South African Wool Price Surges to Record Due to Rand Slump

(Bloomberg) -- The benchmark price of wool in South Africa, the world’s second-biggest producer of the variety used for clothes, climbed to a record as the rand weakened and demand increased.

The Cape Wools Merino Indicator climbed 6.6 percent to 253.82 rand ($16.45) a kilogram (2.2 pounds) at the sale in the southeastern city of Port Elizabeth, Cape Wools SA said in an emailed statement Wednesday.

“The wool market delivered excellent returns primarily due to the weakening rand and was supported by the continued excellent demand for good-quality long and fine merino wool,” the industry body said. “Prices increased across the board, with the fine to coarser ends benefiting. Buyers paid record-level prices for a third consecutive auction.”

The rand weakened to a more than two-year low against the dollar Wednesday after a Tuesday report showed output in Africa’s most-industrialized economy contracted for a second straight quarter to slide into the second recession in almost a decade and as emerging-market assets are under pressure from a stronger U.S. currency.

After peaking at 148 million kilograms in 1966, southern African wool production has declined to about a third of that annually as the popularity of cheaper synthetic fibers climbed and as Australia, which supplies more than three-quarters of the fiber used in clothing, sold off stockpiles.

The country has about 15 million merino sheep, with Cape Wools estimating there are as many as 9,000 commercial producers and 50,000 small-scale farmers. About 35 percent of production comes from the impoverished Eastern Cape province.

To contact the reporter on this story: Ana Monteiro in Johannesburg at amonteiro4@bloomberg.net

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Liezel Hill, Karl Maier

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