Newsletter No. 16 4 May 2018
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Wool outlook for 2018
By Nico Groenewald – Head Agribusiness at Standard Bank
Increased affluence in traditional markets such as China and a growing demand for natural fibres in athleisure wear coupled with an abundant supply have created a “perfect storm” for wool. New demand from the market for active outdoor sportswear (Adidas, Nike, Puma, etc.), which is primarily produced from finer wools, is largely driving this demand for wool. More consumers are preferring natural fibres over synthetic ones.
China imported 53% of the global production in the 2016/17 season, which made it the biggest wool consumer globally. The Asian country’s strong economic growth of 6.8%, well above the global growth of 3.7%, is expected to carry into 2018 and 2019. Strong growth in wool consumption is expected to be fueled by growth in the demand for luxury woollen textiles due to China’s expanding middle-class.
Globally, wool production is under pressure due to declining flock numbers, and a 1% decrease is expected in the 2017/18 season due to a number of farmers switching to other enterprises or even exiting farming operations altogether, because of factors such as risk of predators, diseases, previous low wool price and high competition from other enterprises.
South Africa, a country globally known to produce high-quality wool, contributed 1% to global wool production in the 2016/17 season with 52.46 million kilograms of wool. Of this, 51.63 million kilograms (98%) has been sold and of that, we exported 92% (47.5 million kilograms). Major export destinations were China (71%), the Czech Republic (16%) and Italy (7%).
The industry is directly and significantly influenced by macro trends and development in the global textile industry, from consumer level back through the textile-processing chain. These factors are normally reflected in the wool price. Australia is the world’s biggest producer of wool with a figure of 25%. Therefore, the international price of wool is determined by the Australian market with the Australian Eastern Market Indicator (EMI) indicative of the market performance.
The long-term trend of the South African Merino Market Indicator (MMI) follows the EMI fairly closely. However, since November 2017, the MMI has been trending negatively compared to a positive trend in the EMI. This is explained by the difference between the performance of the Australian dollar against the US dollar, and the performance of the rand against the US dollar. In the coinciding period, the rand strengthened by 15.4% against the US dollar, while the Australian dollar’s performance remained flat.
The positive sentiment for wool is forecast to remain for as long as growth in global demand continues to exceed growth in supply. Strong demand, particularly from China, India and the Czech Republic, coupled with an abundant world supply of Merino wool, is likely to contribute to higher wool prices.
The Australian Eastern Market Indicator (EMI) is forecast to rise by 15% in the 2017/18 season. This higher EMI is expected to be supported by higher prices for fine and superfine wools, reflecting the strong growth in global demand relative to the supply of fine wool used in manufacturing.
Although the rand exchange rate has strengthened and put a brake on the increase in the market price, local wool producers are still expected to benefit a great deal from the positive wool market on the back of improved global prices due to high demand. The South African Merino Market Indicator (MMI) is expected to grow by 8% during the 2017/18 season.
Given the above analysis, now is the right time to increase sheep flocks and it is the ideal agri-market for investors, as the country has a worldwide reputation for producing high-quality, environmentally sound products that meet the needs of the global textile industry.
Malawi increases minimum cotton price by 17%
Taking into account the cost of production and prevailing international market prices, the government of Malawi has raised the minimum support price for cotton by 17 per cent to 375 kwacha ($0.52) per kilogram from last year’s 320 kwacha per kg. A landlocked country in south eastern Africa, Malawi produced around 15,000 tonnes of cotton in 2017.
The decision to increase minimum price for cotton this season was made following a rigorous consultative process with industry stakeholders. This was informed at a press conference held jointly by the ministry of agriculture, the Cotton Farmers Association of Malawi (Cfam) and the Cotton Council of Malawi (CCM).
The cotton marketing season will begin in Malawi on April 27. The season is normally for a 3-month period by which all cotton is harvested.
Over the last few years, cotton production has gone down substantially from around 100,000 tonnes in 2012. Likewise, the number of farmers cultivating cotton has also gone down from 300,000 in 2011 to 150,000 in 2016. F2F
Consumers engaging more with fashion accessories: Report
Consumers are engaging with fashion accessories, including bags, small personal accessories, and luggage, that deliver functionality, luxury, or both, says a recent report. Despite overall declines in the nearly $1.8 billion fashion accessories industry, bright spots exist in the functional and fashion-focused ends, as well as where the two worlds converge.
Consumers are looking for something new and different. Over the past year, fashion accessories introduced between November 2016 and September 2017 drove the most incremental sales gains but represented just over a third of annual 2017 sales, reveals the report by NPD Group, a leading global information company.
The consumer emphasis on function is apparent from the products that are exhibiting growth. Consumers are buying more of some items, like fashion backpacks, and spending more on others, like clutches and shoulder bags. On the other end of the spectrum, designer was the only brand segment to grow across the fashion accessories industry. Designer brands now account for 12 per cent of industry dollar sales, following 10 per cent growth in the past year.
“The move from acquisition and consumption to experiences, travel, and healthier living, is challenging the fashion accessories industry to remain relevant among competing spending opportunities vying for consumer dollars,” said Marshal Cohen, chief industry advisor, The NPD Group, Inc. “Luxury items have managed to keep the industry alive, as consumers view these products as worthy of the investment, but fashion accessories manufacturers and retailers also need to look at how consumers live and address a broader spectrum of needs, desires, and demographic life stages.”
Designer brands are driving growth in most categories, but multi-strap options are an example of functional solutions that appeal to a broader group of consumers. Multi-functional/multi-strap options have grown to almost half of wristlet and nearly 40 per cent of handbag dollar sales in the last year. Though still small in most other fashion accessory categories, multi-strap features are significant growth drivers wherever they exist – in some cases they are the difference between sales losses and gains, adds the report.
“Everything should be a problem-solver in the mind of the consumer, and fashion accessories manufacturers are starting to embrace this,” added Beth Goldstein, NPD’s accessories and footwear industry analyst. “Even luxury designer brands are adding more function into their products, and this convergence has proven to be an equation for even greater success among today’s fashion accessory consumer.” F2F
Did you know……..
The crinoline was a hoop skirt worn under the frocks of the 19th century, and it was made from horsehair, wood, or sometimes even steel. Intended to push the skirt out and give the wearer the appearance of big, regal hips, the crinoline was also incredibly dangerous.
According to the FIDM Museum and Galleries, there are tales of women getting caught up in gusts of wind, being tossed off of cliffs, and getting caught in carriage wheel spooks — yikes. There are also stories of women not being able to escape from burning buildings due to the width and stiffness of their skirts. In 1863 in Santiago, Chile, thousands of people died in a church fire caused by a gas lamp. Many of the victims were women, as their large crinoline skirts got caught in the door.
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