November 15, 2003
THE MILITARY AND AMERICAN WOOL
By Mitch Driggers, American Wool Council Consultant
Nov. 2003 -- As the leaves on the cherry trees along the Tidal Basin begin their annual change of colors, members of Congress return to Washington to hammer out the 13 appropriations bills needed for the country to operate another year.
Fortunately, the military has kept up its continual planning process, and as a result we have some news that affects domestic wool consumption:
1. The FY 2004 Defense Appropriations bill (PL 108-87) was signed into law on Sept. 30, 2003, by President Bush. Apparently, the additional $87 billion appropriation for Iraq, Afghanistan and the war on terror did not affect completion of this legislation.
2. The draft bills from the Senate and House call for military end strengths, including the Coast Guard, to remain constant for the coming year.
- Active Duty personnel will hold at 1,399,100.
- Reserve personnel will increase slightly to 863,330.
- Accessions for 2004 have not been announced. However, we can anticipate entry of new people in the military to remain constant at approximately 255,000 for the year.
3. The individual services released their recruit clothing bag costs for FY 2004 on Aug. 15, 2003.
- The average cost of issue clothing per recruit for FY 2004 is $1,006.00, virtually the same as last year.
- The average cost of wool and wool-blend items in each bag is $320.00, actually up $30 from last year due to some internal changes. So, the value of wool and wool-blend items issued to recruits for the coming year is $82 million.
- The scale of bag contents containing wool and wool-blend items ranges from 19 percent for Army men up to 56 percent for Marine Corps men.
- Overall, the military continues to rely heavily on domestic wool.
4. The Defense Supply Center Philadelphia (DSCP) released its Forecast to Industry on Aug. 10, 2003. Unlike recent years, this forecast covers only the first two quarters of FY 2004.
- This is not surprising as the U.S. Department of Defense was slow to release funds to DSCP for contracting last year and DSCP is most likely trying to be prepared if the trend continues into the new year.
- The following is the breakdown of forecast consumption through March 2004. All weights are for clean wool.
- Blankets for all kinds ? 742,000 lbs. (This is the hardest category to accurately forecast as it is driven by ?fall out? money each year.) This weight is clean, virgin, unrecycled wool.
- Knitted wool ? 231,080 lbs.
- Headwear ? 83,640 lbs.
- Woven wool and wool-blend fabrics ? 1,571,782 lbs.
- Total from all areas is 2,628,502 lbs. of clean wool for the first six months of FY 2004.
It should be another good year for domestic wool consumption by the U.S. military.
AUSTRALIAN STOCK EXCHANGE STARTS WOOL FUTURES TRADING
Nov. 2003 -- The Australian wool industry got a boost in mid September when the Australian Stock Exchange (ASX) started trading in wool futures contracts. The move provides the Australian wool industry with yet another wool marketing option as well as with tools for managing price risks and facilitating price discovery.
The ASX is trading 19.5, 21.0 and 22.6 micron China-type wool futures contracts.
ASX Managing Director Richard Humphry said the launch of the futures contract complements its grain futures contracts, which were launched in May.
?The grains futures contracts, along with index and property futures contracts trading on ASX Futures Exchange (ASXF), continue to go from strength to strength,? said Humphry in a Bharat Textile interview. ?The addition of wool futures is in line with our strategy of broadening our product range and offering innovative futures products.?
Andrew Thomas, managing director of wool exporter Michell Australia Pty. Ltd., said the wool futures contracts likely will develop into the international pricing benchmark for wool.
BIGGEST AUSTRALIAN WOOL BUYER TO SET UP SHOP IN CHINA
Nov. 2003 -- The Italian-based Schneider group, Australia?s biggest buyer of fine wool, will open a top-making mill in China in early 2004 to capitalize on China?s cheaper production costs.
?I don?t think any player in this industry can ignore China,? said Schneider?s Don Belgre in an Australian Broadcasting Corporation interview. ?We are actually going to increase our turnover as far as buying Australian greasy wool is concerned, so for the Australian wool grower that?s a positive.?
China currently purchases about 40 percent of Australia?s annual wool production. Belgre says Schneider plans on purchasing one-third more Australian wool
once the mill is up and running.
GEELONG WOOL PROCESSING PLANT CLOSES DOORS
Nov. 2003 -- The world?s second largest wool-processing company, Bremer Woll-Kammeral (BWK), on Oct. 1, 2003, announced the closure of its Geelong Wool Combing (GWC) mill at Corio, Geelong in Victoria, Australia.
The worsening downturn in the global wool industry and an unresolved industrial dispute were cited as reasons for closure.
The plant had been idle the last five months due to a dispute with the Victoria branch of the Textile, Clothing and Footwear Union at Australia involving the removal of weekend loading rates and employees? refusal to go from a seven-day to a five-day work week.
Jim Robinson, president of the Australian Wool Processors Council, commented that processing wool in Australia was becoming unviable.
?The dream of value-adding Australian wool was turning into a nightmare,? said Robinson.
SHORTAGE OF WOOL HAMPERING INDIA TEXTILE FIRM
Nov. 2003 -- Lack of wool is frustrating efforts to revive a textile firm in Eldoret, Kenya.
Indian company Rupa Textile Mills, formally known as Raymond Woolen Mills, needs a daily supply of 20,000 kgs of wool to operate at full throttle. According to Amu Shah, the factory?s engineering director, the eastern African mill currently is receiving only 500 kgs.
Cabinet ministers are calling on farmers to rear more sheep so that the factory can one day operate at full capacity. They are also encouraging farmers to improve their sheep breeding and form a cooperative society that could sell their wool to the factory.
Cabinet minister Njeru Ndwiga said the factory, which was once voted the best woolen mill in the world, should be given the necessary support so it can employ more people. The factory currently has 800 workers, but can employ up to 4,000 when operating at full capacity. If the mill becomes fully operational, it will be the biggest manufacturer of wool products in east and central Africa.
FABRIC GLUT, RISING DOLLAR WEAKEN WOOL DEMAND
Nov. 2003 -- A bottleneck of processed wool and fabric in China and a rise in Australian currency is dampening demand for greasy wool in Australia, reports the Australian Broadcasting Corporation.
The market slipped again in late September, with the Eastern Market Indicator falling 24 cents to 878 cents a kg clean. China is Australia?s biggest buyer of wool, securing $1.2 billion or nearly 40 percent of the clip annually.
?Processors of Chinese wool are reporting depressed demand for fabric from America and Europe,? reported John Roberts, BWK Elders Shanghai-based marketing manager. ?There has been a build up of stocks towards the fabric end of the chain, so you can say that the fabric is probably where China is holding the most stock at the moment.?