Virus hits wool farmers on heels of foot-and-mouth
The next three weeks will be especially tough for SA's wool industry, in which sales have already dropped by 12.5% in the past week due to a decline in global demand because of the Covid-19 outbreak. Costly diseases are nothing new for the industry, which is still recovering from a foot-and-mouth outbreak that led to China banning wool exports from SA. The ban was lifted in May last year but exports worth R700m sat unsold while it was in effect.This time the threat comes from the coronavirus and SA's 21-day lockdown. "Due to the escalating global crisis of the coronavirus and the accompanying market uncertainty, the wool market had to endure a 12.5% drop on last week's sale [auction]," said Deon Saayman, GM for Cape Wools SA.The drop followed a 2.6% decline in the previous week's auction. The South African Wool and Mohair Buyers Association said President Cyril Ramaphosa's announcement that the country would be under lockdown for 21 days would affect trading as it would not be able to continue with crucial auctions."Despite looking at all available options, it is unavoidable that the receiving, packing, testing, containerisation and shipment of wool will come to a standstill from Friday 27 March 2020," the association said in a statement on Tuesday. It said it was aware of the "dire impact" of its decision on farmers and businesses but had decided to respect the government's decision and support the efforts to stop the spread of the virus.The wool auctions will resume as soon as the lockdown is lifted.Saayman said although farmers will be able to catch up on the 10 remaining auctions for the season, they will be under financial pressure during the lockdown."There's a cash-flow issue for everybody now," he said. SA exports 74% of its wool to China and the rest to the Czech Republic, Italy and India. The wool often ends up in the products of premium fashion designers in Europe or the shops of interior designers in the US, after going through a long and complex value chain that usually begins in China. Saayman said the industry usually has a turnover of between R150m and R180m a week during its auction season.Wool producers, like other farmers in the country, would need assistance from the banks with their loans.Banks have indicated they may offer support to distressed farmers. FNB said it would announce its Covid-19 relief measures in the next few days. "The bank continues to work with the Banking Association of South Africa in engaging with the South African Reserve Bank and government on a variety of solutions aimed at supporting both consumers and businesses through these difficult times," said an FNB spokesperson. Standard Bank said it is looking at the impact of Covid-19 on farmers on a case-by-case basis to determine flexible and practical assistance.Nico Groenewald, head of Agribusiness at Standard Bank, said the assistance the bank could offer could vary from rescheduling or extending payments, capital moratoriums or consolidation of debt.Wessel Lemmer, senior agricultural economist at Absa said the bank previously assisted farmers during the foot and mouth outbreak and continues to assist farmers on a case-by-case basis.