Farmer's Weekly (South Africa)
Commodity Corner
Pork prices in South Africa plummeted after last year’s listeriosis outbreak. While this had a serious effect on producers’ bottom lines, the drop in prices has seen pork become more popular among consumers. Should demand continue to increase, pork produc
Global pork production in 2018 is expected to show an increase due to expansion in China, the US and the EU ( see Graph 1). Large investments in China has resulted in a growing number of pigs. However, recent outbreaks of African swine fever (ASF) in that country may lead to a decline in production over the next year.
Meanwhile, higher slaughter rates and gains in carcass weights should boost US production in 2018. Pork production is also expected to improve in Russia, where the ban on imports from Brazil has boosted demand for Russian pork.
An increase in consumer income is expected to support growth in per capita pork consumption, strengthening demand prospects and encouraging higher production.
Domestic INDUSTRY
The local pork industry has shown signs of recovery and has experienced favourable trading conditions since the second quarter of 2017, following a challenging period in 2015/2016, which saw recordhigh feed prices and low pork prices.
Feed prices dropped after the bumper maize crop of 2016/2017, as yellow maize prices decreased from more than R4 000/t in January 2016 to R2 100/t in April 2017. Pork prices also improved during this period.
These positive trading conditions continued into early 2018, benefitting producer margins. However, the industry suffered another blow when traces of listeria bacteria were discovered on a polony casing produced by Enterprise Foods on 4 March. The public was subsequently advised to avoid all processed meat products. This resulted in a drop in the consumption of pork products, causing a massive oversupply of slaughter pigs on the local market. Demand for pork was also severely affected, with consumers associating fresh pork meat with processed products such as polony.
The result was a drop in prices from R27,44/kg to a low of R19,71/kg shortly after the 4 March announcement ( see Graph 2). However, the current lower prices are expected to boost sales and offer the pork industry a competitive advantage over other more expensive meat types. Pork prices should remain low over the short to medium terms.
Trade
Africa remains South Africa’s largest export destination for pork products. During 2017, more than 86% of South Africa’s total pork exports went to African countries, with Namibia importing 27%, Mozambique 24%, Botswana 12%, and Lesotho and Swaziland 19% and 8% respectively.
To expand the export market and improve profitability, the local industry has to prioritise negotiations to reach bilateral agreements with countries such as Thailand, Vietnam, the Philippines, Singapore, India and China.
About 50% of all South Africa’s pork imports are ribs. Rib consumption is high, and the country’s farmers cannot meet local demand. During 2017, South Africa imported the majority of its pork (63,3%) from Germany and Spain.
Most imported pork is subject to an import tariff of 15%, or a minimum of US$1,30/kg (about R20/kg). Ribs are the exception, with no import tariff imposed. This is due to South Africa’s free trade agreement with the EU.
BIOSECURITY
South Africa experienced an outbreak of ASF at the end of May. This was, however, an isolated case in Springbok, Northern Cape, and was contained to a single farm. In addition, the infected pigs were culled. A large ASF outbreak would severely affect South Africa’s pork exports, with markets being closed to the country.
Although ASF is under control, and no other cases have been reported, South African producers should implement effective biosecurity systems to ensure that diseases such as AFS are contained swiftly. This is crucial to ensure access to more export markets and improve the industry’s profitability.
out loo k
The outlook for the local pork industry remains positive. Feed prices are expected to remain low during the short to medium terms, which will assist farmers in managing input costs.
The pork price is expected to increase gradually on the back of strong demand, especially as role players continue to actively market fresh pork meat.
slow, but ste ady retur n of co nsu mer co nfidence
It is difficult to predict what impact the listeriosis outbreak will continue to have on consumer spending patterns. However, there are already signs that consumer confidence is recovering, albeit at a slow pace.
The limited supply of other meat sources on the market, as producers rebuild their herds and flocks after the long drought, is expected to support pork prices.