Farmer's Weekly (South Africa)
Commodity Corner
Weaner prices during October were down about 10% from the same time last year, and the red meat industry continues to feel the pressure of weak consumer demand.
The summer crop planting season has commenced. However, conditions remain dry countrywide and farmers are holding off on planting in the hope that it rains soon.
According to the South African Weather Service, the rainfall forecast for November to January indicates enhanced probabilities of below-normal rainfall over the far eastern parts of the country, while abovenormal rainfall is predicted to be more likely in the western and central parts.
The eastern maize-producing regions produce mostly yellow maize for the animal feed industry. The planting window in the eastern summer cropproducing area is narrowing due to the hot, dry conditions. As a result of the delayed rain, the intended maize-planting estimate of just over one million hectares of yellow maize, and 1,43 million hectares of white maize, may not materialise.
The increasing probability of a smaller crop could have a negative impact on the livestock sector due to higher feed costs stemming from higher-priced maize and oilseed. However, pasture conditions are likely to improve if seasonal rains materialise sooner, bringing about better grazing conditions.
WEAK DEMAND
Food inflation has been subdued in 2019 mainly due to South Africa’s sluggish economy and weak consumer demand. With the outbreak of foot-and-mouth disease (FMD) in January, which resulted in a meat export ban that raised local supplies, meat inflation was capped.
Because meat makes up a large portion of food inflation, there were no significant increases in the first quarter. Beef prices gained momentum again when exports resumed.
After the latest FMD outbreak, reported this month in Molemole, the industry expressed fear that prices could decrease to first-quarter levels. Local meat prices have been trading sideways since July due to lower domestic demand. The industry had hoped that prices would find support from the usual uptick in demand in the summer season leading up to December. This has not been the case, however.
DOMESTIC BEEF UPDATE
Cheaper alternative proteins such as pork and poultry are readily available and have been adding pressure to the beef price.
The average South African 2019 beef price declined 6,3% from that of 2018
( see graph). The average beef Class A carcass price in October 2019 declined month-on-month, trading 1% lower at R45,60/kg. The domestic beef price has been under pressure due to consumers’ limited buying power. Taking seasonal trends into consideration, prices should recover somewhat over December and January, but the recovery may not be as strong as in previous years.
Weaner calf prices reached an average of R29,58/kg during October, a 2,3% increase month-on-month. However, the price was 10,4% lower than the R33,03/ kg achieved in October 2018.