Wool LDP program poised to lessen the sting of weak wool demand
The Wool Marketing Assistance Loan Deficiency Program was authorized in the 2002 farm bill and each farm bill since and may now provide some relief to wool growers feeling the sting of dwindling demand.
A decade ago, the wool market had strengthened enough worldwide to no longer require such a marketing program but, times have changed for wool demand. According to Peter Orwick, executive director of the American Sheep Industry Association, the loss of China as a primary export market caused weakness in wool prices and demand. About half of U.S. wool is used domestically, in part by the U.S. military. Exports account for about half of wool sales. With textile, garments, and apparel manufacturing nearly at a standstill in the wake of COVD concerns, wool is weak across the board.
“Because of weakness in wool prices, we have a lot of producers who have not sold, they’re still storing their wool,” he said. “Part of it, they can’t get bids for and if they do, it’s 20, 30, or 50 percent of what they’ve been getting the last couple of years. The wool market really has been strong up to this point.”
This marketing assistance loan program is designed, he said, to step in when a commodity program runs into a wreck and the wool market has run into a wreck. Currently, most of the interest in the program is from producers in the loan deficiency payment, a process that follows taking a marketing assistance loan. Producers may take and keep the loan proceeds for up to a year, during which time the wool may be sold to pay principal and interest or if it’s less, pay it according to the posted price from USDA.
The current loan deficiency payment (LDP) on raw wool is 30 cents per pound grease, which Orwick said is about as advantageous as producers are likely to see that provision become during the year. For producers who do not want to take the loan and pay it off later, they can sign paperwork at the Farm Service Agency forgoing the loan and the FSA would then pay the deficiency amount. The loan, he said, cuts through the amount of paperwork of placing a lien on the wool.
The local Farm Service Agency can advise producers about eligibility of unsold 2020 wool.
Lamb feeders, he said, have been unable to sell lamb’s wool out of the feedyards for about a full year, leaving them with a large amount in storage. One of the provisions in the farm bill added with lamb feeders in mind is a provision for an unshorn lamb payment for the LDP on the typical amount of wool on an unshorn lamb, currently at about $2.05 per lamb. Orwick said it could provide some relief to the lamb feeders so affected by drastically decreased food service demand. ❖
— Gabel is an assistant editor and reporter for The Fence Post. She can be reached at email@example.com or (970) 768-0024.