Wool and Mohair Price Support

Wool and Mohair Price Support

Order Code RS20896
Updated October 30, 2008
Wool and Mohair Price Support
Carol Canada
Technical Information Specialist
Knowledge Services Group
Summary
Price support for wool and mohair first became mandatory through legislation
enacted in 1947 and in 1949. The National Wool Act of 1954 (P.L. 83-690) established
direct payments for wool and mohair producers. The act’s stated purpose was to
encourage production of wool because it was considered an essential and strategic
commodity. No similar purpose was stated for the mohair program. Subsequent
legislation extended the wool and mohair support programs several times, until a
provision in P.L. 103-130 required a phase out, ending with the 1995 marketing year.1
Subsequently, assistance was provided on an ad hoc basis for marketing years 1999 and
2000. Wool and mohair were not funded during marketing year 2001. The 2002 farm
bill (P.L. 107-171, the Farm Security and Rural Investment Act of 2002) authorized
marketing assistance loans and loan deficiency payments for wool and mohair producers
for crop years 2002-2007. Most recently, the 2008 farm bill (P.L. 110-246, the Food,
Conservation, and Energy Act of 2008) re-authorized marketing assistance loans and
loan deficiency payments for wool and mohair producers for crop years 2008-2012.
Support Program History
The Agricultural Adjustment Act of 1938 authorized a non-mandatory price support
loan program for wool and mohair. In 1947, price support became mandatory for wool,
followed by mohair in 1949.
The National Wool Act of 1954 (P.L. 54-609) provided wool and mohair support
authority funded through the United States Department of Agriculture’s (USDA's)
Commodity Credit Corporation (CCC) from 1955 through 1959. Subsequent legislation
extended the authority. The support program offered direct payments for wool and
mohair, but differed from other commodity programs because incentive payments were
higher for producers who received higher market prices. This was supposed to encourage
the production of higher quality wool and mohair. The program also provided payments
1 A marketing year is the year in which a crop is marketed and usually begins with harvest. The
wool and mohair marketing year is January 1-December 31.

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for unshorn lambs equal to payments received from shorn lambs. The Secretary of
Agriculture had discretion to set the support price for shorn wool. While the act linked
wool and mohair support spending to 70% of tariffs collected on imported wool and other
textile products, these tariffs did not directly finance the program.2
Amendments to the National Wool Act (P.L. 103-130, November 1, 1993) reduced
wool and mohair producers subsidies for 1994 and 1995, and made the 1995 crops the last
to be supported under the act.
The FY1999 Omnibus Consolidated and Emergency Supplemental Appropriations
Act (P.L. 105-277, Section 1126) authorized interest free recourse loans for mohair
produced during or before FY1999. Recourse loans provide producers with interim
financing to assist them in marketing their crop in an orderly manner and must be repaid
within a certain term. Producers could borrow $2 for each pound of mohair placed under
loan.
The FY2000 USDA Appropriations Act (P.L. 106-78, Section 801) authorized a
recourse loan program for mohair produced during or before FY2000. The loan rate was
again $2 per pound and the interest rate was equal to 1% over the CCC interest rate.
The Agricultural Risk Protection Act of 2000 (P.L. 106-224, Section 204) authorized
direct payments to wool and mohair producers through the CCC for the 1999 marketing
year. Wool producers received 20¢ per pound and mohair producers received 40¢ per
pound.
The FY2001 USDA Appropriations Act (P.L. 106-387, Section 814) authorized loan
deficiency payments of 40¢ per pound to both wool and mohair producers for the 2000
marketing year. Total CCC payments were not to exceed $20 million.
The Crop Year 2001 Agricultural Economic Assistance Act (P.L. 107-25, Section
5) authorized direct payments through the CCC for wool and mohair producers who
received prior payments under Section 814 of P.L. 106-387 for the 2000 marketing year.
The Secretary determined the payment rate and total CCC payments were not to exceed
$16.9 million.
The Farm Security and Rural Investment Act of 2002 (P.L. 107-171, subtitle B)
authorized nonrecourse marketing assistance loans and loan deficiency payments for crop
years 2002-2007 for wool and mohair producers.
Current Program Provisions
The 2008 farm bill (P.L. 110-246, Title I, subtitle B) provides wool and mohair
producers with nine-month nonrecourse marketing assistance loans and loan deficiency
2 Collected tariffs went to the U.S. Treasury, then the CCC borrowed funds from the Treasury
for the wool program. Each year Congress appropriated funds to reimburse the CCC, then the
CCC reimbursed the U.S. Treasury for the funds it borrowed the preceding year. Whenever the
program cost exceeded 70% of the tariffs, it was carried over to the next fiscal year.

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payments for crop years 2008-2012.3 Producers who obtain nonrecourse loans pledge
their crop as collateral and can forfeit their crop in full payment of the loan. The loan rate
is $1.00 per pound for graded wool, 40¢ per pound for nongraded wool, and $4.20 per
pound for mohair for crop years 2008 and 2009. The loan rate for graded wool increases
to $1.15 per pound for crop years 2010-2012. USDA determines the loan repayment rate
based on either the lesser of the loan rate plus interest, or a rate that will limit loan
forfeitures, stock accumulation, and storage costs, and will allow competitive marketing
of the commodity.4 Producers who agree not to take out a loan can receive loan
deficiency payments instead. The loan deficiency payment rate is the difference between
the loan rate and the repayment rate.
Industry Profile
Wool
Production and Imports. In 2007, shorn wool production amounted to 34.5
million pounds (from 4.7 million sheep and lambs) with a market value of $30.3 million
dollars. Shorn wool (greasy wool) is cleaned and the natural oils removed to yield clean
raw wool. Sheep producers are influenced by both the price of meat (lamb and mutton5)
and wool. Producers sell
lamb and mutton when meat
Figure 1. U.S. Wool Production, Imports, and
prices are high therefore
Total Supply, 1950-2007
reducing the size of their
i n v e n t o r y . H o w e v e r ,
producers sell wool when
wool prices are high
increasing the size of their
inventory. Some of the issues
involved in sheep production
include predator losses, hired
labor costs, labor shortages,
the cost of treating sheep for
hoof and skin problems, and
competition with cattle
producers for grazing land,
labor, water, and marketing
and transportation facilities.
As shown in Figure 1,
clean raw wool production stayed near 120 million pounds until the late 1960s, afterward
3 See CRS Report RL34594, Farm Commodity Programs in the 2008 Farm Bill, by Jim Monke
for information on marketing assistance loans and loan deficiency payments.
4 As of September 2008, according to USDA, Commodity Credit Corporation (CCC) estimated
net outlays for wool and mohair together are $7 million in both FY2008 and FY2009.
5 Meat is called lamb if sheep are slaughtered between 8-14 months of age and mutton if it is
slaughtered after 14 months of age.

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trending downward to 18.2 million pounds in 2007, its lowest point. Wool imports
totaled 14.3 million pounds in 2007. Imports long have been the primary source of wool
for U.S. carpet and textile manufacturers. The major suppliers of wool to the United
States are Australia, New Zealand, and the United Kingdom. Wool exports historically
have been much smaller than imports--less than 10 million pounds annually. In 2003,
wool exports rose above 10 million pounds to 11 million pounds. In 2007, wool exports
increased to 17.1 million pounds, in part, because of increased global demand for wool.
Wool and Lamb Production Legislation. In 1999, the U.S. International Trade
Commission (USITC) (15 CFR 2014) ruled in favor of the United States in a section 2016
trade case on lamb meat. The case stated that increased imports of lamb meat from
Australia and New Zealand caused the threat of injury to U.S. producers. In light of the
USITC’s ruling, the Clinton Administration, established tariff-rate quotas (TRQs) and
increased duties on imports of fresh, frozen, and chilled lamb meat. In 2001, the Bush
Administration ended the TRQs on lamb meat imports to settle a World Trade
Organization (WTO) dispute Australia and New Zealand brought against the United
States.
In 2000, the Lamb Meat Adjustment Assistance Program, a four year program, was
established to provide direct payments to lamb producers to help stabilize the U.S. lamb
market. In 2001, the Ewe Lamb Replacement and Retention Payment Program was
established to provide direct payments to producers to replace and retain ewe lamb
breeding stock. Both programs were implemented administratively by USDA under
Section 32 of the Agricultural Adjustment Act Amendment of 1935 (P.L. 74-320), as
amended.
P.L. 106-200, the Trade and Development Act of 2000, authorized the Wool
Research, Development, and Promotion Trust Fund. The Trust’s purpose was to assist
wool producers to improve wool production, disseminate information on improvements
to wool production, and to help them develop and promote the wool market. This Trust
is funded by the Treasury from duties on articles under chapters 51 and 52 of the
Harmonized Tariff Schedule. A sunset provision in P.L. 106-200 abolished the Trust in
2004, but subsequent legislation has extended the Trust. Most recently, Section 325 of
the Emergency Economic Stabilization Act of 2008 (P.L 110-343) extended it to 2015.

Wool Prices. The average price of shorn wool increased from $0.68 per pound in
2006 to $0.88 per pound in 2007. From 1954 until the 1970s, the average market price
of wool remained stable at around $0.50 per pound and the national average federal
program payment rate for wool remained near $0.20 per pound, so wool producers
received revenue of approximately $0.70 per pound. From 1982 to 1986 and 1990 to
1995, the average payment rate greatly exceeded the average market price of wool. The
6 Under section 201 of the Trade Act of 1974, domestic industries seriously injured or threatened
with serious injury by increased imports may petition the U.S. International Trade Commission
(USITC) for import relief. The USITC determines whether an article is being imported in such
increased quantities that it is a substantial cause of serious injury, or threat thereof, to the U.S.
industry producing an article like or directly competitive with the imported article. If the
Commission makes an affirmative determination, it recommends to the President relief that
would prevent or remedy the injury and facilitate industry adjustment to import competition. The
President makes the final decision whether to provide relief and the amount of relief.

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wool (and mohair) program temporarily ended after the 1995 crop (by mandate of P.L.
103-30). Support was restored for marketing years 1999 and 2000. For marketing year
1999, Section 204 of the Agricultural Risk Protection Act of 2000 (P.L. 106-224),
directed that payments of $0.20 per pound be made to producers, and for marketing year
2000, Section 814 of P.L. 106-387, directed payments of $0.40 per pound (compared to
the historically low average market prices of $0.38 and $0.33 per pound respectively).
There was no funding for the 2001 marketing year. For crop years 2002-2007, the Farm
Security and Rural Investment Act (2002 farm bill) defined the payment rate as the
difference between the loan rate and the repayment rate. The 2008 farm bill continues
this definition for crop years 2008-2012.
Farm Structure. According to the 2002 Census of Agriculture, there were 46,255
farms with sheep and lambs used for wool production. There are two types of wool:
territory and fleece. Territory wool is used to make better quality apparel and is produced
in “territory wool states,” which include Texas, South Dakota, the Rocky Mountains, and
the Pacific Coast states. The flock size for territory production typically ranges from 150
to 400 sheep, although some producers may have several thousand sheep. According to
USDA, approximately 70% of all U.S. sheep are located in “territory wool states.” Fleece
wool is used to make coats, blankets, and sweaters. It is produced in “fleece wool states,”
which include Virginia, West Virginia, Pennsylvania, states north of the Ohio River, and
the Great Plains area. The flock size for fleece production ranges from 20 to 50 sheep and
typically is only a small part of a farm that may also raise cattle, hogs, and field crops.
The demand for wool is affected by fashion, relative fiber prices, price variability,
and the economy. Consumer acceptance of manmade fibers began in the mid 1950s.
Manmade fibers, which are sometimes mixed with wool, are fashionable and offer
conveniences such as drip-dry washing, no shrinking, and no moth damage. The U.S.
textile industry started using noncellulosic manmade fibers (such as nylon, polyester, and
acrylic) because of its relative price stability and durability. U.S. sheep and lamb prices
and foreign supply and demand cause price variability because the United States has a
small share of the wool market and textile mills import over half of the wool they use.
Manmade fiber production has minimal price variability and does not depend on
biological lags and annual shearings. Also, the quality does not vary, and since it is
manufactured domestically, foreign supply and demand have little effect on U.S. prices.
Mohair
Production and Exports. In 2007, 1.1 million pounds of mohair with a value of
$4.3 million dollars was clipped from 185,000 Angora goats and kids. Mohair production
was 1.4 million pounds in 2006, an increase from 1.3 million pounds in 2005. According
to the 2002 Census of Agriculture, there were 2,434 farms with mohair sales. The three
major mohair-producing states in 2007, accounting for 90% of production, were Texas
(79%), Arizona (7%), and New Mexico (4%). As shown in Figure 2, mohair production
rose sharply in the 1950s then peaked at 32.4 million pounds in 1965.
Mohair exports were 0.91 million pounds in 2007, a decrease from 1.3 million
pounds in 2006. Over the past 25 years, about 75% of U.S. mohair production was
exported. The United Kingdom, the world’s major importer of raw mohair, processes
mohair and then re-exports it. In 1972, 1975, 1999, 2000, and 2002-2005, U.S. mohair
export demands exceeded production and inventory stocks were drawn down to meet

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demand. Since most mohair is exported, domestic use depends on available supply,
mohair prices, and fashion. The United States and South Africa have historically been
major mohair producers and exporters.
Figure 2. Mohair Production and Exports, 1950-2007
Source: Economic Research Service, U.S. Department of Agriculture.
*1950-1954 and 1971-1987 data are from Texas only. 1955-1970 data are from Arizona, New Mexico,
Missouri, California, Oregon, Utah, and Texas. 1988-1994 data are from Texas, Arizona, New Mexico,
Michigan, and Oklahoma. 1995 to 2003 data are from Arizona, New Mexico, and Texas. 2004-2007 data
are the U.S. total.
Mohair Prices. In 2007, the average market price of mohair increased to $3.78 per
pound from $3.70 per pound in 2006. From 1955 until the mid 1960s, the average market
price of mohair remained near $0.75 per pound. In the mid 1960s the average market
price of mohair dropped to nearly $0.45 per pound. The national average payment rate
under the federal support program remained near $0.30 per pound, which kept total
revenue received by producers at approximately $0.75 per pound. Both the average
market price and the national average payment rate then became variable from year-to-
year. During the 1980s, the mohair national average payment rate exceeded the market
price, so the average payment rate remained near $2.50 per pound which raised total
revenue received by producers to approximately $5.00 per pound. Along with wool, the
mohair program was temporarily ended with the 1995 crop (by amendments to the
National Wool Act, P.L. 103-130). However, subsequent legislation (the Agricultural
Risk Protection Act of 2000, P.L. 106-224, Section 204 and the FY2001 USDA
Appropriations Act, P.L. 106-387, Section 814) was adopted that mandated mohair
payments of $0.40 per pound in marketing years 1999 and 2000. There were no mohair
payments in 2001. Under the 2002 farm bill, the payment rate for crop years 2002-2007
was the difference between the loan rate and the repayment rate. The 2008 farm bill
continued this formula for 2008-2012.