Weak rand, superb clip boost SA wool industry

A wool farmers are benefiting from high international wool prices and a weak rand. But it’s not just the exchange rate that’s in their favour, it’s the top quality of their clip and the fact that local wool is produced in an environmentally friendly manner. Annelie Coleman asked National Wool Growers’ Association chairperson, Harry Prinsloo, why SA wool was so sought-after.

Weak rand, superb clip boost SA wool industry
Harry Prinsloo
Photo: FW Archive

What sets SA wool apart internationally?
South Africa has developed an excellent reputation over many decades for top quality wool that’s well-classed, not contaminated with foreign materials and fibres, and is produced in an environmentally friendly way. Sheep welfare is a high priority on our farms and is strongly supported by a Code of Best Practice developed by the industry for the industry. For example, wool in South Africa is produced from sheep that are not mulesed – a surgical procedure that prevents flystrike. SA sheep are plain-bodied, resulting from decades of selection and breeding.

 

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Wool prices have spiked considerably recently. Why?
The increase in prices is a result of various market forces. The weaker rand against the currencies of trading partners has supported price increases over the past season, as wool produced in South Africa is generally exported. The EU and USA are the most important consumer markets for wool and the recovery of these economies has supported the demand for wool. This has affected the countries where wool is processed – China, Czech Republic, India, Italy and Egypt, South Africa’s main export destinations. The higher demand has consequently supported higher prices.

Under which brand is SA wool marketed and how is it received in international markets?
Wool is mostly marketed generically. Certain markets, however, demand wool that is produced from non-mulesed sheep and South Africa then supplies the client with a certificate of proof. The country of origin is not an important issue. More than 90% of the SA clip is exported to China, the Czech Republic, India, Italy and Egypt, which process the wool for the apparel market in general.

What are our main international competitors?
South Africa’s main competitor is Australia, which is the world’s biggest wool-producing country. SA wool quality competes with the best there is. Australia and China each produce 19% of total world output (IWTO statistics for 2010), compared with South Africa, which produces only 2%. This is the reason that SA wool prices generally follow Australian market prices.

What are our main challenges and opportunities in the international sphere?
Biosecurity is the biggest threat to our wool exports. This was recently demonstrated by the outbreaks of Foot and Mouth Disease (FMD) and Rift Valley fever (RVF). South Africa’s wool is extremely well-positioned in the international market, as our competitive edge lies in the fact that our wool is produced from sheep that are not mulesed and we have a code of best practice as a cornerstone of production.

What is the situation pertaining to the local wool processing and manufacturing industry?
Unfortunately, South Africa is experiencing difficulty in competing internationally to process wool. Our main competitors are China, India and the EU. Existing plants in South Africa struggle to survive and currently run at only about 30% capacity. The regaining of our FMD-free status opens up the world market once more to SA wool. Equal playing fields as well as our image as an export country are important. The industry – producers, buyers and wool marketing institutions – had to go to great lengths to convince our international clients that SA wool is produced where FMD outbreaks have not occurred. FMD outbreaks remain a constant threat to the industry and the export of greasy wool.

What is your opinion on the general animal health status in South Africa and its impact on your industry?
The general health status and biosecurity in South Africa depends strongly on each and every livestock producer, as well as on the good co-operation of the industry with the Veterinary Services of the Department of Agriculture, Forestry and Fisheries. The fact that South Africa regained its FMD- free status supports the fact that sound biosecurity measures are still achievable through co-operation. The AHF (Animal Health Forum) is the vehicle for livestock producers to seek co-operation and ensure that our voice is being heard.

If you were the minister of agriculture, what would you do or change in order to retain and increase the SA wool production industry’s competitive edge?
There is huge potential to increase wool production in South Africa. The first important area where wool production could be improved and production increased lies with the emerging and communal farming sector. The National Wool Growers’ Association (NWGA) is extensively involved with this and has a proud history of success in this regard since 1997.

On the commercial level, wool sheep could be reintroduced into crop production areas as a supportive enterprise, as well as into certain irrigation areas such as North West. Two factors, predation and stock theft, make it impossible to farm with sheep in certain areas, but these issues are in our hands and can be overcome. We should never forget, though, that price remains the driving force.

What are the best- and worst-case scenarios for the industry over the next 10 years?
Predation and biosecurity remain major threats, together with stock theft and natural disasters such as droughts, fire and floods. If all these are managed properly (and this is possible), the international market is open to the SA industry and its international partners. There is also a strong movement back to natural fibres and South Africa, with the IWTO, is a major international role-player. Wool as a commodity has been creating wealth and helping to develop economies all over the world since 6 000 BC. There is no reason it cannot continue to do so!

Phone Harry Prinsloo on 0082 771 1103 or email [email protected].

This article was originally published in the 23 May 2014 issue of Farmer’s Weekly.