Wool              

Areas of production

Wool is produced throughout South Africa, but the main production areas are the drier regions of the country. On a provincial basis, the Eastern Cape is the largest wool-producing region, producing 25,1% of the national clip, followed by the Free State (24,1%), Western Cape (19,9%), Northern Cape (12,5%) and Mpumalanga (7,7%).

Production

Australia remains the largest supplier of apparel wool to the world textile market, with an estimated production of 626 million kg (greasy) in 1999/2000. South Africa, like Australia, produces mainly apparel wool, while the bulk of the production of the other major producers like New Zealand and Argentina is coarse wool, used for the production of carpets and blankets. Wool’s main competitors are manmade fibres such as polyester, nylon and acrylic.

Global wool supply is expected to be flat (elastic) in 1999/2000. However, supply is forecast to lift slowly in 2000/01 and 2001/02 as sales from Australia’s stock and production start to respond to a modest rise in wool prices. Global wool sheep numbers are expected to be 1 041 million head, 12% below the peak of 1990.

Compared to the previous year, the international market for greasy wool was considerably stronger during 1999/2000 due to the substantial improvement in the world economy and the resultant improved conditions in the key markets for wool. Demand from Asia, in particular South Korea, China and Taiwan, also improved substantially. As a result, the market improved and the South African market indicator closed the season at its highest level in three years.

Unfortunately production in South Africa dropped by 8,3% to 49,8 million kg from 54,3 million kg in 1999/ 2000, mainly due to the drought experienced in many production areas during the first half of the season. Production in South Africa has been on the decline for several seasons, mainly as a result of droughts, stock theft, vermin, perceived poor returns and a swing to mutton production and game farming. Total production dropped by some 19% from 1995/96 to 1998/99.

During the past 5 years, trends in production by class were as follows:

Class

1995/96

1996/97

1997/98

Million kg

1998/99

1999/2000

Merino

Other white wool

Lesotho, Ciskei and Transkei

Coarse and Coloured

Dead wool and other

45,1

6,6

3,4

2,0

4,7

42,9

5,7

2,7

1,4

0,7

39,7

5,2

2,8

1,5

1,3

39,3

5,7

2,8

1,6

4,7

34,9

5,5

2,7

1,6

4,5

Total

61,6

55,7

50,5

54,1

49,4

 

Prices

In excess of 90% of all greasy wool sold in South Africa is traded by means of weekly auctions taking place from August to June.

There is normally considerable volatility in prices during and between auctions. The price of wool is determined by a complex set of variables, including the level of the market in Australia on a given day; exchange rate fluctuations; quantities offered for sale on auction; the specific demand for different types of wool at different times; the extent and timing of contract commitments by local buyers for delivery to clients; and economic conditions prevailing in wool consuming countries.

Average prices (total auction revenue divided by total mass sold per season) for all classes of wool from 1995/96 to 1999/2000 compare as follows:

Class

1995/96

1996/97

1997/98

R/kg greasy wool

1998/99

1999/2000

Merino

Lesotho, Ciskei and Transkei

Other white wool

Coarse and coloured

Dead wool and other

10,02

7,16

6,15

3,71

5,58

12,70

8,92

9,65

5,22

7,50

13,20

9,20

8,49

4,76

7,26

10,46

4,76

6,33

6,14

5,50

12,51

8,93

7,34

4,45

7,75

All classes

8,78

11,69

12,24

9,51

11,02

South Africa is mainly producing a Merino clip, which comprises over 80% of all lots offered for sale. Mean fibre diameter is the major price determinant for Merino wool, with finer micron categories normally commanding a premium over medium and strong wool.  

Marketing arrangements

The marketing of wool in South Africa is free from statutory intervention. Cape Wools of South Africa promotes the interests of the South African wool industry. It is a non-profit company established and owned by farmers and other directly affected industry groups registered with the Wool Forum, the official policy-making body of the industry. The Board of Directors proportionately represents these groups and is elected from the Forum. Cape Wools acts as the executive arm of the Forum and started operating on 1 September 1997. The company has since been granted statutory measures by the Minister for Agriculture and Land Affairs for the collection of statistics for the wool industry, which enables it to create a wool statistics data bank from which a national market indicator and other information regarding the industry can be made available locally as well as internationally. Its service portfolio comprises market information and statistics, research and development, wool production transfer, and promotion. Cape Wools is funded by the Wool Trust.

Exports

Between 90% and 95% of South Africa’s wool production is exported. The main export destination countries are Italy, France, Germany, the UK, South Korea, Japan, China and Taiwan.

Prospects

The outlook for the raw wool market for the 1999/2000 season looks fairly positive and the market is expected to be driven by the resurgence in the Western European wool pipeline and the ongoing strength of China. However, the situation has deteriorated in Japan, Korea and Taiwan (countries that were key to the recovery in the raw wool market early in 1999/2000). The wool textile cycle in this region appears to have peaked and sentiment at early stages has turned pessimistic. It is hoped that the pickup in Western European demand will be sustained in order to offset the decline in demand from Japan, Korea and Taiwan. If the Chinese industry can sustain last season’s high levels of raw wool demand, raw wool prices should be well supported. However, the expectations for auction prices and the general market level for the 1999/2000 season are speculative at best.

Mohair

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