South Africa’s smaller pork producers under threat

While the pork industry is growing organically each month, production is under threat due to the cost squeeze.

Johann Kotzé, CEO of the South African Pork Producers’ Organisation (SAPPO), said pork’s affordability within the broader red meat sector was appealing to consumers. For example, the average retail price for pork was R104,96/kg in December 2021, compared with R160,47/kg for lamb and R117,63/kg for beef, according to SAPPO statistics.

This had also been a major driver of industry growth. “The pork industry grew by roughly 4,5% last year, which is substantially more than the beef industry, albeit from a low base,” Kotzé said.

According to the Bureau for Food and Agricultural Policy’s Baseline 2021 report, pork consumption grew 43% over the past decade, while production grew even faster at 50%, allowing the share of imports to decline from 14% in 2010 to 7% in 2020.

Despite this, farmers were struggling financially due to high production costs. Kotzé identified feed as the largest cost, accounting for about 70% of production.

Average weighted abattoir prices for pork nevertheless had remained relatively flat over the past few years, ranging between R24,48/kg and R30,17/kg in 2021, and between R19,82/kg and R30,36/kg in 2020, according to SAPPO.

Prices trended higher closer to the festive season, averaging R28,56/kg in December 2021, compared with R28,01/kg in November 2021. In January this year, prices already started to decline, averaging around R27,63/kg compared with R26,09/kg in 2020 and R30,17/kg in the comparative period during 2021.

Kotzé said higher prices were not the answer to the situation, as consumer spending was already under pressure because of poor economic growth and high levels of inflation. Producers also had no influence over prices, unless they were vertically integrated into the supply chain. “A sheep or lamb producer can still hold animals back if the prices are unfavourable. For biosecurity and production efficiency purposes, pork producers, however, have an all-in, all-out system. When animals are market ready, they have to be sold together all at once, or the animals will eat into profits,” Kotzé said.

Economies of scale also helped, but this was only accessible to farmers with large operations. “Large producers are able to buy inputs, such as feed, in bulk, but smaller producers are unable to take advantage of economies of scale because of the small size of their operations,” Kotzé said. – Glenneis Kriel