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SA wool output to rise from century low as price jumps

Aug 24 2017 11:57
Ana Monteiro, Bloomberg

Johannesburg - Wool output in South Africa may surge about 50% from the lowest in a century as local prices climbed amid global supply that’s at a 70-year low, the head of the main industry body said.

Production by South Africa, as well as the neighbouring countries of Namibia and Lesotho, could climb to 75 million kilograms in the next three years as consumers’ demand for apparel made from the fiber increases, Cape Wools CEO Louis de Beer said.

“There is a market gap,” De Beer, whose company represents groups involved in producing, trading and processing wool, said on Tuesday. It “presents an unbelievable opportunity to increase South Africa’s export earnings.”

Prices surged at the first auction of the season on August 16, with the Cape Wools Merino Indicator climbing 20% to R183.50 a kilogram, boosted by demand from buyers in China, India and the Czech Republic, the association said. It eased to R180.92 at Wednesday’s sale, but is still higher than any since at least the 2007 season and is above the average of every year since 1971.

Farming output contracted for eight consecutive quarters until the end of 2016 due to a 2015 drought that was the worst since records started more than a century earlier.

Output decline

After peaking at 148 million kilograms in 1966, southern African wool production has declined to about a third of that annually as the popularity of cheaper synthetic fibers climbed and as Australia, which supplies more than three-quarters of the fiber used in clothing, sold off stockpiles.

Production in southern Africa rose 5.3% to 52.2 million kilograms in the 2017 season that ended in June, data on the Cape Wools website show. Of that, 45.9 million kilograms came from South Africa. The province with the biggest production is the Eastern Cape, responsible for about 30% of output.

Producing a further 25 million kilograms could add about R2bn to the gross domestic product, using an average price of R80 a kilogram, De Beer said.

The country has about 15 million merino sheep, with Cape Wools estimating there are as many as 9 000 commercial producers and 50 000 small-scale farmers. About 35% of production comes from the impoverished Eastern Cape province, De Beer said.

Cape Wools is in talks with the government about providing more support to new farmers in the country with an unemployment rate of 28% and where the slow pace of transfer of land to black people following the end of white-minority rule in 1994 is a politically contentious issue. Most of the nation’s profitable farms are still white-owned.

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