The latest updates on food inflation for both South Africa and the world show a deceleration in December 2021, that’s according to FNB Agricultural Economist Paul Makube.
He said that Statistics South Africa’s December 2021 food inflation print slowed for both the fourth consecutive month to 5.9% year on year from 6% in November 2021.
“Underpinned by elevated raw commodity prices in the grains, meat, and vegetables oils, the overall average food CPI for 2021 accelerated sharply by 6.5% year on year relative to the 4.6% recorded in 2020,” he said
In the animal protein category, he said that meat price inflation jumped 1.2% month to month which is the biggest monthly increase since May 2021.
“After decelerating for three consecutive months since August 2021, the meat CPI rebounded by 8.6 year on year in December with increases of 20.4% and 15.7% for the prices of beef rump steak and beef offal respectively, while pork chops, mutton/lamb loin chop and IQF chicken portions rose by 12%, 8.9%, 8.4% year on year respectively.
“A combination of limited availability due to the reduced livestock slaughter in 2021, the increased poultry tariffs and the subsequent centration in imports kept the overall meat price complex on the upside.”
Makube pointed out that livestock slaughter figures for the 2020/21 (Nov-Oct) season saw declines of 1.4% and 4.9% year on year respectively for cattle and sheep.
“The pig market was however the exception with the total seasoned slaughter rising by 6.3% year on year.
“This trend continued into the 2021/22 slaughter season (Nov-Oct) with cattle and sheep slaughter numbers for November 2021 trailing the previous season by 0.4% and 5.5% respectively. Port remains an exception with increases of 15.4% month on month and 7% year on year.”
Globally, said Makube, the meat price as measured by the United Nations Food and Agriculture Organisation ( FAO) showed a further monthly decline for a fifth consecutive month at -0.1% month on month.
“Although still elevated at 17.4% year on year, the December meat price inflation slowed for the third consecutive month at 17.4% year on year as the increased availability of poultry and ovine exports weighed heavily on prices.
“Meanwhile, the average prices for the first three weeks of January 2022 still shows an uptrend across most categories except for the port market that remains under pressure with decreases of 17.8% and 7.7% for porkers and baconer respectively,” he said.
International update on beef markets
The US import market continued to post gains in prices underpinned by the relatively good demand amid limited availability from Australia and New Zealand. Logistics challenges continued to resurface with shipping delays and labour shortages reportedly being a challenge in some of the ports.
In Australia, favourable rains have boosted production conditions and subsequently prices as producers held back on their stock. This saw the country’s benchmark eastern young cattle indicator (EYCI) reaching a new record in last week’s trade.
Domestic Beef Market update
Beef prices saw further weakness during midmonth with decreases across the boarders expected due to the seasonal dip in demand post the December holidays. However, the current beef prices are holding well relative to the last year with Class As and Cs both over 7% higher relative to last year.
We saw a similar trend in the weaner market with prices off the 2021 peak at R40.28kg live weight (LW) which is however still 5% ahead of the 2021 levels for this time of the year.
Good rains have ensured good grass cover and producers have held back on their stock for the herd rebuilding. However, this comes with its own perils with animal health costs likely to increase due to the increased incidences of animal pests and diseases. The price of grains particularly maize, a major ingredient in livestock feed, also remains sky-high due to the inclement weather that caused crop damages and further threatening yield prospects for the 2021/22 harvest.
Outlook
Although a bit softer, beef prices are expected to rebound due to limited availability.
Weekly Summary of the sheep market
International sheep market update
In Australia, indicator prices for both lamb and mutton came under pressure and weakened in last week’s trade to limited demand and higher supplies. Meanwhile, favourable seasonal conditions as the La Nina weather pattern to manifest will help improve weights.
Domestic Sheep market
Softer seasonal demand pulled the lamb and mutton prices from the December high. However, the current lamb and mutton process both remain stronger relative to the 2021 levels by just over 4%. The long-term average is even stronger by over 8% respectively relative to the 3-year average for this time of the year.
In the feeder lamb market, prices reversed late 2021 gain of closer to R45/kg weight (LW) due to the limited update. Feeder lamb traded last week at R40.52/kg LW, which is down 1.6% on the week earlier but still 2% higher year on year and 10% above the 3-year average for this time of the year.
Weekly pork market
International Pork market update
In the US pork market, there has been relative downward pressure on process due to demand concerns emanating from the Omicron wave of infections and interest rate hikes in the outlooks.
Domestic pork market update
Latest developments on the pork market indicate downward pressure on prices due to the seasonal dip in demand. Both baconer and porker prices are now way below the 2021 levels by 7% and 19% respectively. However, at current levels pork and baconer prices are still way above the 3-year average by 17% and 31%. With feed prices still unrelenting at higher levels, we can expect further downward pressure on profitability in the industry.
Weekly poultry market update
Although easing from the December 2021 high due to normal demand trends, broiler meat prices remain quite elevated relative to last year. Limited stock amidst the increased tariff regime and lower imports continue to provide upside support for the poultry market. The pace of poultry imports for 2021 has been relatively slow thus providing some breather for the local market. Total imports for November 2021 were marginally down by 0,8% month on month at 32.64 thousand tons and were still 17% lower relative to the same month last year. The cumulative YTD imports reached 373.63 thousand tons which is 12% lower year on year, the lowest level in the past four years and 80% of the 3-year average to 2021.
Although the meat/maize ratio improved modesty in the past month on the back of strong broiler meat prices, the elevated maize prices continued to prevent it from edging above the breakeven level.
Outlook
Tight domestic stocks and contraction in the volume of imports will continue to provide upside support for the market. Nonetheless, the good rains turned out to be bad for the industry as heavy rains caused damages to the grain fields thereby exerting upward pressure on feed grain prices.
Raw feed input price update
Extensive rain damage to crops in some areas dampened the 2021/22 grain production outlook. Prices thus remain elevated which places downward pressure on the profitability of livestock feeding.
Although the nearby yellow maize futures reached a high of R3.833/ton by mid December 2021, they have fallen to R3.558/ton but still not enough to reduce pressure on feed costs. In the oilseed complex, we saw a similar trend with soybeans above R7000/ton with the nearby sunflower futures reaching R9744/ton recently from a high of over R10 000/t in 2021.
