Farmer's Weekly (South Africa)
Commodity Corner
While mohair prices have improved over the past marketing year, public backlash following allegations of inhumane treatment of animals may have a negative impact on consumer demand over the short term.
South Africa is the largest producer of mohair globally, producing about 54% of the world’s mohair and processing 70% ( see Graph 1). Production in 2017 was approximately 2,4 million kilograms. Further downward pressure on production is expected this year and next year due to persistent dry conditions in the largest growing area: the Eastern Cape, specifically the Karoo and Klein Karoo.
The impact of the drought was evident this season, with a lower volume offering to the market and much finer mohair available. Demand and price were both fairly high during the summer season , and the average market indicator closed at R280,57 for the season, 42% higher than the figure at the same sale the previous year.
The 2018 winter season started well, with the average market indicator at R282,62/kg. The average price for the fourth sale of the season increased to R289,03/kg (35,5% higher than the same sale the previous season). This compares with R282,62 at the first sale of the season.
Strong competition and a weaker rand supported mohair prices.
Rising demand
Rising demand for mohair products in the Chinese and Italian markets continues to support prices. Global fashion trends are leaning towards more environmentally friendly, sustainable, natural fibres produced in an ethical and socially aware environment, driven by concerns in the consumer market. This puts mohair production and demand at an advantage to synthetic fibres, supporting mohair prices.
Targeted marketing and consumer awareness will support increased domestic production. The kid and young goat sector will benefit from these trends; an improvement and increase are therefore expected throughout 2018.
Challenges and risks
In 2018, the ethical and fair treatment of goats in the mohair industry in South Africa came under scrutiny in the media. However, despite fears of a negative backlash from social media that could have potentially lowered prices, this has not yet materialised.
Industry experts expect the negative impact on supply and demand to be minimal in the short term. South African mohair is a sought-after product, with worldwide high-end fashion houses endorsing and promoting the product amid these media disruptions. The industry strongly encourages growers to follow sustainable and ethical treatment of animals guidelines in their production systems to prevent any media and animal support group attacks.
The mohair industry in South Africa, unlike other commodities, is relatively small and concentrated in one area. An attack like this places immense pressure on the entire industry, therefore adherence to sustainable/animal-friendly guidelines and protection of the industry are vital. To promote the sustainability of the industry, all farms should be accredited by Mohair SA before mohair can be offered on auction
Demand and supply
Some spinners may reduce their mohair demand if they think that certain retailers may pull back due to fear of a public backlash after allegations of unfair animal treatment. Should this occur, demand may decline, putting downward pressure on prices ( see Graph 2). Smaller spinners, however, could take advantage of this situation and increase mohair purchases, especially if they were unable to obtain enough mohair in the previous season.
The crippling drought in the Eastern Cape still endures and production is thus expected to remain low. Due to the media backlash, farmers could potentially lower their production. Stringent audits and related compliance costs may make farmers reluctant to produce mohair.
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Local growers are encouraged to follow guidelines for sustainability and ethical animal treatment. An attack like this on certain producers could place the entire industry under pressure.
Demand should grow as consumer confidence in China, the largest mohair importer, has risen to multi-year highs, encouraging consumer spending. A weaker rand, lower production, improved economic growth and a global trend towards natural fibres support mohair production and prices.
Positive prices and targeted marketing may encourage investment in the industry. However, US President Donald Trump’s trade wars might put a damper on economic growth in China, reducing the demand for luxury items such as mohair.