In general, the demand and supply forces are key price determinants of almost all agricultural products. For meat and its products, the average purchase price can be also influenced by the tonnage of other types of meat sold at a particular time and other factors. For example, demand for a particular part of the meat that is considered high quality, factors such as tenderness, healthiness, consumer budget or its origin all play a crucial role in prices. Lamb is normally more expensive when compared to beef or chicken and that has to do with its characteristics such as the ones mentioned above.
Regarding food inflation prices, in South Africa meat is the third highest weighted food group after processed and unprocessed foods. For that reason, the impact of meat prices on the overall food price inflation will be noticeable, especially when one adds food commodities used for meat production.
Livestock production and its products thereon depend on production costs which account for at least 70% of the feed cost in the case of poultry. The higher the feed prices, as is currently the case, the more expensive the meat or its products are.
In August 2021, lamb, beef, pork and poultry producer prices were noticeable higher when compared to the same period the previous year. Beef classA2/A3, chicken-fresh portions, lamb class A2/A3 and pork baconer were 17%, 16%, 10% and 2% higher in August 2021 when compared to August 2020.
End of August, livestock slaughter numbers are lower this year since June 2021. As a result, beef prices are currently high because of elevated feeds costs, and the demand for South Africa’s beef both domestically and globally compared to this period last year. Beef exports for the first seven months of 2021, were 211% higher when compared to the first seven months of 2020 and 381% in 2019. As the result, the country has recorded the highest beef exports in 20 years.
When comparing June-August 2021 to June-August 2020, cattle slaughter numbers across commercial abattoirs in South Africa declined by 7% and 2%, respectively, thus putting more pressure on retail prices. The same applies to sheep slaughtered for the same period which declined by 10% and 3%, respectively.
Following a slight decline in pigs supply in July 2021, when comparing August 2021 to August 2020 an increase of 13% was observed, but pork retail prices remain high mainly due to feeding costs.
Poultry which can be considered a staple food in South Africa followed the same path as other meat products. Retail prices for chicken giblets and Individual quick-frozen (IQF) 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 sufficient enough to meet local consumption.
As a result of the above-mentioned issues related to meat production, prices for processed meat products have significantly increased in recent months. Retail prices for Ham 500g, polony per kg, sausage 500g and cheddar cheese were 20%, 16%, 11% and 5% higher in August 2021, respectively, when compared to August 2020.
Based on data from the Red Meat Abattoir Association, normally, the supply of meat increases from November – December of every year. This is due to demand fuelled by the festive season. Under normal circumstances, lower feed costs and an increased supply tend to ease retail prices for meat and meat products. But, prices for soybean and yellow maize in the global market will continue determining meat prices due to global market forces which are currently unpredictable due to production shocks from major producing regions. For that reason, meat prices during this festive season are likely to be higher when compared to other seasons which bodes well with producers’ aspirations as opposed to consumers. But the next few weeks will be crucial as we approach Christmas and how the current global market situation unfolds, especially for vegetable oils and yellow maize.
