Meat prices to remain high during festive season

Durban: The price of meat will remain high going into the festive season due to the increase in fuel and animal feed.

The high cost is also attributed to the onset of the Covid-19 pandemic, the Avian influenza outbreak earlier this year, the unrest in July in KwaZulu-Natal and Gauteng and higher shipment prices.

Thabile Nkunjana, an economist in the agro-food chain unit at NAMC, said meat was seen as a major protein source – with products such as eggs and dairy used as complementary products.

“In South Africa, meat is the third-highest weighted food group after processed and unprocessed foods. For that reason, the meat price trend will always weigh in on the overall food price inflation. For meat, the rise in prices can be linked to a number of factors, both domestically and globally.

“Global factors are more to do with feed, but there are other factors that can influence meat prices, such as imports. In South Africa, meat is supplied to a larger extent by commercial producers whose production depends on production costs of which feed constitutes more.”

Nkunjana said that producer abattoir door prices have been increasing over the years. She said this could be connected to rising production costs such as feed, electricity, and fuel prices.

“By the end of quarter three of 2021, the average producer prices for chicken fresh, chicken frozen, and Individual Quick Freezing, had all increased by 19.7%, 16.5%, and 14.8%, respectively, when compared to the same period the previous year.

“For beef, the prices are currently high because of elevated feed costs. More than 70% of beef consumed in South Africa is produced in feedlots (an area or building where livestock are fed or fattened up). The demand for South Africa’s beef domestically and globally is significantly higher this year.”

She said South Africa had recorded the highest beef exports in 20 years.

“Beef exports for the first seven months of 2021 were 211% higher when compared to the first seven months of 2020 and 381% higher when compared to 2019.

“Like beef, the number of slaughtered sheep was lower between July and August 2021 (918 848 units) when compared to the same period in 2020 (954 947 units). This resulted in 36 099 units or 4% less for 2021. This can be attributed to a dryer environment in the main sheep-producing areas.”

Pork slaughtered numbers slightly increased for the period June-August 2021 (908 145 units) when compared to the same period for 2020 (860 891 units).

This, she said, was 5.5% higher, but pork retail prices remain high mainly due to feeding costs and substitution towards cheaper protein products.

She said poultry, which can be considered as the preferential protein source in South Africa, as it is consumed by most people and it is the cheapest source of animal protein, followed the same path as the other meat products.

“The retail prices for chicken giblets and Individual Quick-frozen per kg were 19% and 17% higher, respectively, in August 2021, when compared to August 2020. This rise can be attributed to several factors, such as broiler production prices, which have increased when compared to the same period the previous year, and the decreasing poultry imports while the local supply is not necessarily sufficient. These factors resulted in more pressure on retail prices for chicken meat.

Global Market

“In South Africa, the poultry sector is the biggest agricultural sub-sector, and it was of the most hard-hit sub-sectors by feed cost because it’s the most dependent sector on soya bean and yellow maize, which constitutes at least 70% of the production costs.

“Given the current global uncertainty in the grain and oilseed market, it is not easy to make conclusive decisions as to when the prices for meat can decelerate. We are approaching the festive season, which normally increases the demand for meat. Given the current demand for meat, both globally and domestically, it is likely that prices for meat (will) remain elevated until the global market situation improves.”

She said for businesses that served meat, in the short-to-medium term, they were likely to buy meat at relatively higher prices than normal and that those prices would be subsequently transmitted to consumers.

Nkunjana added: “To maintain prices, a number of things need to happen, but most importantly, feed prices will be a key determinant of that as well as controlling disease outbreaks. These two are key to expanding production both domestically and globally. This rise is also attributed to higher shipments mainly to Mexico, Cuba, Angola, and other diverse markets.”

Peter Gordon, the CEO of Sampa, said they have also seen a significant increase in raw material prices.

“With respect to processed meat, polony, viennas, etc… as most ingredients and packaging material is imported, and the rand and dollar value has weakened by 10% in the past quarter. This is one of the contributing factors to the inflated pricing.

“There is also a shortage of supply as a direct result of the riots in July. The riots also forced prices higher by as much as 80% for mechanically deboned meat (MDM), a key raw material of which 100% is imported.

“Global shipping cost increases, fuel price increases, etc… have all resulted in significant upward price pressure on every aspect of manufacturing. MDM prices have come down but to a new normal, which is about 60% above prices in the first quarter of 2021.

“The prices are unlikely to return to their lows again. Food, gas, electricity and fuel price inflation is driving South Africa’s inflation, and it shows little sign of changing anytime soon.”

Rise in demand

Meanwhile, Zola Brunner of Chicken Facts said with holidays, and the festive season, the demand for chicken would rise again.

“As we all know, fuel prices are a basic contributor to the cost of doing business. A rise in the fuel price causes a ripple effect through the economy. As a result, ChickenFacts has compiled its own fact sheet to record these price increases.”

She said ChickenFacts compiled a report for December, just before the festive season.

“It is concerning that poultry prices have risen above inflation for the last 10 years. The main contributor to this price rise is the cost of chicken feed, droughts, avian flu, SA’s recent looting incident, but the prices of fuel and increased tariffs on chicken imports are also a major concern,” she said.

Brunner said as a comparative exercise, ChickenFacts also looked at chicken prices around the world as a percentage of earnings per country.

“The main conclusion from this fact sheet is that the price of chicken and chicken products should be of major concern and that the poultry industry should be investigating ways to open up the industry to new players, address concerns around the shortages of feed, and encourage access to markets for exports.

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