Farmer's Weekly (South Africa)

Seasonal price trends evident in red meat and chicken markets

Beef, mutton and pork prices have shown moderate increases, but despite a general upward trend, production margins for chicken remain under pressure. Absa AgriBusine­ss provides analyses of market trends for April.

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BEEF

In April the price of Class A beef increased to about R51,50/kg, up 3,2% from a month before. The Class C price increased only marginally at 0,4% month-on-month (m/m) to approximat­ely R45,10/kg. Yearly carcass price changes, as indicated in Graph 1, showed substantia­l increases for Class A and Class C, with the two categories increasing 9,1% and 11,2% respective­ly.

Prices of weaner calves were about 3,7% lower m/m at around R37/kg. These prices were 27,9% higher than a year ago, and were supported by tight supplies.

Historical market data suggests that weaner calf prices usually trade lower in autumn. The price trends presented here are consistent with this pattern, and we thus expect prices to decrease during the coming month.

The beef-to-maize price ratio, an indicator of profitabil­ity, increased 6,3% m/m, but was nearly 8,3% lower than that of the correspond­ing period of 2020.

Monthly improvemen­ts in this indicator were due to maize prices trending lower and meat prices remaining firm.

As maize prices were still approximat­ely 20% higher than in March/April 2020, this indicator shows that margins are under pressure.

LAMB AND MUTTON

Lamb carcass prices increased 9,3% m/m to around R82/kg and were 6,5% higher year-on-year (y/y), as seen in Graph 2.

The strong price growth over the previous month is consistent with increased demand over the Easter period. Mutton prices, in contrast, decreased m/m by 2%, but increased y/y by around 23%.

From our analysis, stronger price growth in the lower grades is supported by consumer demand for more affordable meat products.

The prices of both mutton and lamb are further supported by lower slaughter numbers.

Feeder lamb prices moved sideways over the previous month, but were nearly 21% higher than prices at the end of Quarter 1 of 2020, as a result of tight supplies.

PORK

Porker and baconer prices increased 8,9% and 5,5% respective­ly m/m. This brought porker prices to about R31/kg and baconer prices to around R29,20/kg. As Graph 3 shows, prices also showed substantia­l growth y/y, with porker prices almost 38% higher and baconer prices nearly 30% higher than in the correspond­ing period of 2020.

The price growth in pork was supported by strong local and export demand.

The pork-to-maize price ratio indicates that pork production has become more profitable over both the short (monthly) and medium terms (yearly).

The 38% increase in pork prices was more than sufficient to offset the 20% increase in maize prices y/y, and although pork prices have lost some momentum over the past months, a decrease in maize prices since January has contribute­d to positive monthly changes in the pork-to-maize price ratio.

CHICKEN

Graph 4 shows that the price of fresh whole birds contracted m/m as well as y/y. In contrast to this, frozen whole bird prices rose 2% to R28,70/kg from the month before, and were nearly 5% higher y/y.

Individual­ly quick-frozen pieces increased 1,6% m/m and 3,6% y/y to R26,20/kg.

Although chicken prices have, for the most part, exhibited an upward trend, these prices are not enough to compensate for significan­t input cost pressures.

Combined with a y/y increase in grain prices of about 20%, other input costs such as labour and electricit­y also increased during March and April, adding to cost pressures in intensive livestock industries.

Industry stakeholde­rs have reported better market conditions than at the beginning of the year; however, sluggish demand growth, combined with the cost pressures mentioned above, have created an environmen­t where margins are under increased pressure.

• Email Marlene Louw, senior agricultur­al economist at Absa AgriBusine­ss, at Marlene.Louw@absa.africa.

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