Slight price relief for red meat lovers
Consumers warned to take advantage as 15% hike expected
AN OVERSUPPLY of red meat has kept meat at affordable rates. However, this will be short-lived as electricity, transport, refrigeration and labour costs will see prices rising soon, according to experts.
Karabo Takadi, agricultural economist for Agri Business/Absa retail and business bank, said producer and consumer prices increased from last August to March, but the percentage increase in the case of consumer prices was less than that of producer prices.
“It’s also worth keeping in mind that the retailer price will also be affected by transport costs, refrigerator costs and labour costs. In terms of seasonality, beef prices are bearish and are retreating from their highs. It seems supply also exceeds demand which adds to the bearish tone.”
Takadi added that slow growth in consumer spending, higher food inflation and higher interests rates were factors which added pressure to demand prospects.
“There is normally reduced demand during this time of the year due to cold temperatures and demand shifts more towards Class C, which is more your factory meat. Consumers should start to get some relief.”
Dawie Maree, head of information and marketing at FNB Agriculture, said it had been unfortunate that farmers had to sell their livestock because of the drought, which had caused prices to drop as a result of oversupply.
Maree said another aspect which needed to be taken into account was the condition of the animals was not good, making the meat cheaper.
He said retailers were at liberty to decide on prices after their overhead costs had been taken into account.
“There are obviously other costs involved in the supply chain for retailers, which we sometimes forget about, such as transport costs, maintenance of the cold chain to keep the product fresh, which is expensive, electrical and labour costs.”
Maree added that in the long-term it would be tougher on consumers as there would no longer be an oversupply, especially when conditions improved and farmers were able to hold onto their livestock.
He said consumers should brace themselves in the long-term for a price hike of about 15 percent in red meat, which would be above inflation.
Woolworths said, based on their long term relationships with suppliers, they were able to collaborate to keep prices down and, in some instances, had negotiated with suppliers to hold prices even though prevailing circumstances justified an increase.
Pick n Pay said: “We work hard all the time to keep prices as low as possible for our customers, by becoming more efficient and by ensuring that our suppliers justify any increases in the prices they charge to us.
“In the year to end-February, Pick n Pay reported selling price inflation of 3.1 percent, below the consumer price index food inflation of 5.3 percent.
“Much of the current inflation in food prices has been driven by the drought. For example, beef prices have risen more than chicken prices. So customers can to some extent reduce the overall inflation they experience in their baskets by substituting products which are experiencing lower inflation.”
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