Demand for wool still outstrips supply

The continuing producer confidence in the future of quality wool was likely to further stimulate investment in wool sheep farming during 2015, according to Louis de Beer, CEO of Cape Wools.

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The South African clip has grown from a five-year low of 44 million kilograms to its current level of 50,5 million kilograms, with a 3,2% growth during the previous season despite it being described as a challenging year at best,” De Beer said. Despite the economic woes of 2014, during which organisations such as the International Monetary Fund projected sluggish growth, particularly in key emerging economies including China and India, the wool industry showed resilience, growing in value from R2,67 billion/annum to R2,96 billion/annum, an 11,2% increase.

“Firm wool prices combined with the depreciation of the rand should support higher returns for SA wool farmers in 2015,” De Beer said.

“Also expect increased profitability on-farm, as declines in feed grain prices will improve meat-to-feed ratios, supporting intensive livestock production, resulting in a positive spin-off for wool.”

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Global wool production had increased by 1,2%, to 1,14 million tons. SA and Australia produced apparel wool of comparable quality. SA production was increasing, but Australia’s was declining because of favourable meat prices and drought. During the 2014/2015 season, the Australian clip could shrink by another 13 million kilograms, to 328 million kilograms, after having already lost 24 million kilograms in 2013/2014, De Beer said.

SA producers should enjoy an increase in product demand soon, without the worry of a developing oversupply. Wool had become a niche, with 100% natural fibre making up less than 1,5% of global fibre consumption. “The interest in wool should continue to grow, as it is a unique fibre with unique properties, including thermal insulation, UV protection and the ability to take up moisture,” De Beer said.

“While Japan is showing a marked drop in demand for wool, India is expanding its processing capacity as is reflected in SA sales data. The Czech Republic and Italy combined take up 26% of SA’s production in value.

“In the short to medium term, Cape Wools expects these trends to continue, as wool processing follows areas of low labour costs.”