By Koos du Pisanie
The South African wool industry is in a privileged position and has ample opportunity for growth. Wool prices are doing remarkably well, and economists and wool buyers believe this trend will continue due to international market demand exceeding the supply. The wool price has been low over the last few years, which has translated into wool growers facing challenges such as affected demand. However, a different trend has become evident and there is potential for growth.
Louis de Beer, CEO of Cape Wools SA, says there used to be a historical wool stockpile which was sold out in the late 1990s. Australia, for instance, sold nearly 4,7 million bales of wool. With this enormous sell-out, there was no surplus wool globally. “As a matter of fact, during these tough times, wool production declined from approximately 900 million kilogram to around 382 million. Today the world’s wool supply is the lowest it has been in the last 70 years,” he says.
In the previous year, South Africa produced roughly 50 million kilogram, but with high global demand there is still an opportunity to expand. According to international marketing projections, local producers can increase production to 75 million kilogram of wool per annum.
Wool producers are enjoying an exceptional upswing in the wool market and De Beer says this is due to various factors. “We have to give credit to those producers who didn’t lose hope when the market was on the downside. They are the ones in the pound seat now. People like them have put the South African wool industry in its current position.”
The current high demand and low supply, coupled with the weak rand, renders the market advantageous for wool producers. These macro-economic factors in the economy have laid the table for excellent wool prices in the immediate future as well as on the midterm. Therefore, now is the right time to increase sheep flocks and it is the ideal agri-market for new investors.
De Beer says there have been huge innovations in the industry. Good wool is in high demand, and especially in the clothing industry wool has become a favoured raw material again. He says South African wool is in high demand on international markets.
Consumer’s demand has evolved over the years. The modern consumer is more aware of conservation and wants to know that the fibres used for tailoring originate from a sustainable industry. They are much more informed about the industry and are more discerning, demanding only the best.
“In the past, a good woollen suit was more than enough for men, but nowadays a finer woven wool with finer microns are preferred,” he explains.
There have been conditions in recent years which have negatively affected the wool industry, namely droughts, low prices, better prospects in other agricultural industries. These factors all contributed to a lower supply.
Opportunities for producers
“The wool market has developed in the past decade between these guidelines. Although there is a lower supply, it opens up the industry for new entrants as well as for established producers to expand production.”
There are numerous opportunities for local wool growers. Those who have the opportunity to acquire land for production are in the best position. “You don’t have to be concerned that the market will be flooded or that the price will be influenced with higher production. There is enough demand in the world.
“Two decades ago, South Africa produced 140 million kilograms of wool annually, and in the last year around 50 million was produced. Although many wool growers changed from wool to meat production when the prices tumbled, the market has changed and the wool industry is now in a favourable position.”
Another opportunity is the development of the product itself. De Beer says producers are in the position to develop the fibre through genetic development to a more sought-after clip. The modern wool producer does a lot of development in this regard. “More information is available; producers are keen to learn from new scientific information and to test it on their herds. They are more eager to join clubs and organisations in order to learn from each other.”
He is very positive about the wool market in the country and states that South Africa delivers the best classed wool in the world, although it is not traditionally the biggest user of wool. “We have the best producers and excellent land for the production of wool. As wealth grows in the country, the market and demand for wool will also grow. This is already visible in the clothing market.” Approximately 90% of local wool is exported and 10% used for wool products manufactured here.
Added value in the value chain
With almost 100% of raw wool being exported, there is opportunity in the country to add value to the wool value chain. Certain factors, however, need to be addressed first. “South Africa is not competitive enough; our policy measures are not in place and the possibilities are simply not available. On the other hand, if we don’t change these possibilities into opportunities ourselves, it won’t happen. From the wool industry side, we are looking at this, and in my opinion South Africa can be more competitive in the global market.
“However, organisations need to collaborate in order to achieve this goal. Not only agricultural organisations and private investors, but government intervention will need to form part of the process to develop this source of income. There are so many upcoming farmers who can benefit from the wool grower’s industry,” De Beer says enthusiastically. “Wool growers are spread throughout the country. It represents a distribution of wealth in a sustainable industry across South Africa. Wool production is not limited to only some parts of the country.”
He also notes that the wool industry has a mature and well-structured marketing system which stimulates wool production. Wool growers do not need to create a new market for wool or are not required to put marketing systems into place. There are more than 30 official wool auctions per year, which coincides with a sound, well-structured system in all aspects of wool production. All of these structures are already there and available to both established farmers and newcomers.
“Most important is the willingness among wool growers to offer assistance. They live in rural areas and witness the realities of our country. I think they are exceptional people who want to take part in South Africa’s progress,” De Beer concludes. Wool production is one of our nation’s agricultural branches which still has a bright future, presenting a great opportunity for more farmers to benefit from the market gap.
For more information, contact Louis de Beer on 084 600 0746 or 041 484 4301.