The Supply of Wool in Lesotho

Agrekon, Vol 35 No 1 March 1996) Phororo THE SUPPLY OF WOOL IN LESOTHO Hopolang Phororo Research Fellow, Institute ofSouthern African Studies, National University ofLesotho, Lesotho Lesotho is a very small producer of wool (1 thousand tonnes per year) and therefore has no influence on world prices and on world wool production. However, the earnings generated from wool exports contribute significantly to the economy, thus making wool an important product. This paper determines the factors that producers consider in their decisions to produce wool. An econometric supply model is developed which hypothesizes the variables that affect wool production. Lagged wool and mohair prices and rainfall are important variables that influence farmers' decisions to produce wool. The previous years' wool production is less important because of the biological lag associated with production. Other variables such as the marketing arrangements of wool and domestic policies might influence farmers' decisions to produce wool but were not considered in detail. DIE AANBOD VAN WOL IN LESOTHO Lesotho is 'n bale klein produsent van wol (eenduisend ton perjaar) en het dus geen invloed op wereldpyse en op wereld wolproduksie nie. Die verdienste uit woluitvoer dra egter betekenisvol tot die ekonomie by en maak wol dus 'n belangrike produk. Hierdie artikel bepaal die faktore wat produsente in ag neem in hul besluite om wol te produseer. 'n Ekonometriese aanbodmodel word ontwikkel waarin die veranderlikes wat boere se besluite om wol te produseer, gehipotetiseer word. Die vorigefare se wolproduksie is minder belangrik weens die biologiese sloering wat met produksie geassosieer word. Ander veranderlikes soos bemarkingsreelings vir wol en plaaslike beleide mag boere se besluite om wol te produseer beinvloed, maar is nie in besonderhede oorweeg nie. 1. INTRODUCTION • The wool production sector in Lesotho is assessed by developing an econometric supply model and The countries of the southern hemisphere have a long hypothesizing the variables that affect wool production. history of wool production. Two decades ago, about 60 percent of the world wool production came from 2. OTHER WORKS SUMMARIZED Australia, New Zealand, South Africa, Argentina and Uruguay. Australia, the-major wool producer produced Most studies on the wool industry have been concerned 29 percent of the world production of greasy wool in primarily with Australia and New Zealand. This article 1991/92. World wool production increased by only 4.8 is based on studies that have described production percent from 1970 to 1988. The increase has processes and/or estimated supply functions. Five diminished from 10.6 percent from 1960 to 1970 as a studies were reviewed: from China, New Zealand, result of increasing competition from artificial textiles. Uruguay and two from Australia. The most important Wool consumption also decreased, in the 1970s, 80 study and the•one that many researchers appear to draw percent was consumed by eight countries, mainly in the from is the one by W.H. Witherell(1969). European Community. Witherell compared the determinants of wool production Although, the production and consumption of world in the six leading wool producing countries for the wool increased slowly, wool continues to play an period 1949-1965. The countries included Australia, important role. Wool is also an important product for New Zealand, South Africa, Argentina, Uruguay and the Lesotho, even though the country produces only 0.1 United States. A theoretical model of the seasonal percent of world wool. Lesotho has no influence on the production of wool was described based on the price of wool and is a price taker. The average prices assumptions of lagged adjustment of actual to desired for greasy wool followed a pattern similar to that of output and 'naive' price expectations. He discussed South Africa but always at a lower level. This is because various data series used and problems encountered in Lesotho's wools are susceptible to breakage and tend to the research. He also compared the estimation results command low prices at South African auctions. for the six countries, and in the conclusions provided However, the wool earnings averaged M12,305,799 for further explanation of the nature of seasonal wool the period 1985 to 1991 and accounted for an average of production. The assumptions specified in this study will 12 percent of the total value of exported goods, be applied to the Lesotho wool equation. Witherell generating much of the economy's income. Lesotho's determined that wool production is quite stable in all wool exports are destined for markets in the European the countries but varies slightly and after a long lag in Community but are marketed through South African response to changing economic conditions. wool auctions. A.C. Rayner (1968) developed a model of the New Wool production is a source of income to households in Zealand sheep industry to predict the number of animals Lesotho and provides employment, particularly to in various categories based on sex and age splits. The herdboys. Sheep are basically reared for wool with the estimated equations showed the influence of price on occasional one slaughtered for meat during feasts. The farmer's decisions and that a lag is involved between farmers perceive livestock as a form of investment and price changes and the implementation of the resultant will not slaughter on a regular basis. Wool sales and change in stock numbers. the accumulation of sheep are a key component in a migrant labourer's strategy to supplement his mine wage P. Simmons, B. Trendle and K. Brewer (1980) to provide for his family and later for retirement. examined the future of Chinese wool production. Wool 20 Agrekon, Vol 35 No I (March 1996) Phororo prices paid by the Chinese government strongly are to changes in price. The coefficient of supply influenced wool output. To increase wool production elasticity normally has a positive sign. In the short-run, further, the authors recommended that government can the supply of most livestock products will be very increase wool prices with higher producer payments and inelastic because supply cannot be increased. The incentives for quality. production process for wool is relatively fixed in the short-run, therefore producers cannot respond quickly to R.G. Reynolds and B. Gardiner (1980) examined the market changes. However, as the time period is supply response in the Australian sheep industry. The lengthened greater flexibility in production exists and authors used economic procedures to analyze sheep supply will become more elastic. producers decision-making processes regarding the annual supplies of wool, mutton and lamb. The authors The production of wool in Lesotho has fluctuated from determined that the sheep and beef industries are 1973/74 to 1987/88, as indicated in Figure 1. The substitutes and that seasonal conditions play an variables that could affect the production process are the important role in influencing the size and composition of prices that fanners receive, prices of inputs, seasonal the flock. conditions and the prices of substitutes. Short-run changes that affect wool production are weather The econometric supply model developed in this paper conditions and outbreaks of disease. Excessive rainfall is based mainly on the study of Witherell. The other or drought conditions will have a direct impact on wool studies introduced additional variables that affect the production. production of wool and were also incorporated into the equations. In the long-run, producers will consider the relative expected returns of alternative agricultural commodities. 3. WOOL PRODUCTION IN LESOTHO However, the majority of wool production is concentrated in the mountains, therefore fanners may The mountains ofLesotho support the largest percentage have no alternative use for the land, therefore will be of sheep. In 1975/76, the four mountain districts: forced to continue to produce wool. Mokhotlong, Thaba-Tseka, Qacha's Nek and Quthing supported 42 percent of the total Lesotho sheep flock. In The supply of any product is generally a function of the 1985/86, the mountains supported 59 percent of the total prices of inputs and the prices of the output. Expected flock. Natural grasslands grow on these mountains prices are important in the production of wool, therefore which are well suited to the sheep industry. In addition, they will be represented by various lags. The general in the 1990/91 wool season, the mountain districts hypothesis used in this model is similar to the one produced 57 percent of the total tonnage of wool developed by Witherell. In this model, the fact that produced. The foothills produced 43 percent of the total Lesotho cannot respond quickly to a change in the wool produced with Maseru producing 12 percent. market is built into the equation. A distributed lag model of partial supply adjustment will be used: However, several problems are faced in Lesotho's efforts to increase wool production. Overstocking and range WLt WIA-1 = D(WLt* 0 <D < 1 (1) degradation have had a direct impact on the production or WLt = 1-D)WLt- + DW Lt* of wool. Low productivity rates for sheep have been the result and this is reflected in low fleece weights and WLt and W Lt-1 are the actual level of wool produced in progeny produced per female. In 1986, the fleece Lesotho in year t and year t-1. WLt* is the desired or weight per sheep averaged 2.4 kilograms of wool in equilibrium level of production in Lesotho for year t. Lesotho as compared to South Africa where the average The assumption can be made that the change in actual was 3.96 kilograms. Lesotho's wool tends to be fme production in year t over t-1 is a fraction D of the because of the high altitudes, poor nutrition and disease desired or equilibrium level. D measures the speed and is used for blending with strong wools in processing with which actual production adjusts in response to woollens.

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