Festive red meat costs to soar 15%
Increased demand expected
MEAT prices are set to go up by as much as 15 percent as the festive season draws closer as a result of an anticipated increase in demand.
First National Bank senior agricultural economist Paul Makube said yesterday that red meat prices were currently at relatively stable to strong levels due to tight supplies as farmers held on to stock and avoided slaughtering in the hope that pasture conditions would improve should seasonal rains materialise in the short term.
“As braai season approaches, red meat prices are expected to trend higher by at least 9 to 15 percent from now until December due to tight supply and increased demand from consumers during the festive season,” Makube said.
Makube added that red meat slaughtering had been substantially higher this year compared with the past three years as a result of the drought.
“The cumulative sheep slaughter number is currently 111 percent and 69 percent higher than the 2015 and 2014 levels, respectively.”
Makube said despite an increase in slaughtering, the industry did not experience an oversupply of meat, which would have resulted in lower prices due to exports and a strong demand for meat in the tourism sector.
He said consumers could expect an increase of between R3.40 and R5.70 a kilogram for Class A beef towards the festive season.
“Consumers that prefer to braai lamb must expect to pay between R5.60 and R9.40 a kilogram more for Class A lamb,” Makube said.
However, he said that despite continued pressure on disposable income, consumers would still be able to absorb a slight increase in meat prices during the festive period.
According to the Bureau for Food and Agricultural Policy (BFAP) research conducted early this year, the demand for beef is projected to increase by almost 28 percent through the next decade compared with 15 percent through the past decade. This will result in almost 200 000 tons of additional beef consumption by the year 2024.
The increase in the price of meat is expected to last only RAND WATCH: The rand firmed yesterday, gaining alongside fellow emerging currencies as the dollar stumbled on expectations that the US Federal Reserve will not raise interest rates this week. At 5pm, the rand had gained 1.23 percent to R14.0046 against the dollar, compared to Friday’s close of R14.19. “Event risk this week is all about central banks, although almost certainly more about what they say than (what they) do,” said John Cairns of Rand Merchant Bank. page 18 for the festive season and the prices will fall again at the beginning of next year.
“The prices will return to normal levels in January post the festive season to avoid resistance from consumers,” Makube said.
“With rain expected in the coming months, the situation should start improving for livestock farmers that have suffered financial losses as a result of the drought.
“Forecasts are now projecting neutral conditions for the 2016/17 season, meaning that we should expect normal, instead of above normal rainfall as had been previously estimated.”
Agribiz agricultural economist Wandile Sihlobo said the increase in anticipated demand was in line with industry projections.
Sihlobo said the industry had taken a knock over the past few months due to the persistent drought conditions and increased its output to mitigate the effects of the drought on their stocks.
Chance of La Niña weather pattern in late spring/summer
“This led to higher slaughtering rates, which were seen at 16 886 cattle in the second week of September, up by 49 percent from the corresponding week last year and subsequently putting downward pressure on prices,” Sihlobo said.
Beef production in South Africa increased from 613 000 tons in 2012 to 698 000 tons in 2014. The mutton and lamb supply grew from 98 000 tons to 101 000 tons during the period.
Sihlobo said the recovery of the beef industry would depend on weather conditions.
“Currently the Australian Bureau of Meteorology indicates that there is 50 percent chance of a La Niña occurrence towards late spring to summer season. If this materialises, there could be some improvement of grazing fields across the country.
“Against this background, we maintain our view that livestock farmers could soon start to rebuild their herds and that might lead to a decline in (the) slaughtering rate, which in turn, could support beef prices,” he said.