Yarns to see what she had to say about changing market conditions. “We are in a confusing economy. Making decisions to raise prices is difficult because the unknown is how customers will respond to a pricier item that is already paid out for out of disposable income. We know that more people are employed, but are there incomes going up? If incomes are going up and their employment feels more stable, they may actually decide to spend money on different kinds of things than yarn, like a new car or similar pricier items. These are among the questions I have been thinking about recently. But it is also important to make sure that we continue to cover costs. If we don’t, we will not be in business.”

If you have a wool-based craft business and would like to learn more about this important issue Stitchcraft Marketing is here to help. Contact us today and we’ll help you implement plans to prepare for rising wool costs!

Leanne Pressly
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