Foot and mouth disease: South African outbreak drives up Aussie wool price

The Australian wool market has rallied after news of a foot and mouth outbreak gripping South Africa’s sheep industry.

There has been an immediate lift in the Australian wool market after the announcement of a foot and mouth disease outbreak in South Africa.

The benchmark Eastern Market Indicator rose 4c/kg to close at 1379c/kg after yesterday’s sales with Merino fleece lines up to 20c/kg dearer according to Australian Wool Innovation’s daily report.

China introduced a ban on South African wool on April 1 due to outbreaks of FMD in the regions of Northwest Province, KwaZulu-Natal and Limpopo.

A spokesman for Cape Wool SA said the ban would have a “massive impact on many industries in South Africa”.

“The importance of the South African Wool industry cannot be over emphasised, as it supports around 40,000 communal and 8000 commercial farmers, their families and dependants as well as the farm workers employed within the industry,” the spokesman said.

“Communal farmers, in particular, rely on the Chinese market for the sale of their wool.”

South African wool has been banned before, most recently due to a FMD outbreak in 2019, when China stopped buying for eight months.

“Exports could only resume once several new measures were implemented as required by China,” the Cape Wools SA spokesman said.

“The fact that these measures are still strictly enforced, the announcement of a blanket ban of cloven-hoofed derived products from South Africa, which includes wool, comes as a surprise.”

South African wool auctions had been postponed until the situation became clearer.

Fox and Lillie managing director Jonathon Lillie said it was a difficult time for the South African wool industry.

“We wouldn’t wish a foot and mouth disease (outbreak) on anyone, yet it looks like our industry will benefit from their unfortunate scenario,” Mr Lillie said.

“You would logically think that our market would have to lift.”

Australian Wool Exchange senior analyst Lionel Plunkett said there might be an initial spike in the Australian market if the outbreak followed the same pattern as the 2019 outbreak.

“There will be orders already in place that Chinese processors may need to immediately replace, they will need to go elsewhere and Australia is the obvious choice,” Mr Plunket said.

“In terms of quantity though, South Africa is a lot smaller than Australia so stopped exports may not have a huge effect on the market because the quantities are reasonably small.

“It will be very interesting over the next few days whether that has an immediate flow-on effect to our market with Chinese exporters looks to replace South African wool immediately.”