The wool market may bring us a few pleasant surprises in 2019. (Photograph supplied by the NWGA)

Stockfarm recently spoke to the National Wool Growers’ Association (NWGA), BKB and OVK during the last quarter of 2018 to find out more about the state of the wool and mohair industry hot on the heels of the recent shearing season.

Leon de Beer, general manager at the NWGA, believes that carefully considered and targeted initiatives to promote wool worldwide, have been an important focus of the International Wool Textile Organisation (IWTO) for some time now.

This has led to the establishment of a market in which sophisticated consumers lay down certain requirements in respect of the products they buy. “Consumer preferences include, among others, that products are produced in a sustainable and socially responsible way, and that production methods and practices that promote and maintain animal wellbeing, are applied.”

Acceptable production practices

The South African wool industry took a firm stand by implementing acceptable production practices and developed a Code of Best Practices, the results of which meant that the South African clip can usually be differentiated from other clips in the international trade.

“The training of our sheep shearers meets the highest international standards, and the NWGA has been offering shearing courses accredited by the South African Qualifications Authority for decades,” says Leon.

Well-trained shearers ensure that the clip is shorn according to international sheep shearing standards. “More than 90% of the South African clip is exported and wool is one of the most important commodities earning foreign currency for the domestic market, with a value of more than R4,8 billion at the end of the 2017/18 season.

“More than 70% of the clip is exported to China, with additional wool exports to the Czech Republic, Italy and other important foreign destinations.

Unstable wool prices

“Wool prices traded at record levels over the previous seasons, despite the fact that prices varied, and even declined slightly, towards the end of 2018. This was mainly attributed to the Chinese economy, in which the growth rate dropped to 6,5%.

“According to the National Council of Wool Selling Brokers of Australia Inc, this is the lowest annual growth rate China has recorded since the global financial crisis a decade ago. This has led to reduced processing activities and investments in infrastructure, as well as lower consumer spending, which is currently putting pressure on the demand for wool.”

According to Chris Wilcox, executive director of the National Council of Wool Selling Brokers of Australia Inc, the decline in wool delivery from Australia due to drought conditions, may have a mitigating effect on the decrease in wool prices.

Leon also refers to the Cape Wools SA market indicator, which maintained levels above R210/kg in November 2018 – this made wool a farming commodity of choice, even in a market that experienced some pressure.

Decline in wool production

Isak Staats, general manager of wool and mohair at BKB, says the wool market was off to a roaring start early in 2018. “Wool prices were initially 15% higher than the closing auction and up to 26% higher than during the same period of the previous season. Unfortunately, prices fell approximately 12% and we had a very unusual situation in the last few months of 2018.

“Wool production in Australia had declined by around 11% by November 2018 and with the country’s ongoing drought, chances are good that production will decrease even more. On home soil, the drought is causing an overall over-production of fine wool, which is pushing the market down even further. It appears as though the trade war between America and China is suppressing consumers’ appetite for textile goods in both countries.

“Cotton and polyester prices also seem weaker, giving the impression of a high wool price when measured against other textiles. Buyers are always very cautious when buying in a declining market, because they don’t want to be caught with expensive stock.”

Prolonged droughts, which harm production even more, can cause serious damage to the mohair industry. (Photograph supplied by Pieter Jordaan)

Demand for mohair

According to Isak, November saw good price levels maintained by the mohair market, despite a stronger rand, with the average market indicator falling by only 1,1% to close on R289,03/kg. Although the average price of young and adult mohair has decreased slightly, the demand for kid mohair has remained firm with a marginal increase of 0,6% to close on R405,51.

Heinrich Victor, operational manager of fibre and shearing services at OVK, says the wool season kicked off on a positive note in the last quarter of 2018 and reached record highs at the first three auctions. “This applies mainly to the long fine-wool segment, in respect of which the market reached a record price – the Cape Wools Merino Indicator reached levels of R253,20/kg for clean wool.

“Predictions for the short and medium term are that the market will not see a marked decline, but will instead retain reasonably stable levels. This is due to a relatively open global wool pipeline and the fact that there are no wool surpluses. Global wool production is under severe pressure, also in South Africa.”

Drought and predation

The decline in Australian production is attributed to a severe drought in a large production area, as well as predation, which has a negative effect on the progeny in wool sheep herds.

Heinrich says Cape Wools and the NWGA received reports that predation has the same effect on herds in the South American wool-producing areas and that the lambing percentage is no more than 70%. “Wool production levels in South Africa are also much lower than the same time last year, and almost 14% less wool has been received in brokers’ warehouses, compared to the same period of the previous season.

“The ongoing drought is one of the main culprits. Lambing percentages are under severe pressure, which resulted in fewer lambs being born, and volumes being put under pressure.”

Trade with Lesotho

Heinrich says another major reason for the decline in production is legislation passed by the Lesotho government, preventing the country’s wool producers from sending fibre to South Africa to trade on the local market. Our neighbour’s wool production is around six million kilograms per year, usually traded through the South African auction system. Talks are currently underway with the government to reopen the border for trade between Lesotho and South Africa.

“Producers should also note that China is presently the world’s largest destination for raw wool with nearly 70% of the global volume, and that they are setting increasing requirements for sustainability.”

Heinrich refers to the fact that no wool from Rift Valley fever infected areas may be shipped to China. “It is therefore of the utmost importance that producers regularly immunise their herds. Precautions are a necessity, as is biosecurity in respect of diseases such as Rift Valley fever and anthrax.”

An exceptional season

Pierre van der Vyver, mohair manager at OVK, says the mohair winter auction season (July to December 2018) was exceptional. “With the unfair attack by People for the Ethical Treatment of Animals (PETA) in the media still fresh in our minds, there was great concern over the next winter season. However, pricewise and in rand terms it was the best winter season so far.”

By November last year, the OVK market indicator for mohair averaged R291,31/kg after the first five auctions. “This was a staggering 43,2% increase on the 2017 price and an incredible achievement,” says Pierre. “The second auction of the season had the greatest turnover and the highest average price for a mohair auction yet. At the OVK auction, Willem Wagenaar of Willowmore’s mohair fetched a world record price of R390,10/kg for adult mohair.”

Pierre also refers to the most destructive drought in living memory that has affected the mohair production area. “The drought of the past two years is taking its toll on production. While we expected a decline in production, dedicated producers and huge volumes of bought-in and donated feed ensured that this did not realise. However, these practices cannot be sustained any longer, and a decline of more than 8% in production compared to 2017, has already been recorded.” –Carin Venter, Stockfarm

For more information, contact Leon de Beer on 041 365 5030 or leon@nwga.co.za, Isak Staats on 082 495 0628 or isak.staats@bkb.co.za, Heinrich Victor on 041 406 7553 or heinrichv@ovk.co.za, and Pierre van der Vyver on 082 854 9120 or pvdvyver@cmw.co.za.