South Africa’s Wool Industry Has $325 Million Question for China

(Bloomberg) --

South Africa’s wool industry is on tenterhooks as exporters seek clarity on a Chinese ban on imports of the fiber following an outbreak of foot-and-mouth disease earlier this year in the world’s second-biggest producer.

At issue is whether China has fully reversed rules governing shipments of cloven-hoof animal products even though South Africa’s agriculture department in April declared the country free of the highly contagious disease, according to Deon Saayman, the general manager for industry body Cape Wools.

Uncertainty whether the lifting of the ban means storage requirements for wool from previously disease-hit areas still applies prompted Cape Wools to cancel its opening sale of the new season, the first time the weekly auctions have been halted in about three decades, Saayman said by phone from the eastern city of Port Elizabeth where the auctions are held.

China accounts for about two-thirds of the country’s wool exports, while the industry generates about 5 billion rand ($325 million) in sales per season, Saayman said.

“If it goes on like this it will have a dire effect on the whole value chain -- the buyers, the brokers and the farmers,” he said. “It could have serious consequences.”

Chinese authorities initially banned South African wool exports in February, weeks after foot-and-mouth disease was reported in northern Limpopo province. Three months later they allowed shipments, provided the wool complied with World Organisation for Animal Health storage regulations, clearing the export of about 266 million rand of the fiber from the previous season, Saayman said.

Strapped For Cash

Clarence Friskin, the chairman of the South African Wool and Mohair Buyers Association, said the confusion was straining members’ finances. “The bottom line is buyers have spent all this money on wool that they haven’t been able to ship yet,” Friskin said. “They just don’t have the finances to continue buying until some of this wool is moved and clarity is obtained.”

The Department of Agriculture, Forestry and Fisheries has been in contact with Chinese authorities and is expected to provide clarity this week, Saayman said. A spokesman for the department didn’t respond to a text message seeking comment.

The highly contagious foot-and-mouth virus affects sheep, cattle, pigs, goats and other cloven-hoofed animals. Human infections are rare and doesn’t result in serious disease.

To contact the reporter on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Hilton Shone

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