Mixed Outlook for South African Wool

Following the excellent South African wool season experienced in 2016/17, which was one of the best in decades in terms of price and production, producers and industry leaders are confident that wool will continue to perform well in 2017/18.

Anthony Kirsten, chairman of the South African Wool and Mohair Traders Association, explains that the market is expected to remain buoyant.

"South Africa has become entrenched as a reliable supplier of wool to China and the Czech Republic and as long as demand from these countries remains strong, I don't see prices for long wools coming down," he says.

Conditions in the processing industry, however, are tough. "At the current high price levels, it is extremely difficult to pass on price increases and remain competitive," he says. "We have to compete on what is not always a level playing field."

The effect of the challenges facing the processing industry is reflected in Cape Wools' statistics for 2016/17, which show a substantial decline in local early stage processing. Worst affected was the production of Merino scoureds – which was down 51% on the previous season. Carbonised production dropped by 6%, and wool top processing fell by 6%. The only increase recorded was in the production of noils – which was up 37%.

This trend confirms South Africa's position primarily as a greasy wool exporter, with 44,246.3 metric tonnes of greasy wool shipped in 2016/17, representing an 89% market share of the total value of the country's wool exports.

The main importers of South African greasy wool are China, the Czech Republic, Italy, India and Egypt. China took 75% of the greasy wool exports in 2016/17.

Guilleau du Toit, chairman of the National Woolgrowers Association of South Africa (NWGA), says the continuing drought in many wool producing areas remains a concern for the industry and may affect production this season.

"The record wool prices and current high meat prices are a saving grace for farmers in these areas, particularly in the grain producing areas where the income from grain has dropped dramatically," he says. "Sheep have had a stabilising effect on the agricultural sector because they render income both from wool and meat."

Du Toit's farm falls within a drought stricken region and he has first-hand experience of the effect of the drought on production. "I have just finished shearing and although wool quality was good, fleece weights were down by 700 kg per 1,000 ewes compared with the previous season," he says.

South Africa's shorn wool production for 2016/17 increased by 3.6% to 52.5 million kg – breaking through the 50 million kg level for the second time since 2013/14. Du Toit is convinced that producers will do their best to retain their sheep, but said that the lower fleece weights may affect overall production.

NWGA manager Leon de Beer confirms that wool producers are positive about the prospects for wool, but that they do face major challenges, such as the uncertain political environment and crime.

"Utterances by politicians and presidential hopefuls of possible land confiscation without compensation create a lot of uncertainty within the farming community," he says.

While accepting that crime occurred all over the world, he felt that the high unemployment and poverty levels in South Africa resulted in increased crime levels, with criminals not only stealing stock but also implements, vehicles, etc from farms.

De Beer nevertheless believes that the 2017/18 season will bring rewards for the wool industry.

Meanwhile, the latest figures show that the micron profile of the South African wool clip has changed little over the past few years, with the bulk of the clip still falling in the medium-fine category.

An analysis of the fibre diameter for the 2016/17 season shows that 57% of the clip tested fell in the 19-20.5-micron category.

A small percentage of wool (16%) tested finer than 19 microns, while only 5% was 23 microns and stronger.

The average fibre diameter for all wool sold (including other white wool breeds) was 20 microns, with Merino wool averaging 19.5 microns.

Mohair processing industry flourishes

While South Africa's early stage wool processing industry is under price pressure, the local mohair processing industry is flourishing.

"South Africa is the world's hub for mohair processing and 85% of mohair is exported in top form," says Deon Saayman, general manager of Mohair South Africa. "This includes mohair imported from overseas, including Texas, New Zealand, Argentina and Australia."

Mohair imports into South Africa in 2016 totalled 1.2 million kg. Local production came to 2.48 million kg but is expected to drop in 2017 as a result of the drought that has severely affected major mohair production areas.

The main importers of South African mohair are China and Italy. Italy has traditionally been the leading importer, but was surpassed by China in 2015. China imports mainly stronger mohair while Italy concentrates on the finer end of the market.

"China has become an important consumer market for mohair over the past three years as awareness about the fibre is increasing," says Saayman. "In the past, consumers were ill informed about mohair and many of the younger generation believed it was an artificial fibre."