Despite a slight correction at the last two wool auctions, prices have returned to sustainable levels for small-stock farmers after several seasons of weak performance.

By Fredalette Uys

Although prices at the last two auctions dipped slightly for the current season, the Cape Wools SA Merino Indicator remains almost 30% higher than at the same time last year, and about 20% higher than at the first auction of this season. The average price for certified wool also surpassed R200/kg this year for the first time since the 2021/22 season.

The price increase is a welcome relief, says Jacques le Roux, general manager: wool and mohair at the OVK Group. “The good wool price, along with strong lamb prices, makes me very excited that livestock farmers can once again get their heads above water.”

Billy van Zyl, a wool farmer from Cradock and chairman of the National Wool Growers’ Association, says it was about time prices started to rise. “There is optimism again, because the world is interested in wool, and meat prices have also started to rise.”

Peter Cloete, a wool farmer from Dordrecht and chairman of Agri Eastern Cape, describes the improvement as magnificent. “Compared to other commodities, wool has lagged behind. From a livestock farmer’s point of view, it’s late, but we’re grateful that wool prices have now moved up along with meat prices. Livestock farmers have suffered financially for a long time.”

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Too Little Wool

Le Roux attributes the increase mainly to low inventory levels and China’s economic recovery after the Covid-19 pandemic.

Processors in China have been very cautious about buying wool because demand was weak due to poor economic conditions, he says. They didn’t want to sit with inventory they couldn’t sell. The market stagnated, and suddenly there was no longer enough stock.

As supply tightened in both South Africa and Australia, prices began to rise sharply.

Isak Staats, executive manager of BKB Wool & Mohair, notes that the shortage in Australia, particularly in the 21-micron segment, has been a key factor, especially as many Australian farmers have left the wool industry.

Van Zyl adds that the supply shortage offers a silver lining. Although wool production is at its lowest level in history, South African farmers are faring better than many others in a rising market by producing more certified wool, maintaining high standards and operating a well-classified shearing system.

He hopes, however, that prices will rise more steadily in future. “No price that rises this quickly can stay at that level for long.”

Le Roux notes that the initial increase was “very aggressive,” and a correction – now under way – was expected. Early indicators from Australia suggest prices are likely to stabilise rather than fall further. The slight correction seen now is simply bringing moderation back to the market.

Staats believes that the current levels appear sustainable, though prices could still soften slightly.

Le Roux says the main uncertainty lies in consumer demand in China’s domestic market and whether it can absorb existing stock. Preliminary signs show good demand, but it’s still too early to tell.

He notes that a similar surge has not yet occurred in European markets, which remains a concern. “I’d like to see greater participation from Europe, but that’s not happening yet. We’re worried about what’s unfolding there and in the rest of the world.”

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Impact of Poor Prices

The weaker prices of recent years have taken their toll, says Staats, with several farmers leaving the industry. Deliveries did, however, increase during the previous season, an indication that those who remain are rebuilding their flocks.

Le Roux adds that small-stock numbers have declined, particularly in the Western and Southern Cape, but also in other regions. Although poor wool prices have certainly contributed, he says it’s difficult to attribute the decline solely to market performance. Stock theft and high grain prices have also played a role in pushing livestock farmers out of wool production.

Staats expresses concern about whether producers will remain committed to wool. Wool farmers have to do two calculations, he says, one for the return on investment, and another for the return on effort. If prices fall, the second calculation becomes difficult. But South Africa remains in a strong position thanks to the number of certified wool producers.

Le Roux says he hopes the improved wool prices will encourage livestock farmers to remain in the industry.

Biogenic Carbon Accounting

Good news for the wool industry, Staats says, is that research by Drs James Blignaut and Paul Swan, which takes a new approach to assessing wool’s carbon footprint, has been very well received and appears to be gaining acceptance in the commercial sector. The study examines the role of biogenic carbon in the wool cycle, presenting wool in a much more favourable light than current life cycle analyses used to determine product carbon footprints.