According to Paul Makube, Senior Agricultural Economist at FNB, as the braai season approaches, red meat prices are likely to increase by at least 9 to 15 per cent from now until December, because of carefully controlled supply by meat producers, and increased demand from consumers during the festive season.
Currently, red meat prices are relatively stable, although high, due to livestock farmers holding on to stock and avoiding slaughtering in the hope that pasture conditions will improve if seasonal rains materialise sooner than expected.
Makube says substantially more red meat stock has been slaughtered this year than in the past three years, because of the drought. For example, the current sheep slaughter figures are 111 per cent higher than in 2015, and 69 per cent higher than in 2014.
However, despite an increase in slaughtering, there has not been an oversupply of meat which would have resulted in lower prices due to exports and a strong demand for South African meat in the tourism sector.
“In terms of the outlook for beef, we are heading into a seasonal price increase of between R3,40 and R5,70 per kilogram (kg) for Class A beef as braai season returns.
Consumers who prefer to braai lamb can expect to pay between R5,60 and R9,40 per kg more for Class A lamb over the festive period,” said Makube.
Pork will also benefit from the red meat price gain; however, there won’t be much of a price movement in poultry due to increasing imports.
Despite continued pressure on disposable income, consumers are expected to be able to absorb a slight increase in meat prices during the festive period, although some will opt to purchase red meat in bulk to cancel out the increased price.
“Even during tough economic conditions, there is an identifiable trend – consumers usually cut back on luxuries and non-essentials, but generally spend more on food and meat during the festive season.”
However, Makube cautions that prices would have to return to normal levels in January, after the festive season, to avoid resistance from consumers.
He says that with rain expected in the coming months, the situation should begin to improve for livestock farmers who 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 estimated previously.
According to Makube, this is good news as the sector will not have to worry about possible damage resulting from floods, torrential rains and heavy winds, often associated with a strong La Nina, which was predicted during the past few months.
The expected rainfall should be sufficient for herd-rebuilding to begin, further helping livestock farmers to reduce costs in the long-term.
By mid-2017, we should see a moderation in grain prices which will lower animal feed costs, resulting in improved margins and profitability levels for farmers who are currently facing losses as a result of the recent drought,” concluded Makube.
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