Market Synopsis

Surprise recovery in the beef market in early May

Analysis of weekly livestock prices on the domestic beef market so far for May shows that although under pressure towards midmonth, average class A carcass prices for the first two weeks were a bit better relative to the same period last year (figure 2a). However, the Class C category still trails last year’s by 6.6% (-R3.04/kg).

Senior Agricultural Economist at FNB Commercial Paul Makube says the weaner market seems to have weathered the storm due to weaning pressure with prices ahead of the same period last year by 1.5% (+R0.48/kg live weight (LW)).

“We saw a similar trend in the sheep carcass market with average class Cs for the first two weeks of May easing by 0.8% ( R0.45/kg) y/y as illustrated in figure 2b.  However, they edged 0.6% (+R0.32/kg) higher m/m. Feeder lambs posted monthly gains of 3.1% (+R1.33/kg LW) m/m and were 4.4% (+R1.89/kg LW) higher y/y.

“Except for the IQF which softened by 0.8% (-R0.27/k) m/m and still down by 6.1% (-R2.02/kg) y/y, poultry prices are so far mostly on the upside underpinned by the resilient demand (figure 2c). Meanwhile, low value items have enjoyed strong price growth due to the seasonal upswing in demand,” says Makube.

He said that monthly pressure in the pig market saw pork and baconer prices falling by 1.7% (-R0.56/kg) and 1.8% (-R0.57/kg) m/m respectively.

“However, the average pork and baconer prices for the first two months of May were up by 5.8% (+R1.72/kg) and 0.3% (+R0.10/kg) y/y respectively as illustrated in figure 2c.”

The latest update on global meat inflation showed a slight rebound of 1.6% m/m in April 2024 which is a third consecutive monthly increase since the index reversed course earlier in February, according to the United Nation’s Food and Agriculture Organization (FAO) data.

Makube explains that the combination of the avian influenza-induced production cuts and strong import demand for poultry in the Middle East, as well as the uptick in bovine and sheep prices underpinned the recent upside in the monthly meat inflation.

“Poultry meat inflation posted the biggest increase of 2.7% m/m followed by bovine and sheep meat with monthly increases of 2.3% and 1% respectively.

“However, the annual trend in meat inflation remained in negative territory for the sixteenth consecutive month at -04% y/y (figure 1a). Poultry, pig, and sheep meats remained in deflation in 2024 with decreases of 1.6%, 2.3%, and 21.7% y/y respectively in April 2024. Beef was however an exception after posting a modest gain of 4.9% y/y in April which is the sixth consecutive annual increase.”

Meanwhile, says Makube, forecasts for the world beef and sow herds showed contraction of 0.3% and 2% y/y respectively to 206.33 million and 69.95 million head in 2024 according to data from the United States Department of Agriculture (USDA).

“For beef, most of the decrease was for the US as high feeds costs and drought in some areas in the past few years forced producers to reduce their stocks by 2.9% and 3.4% y/y respectively in 2022 and 2023.”

Makube says a further contraction of 2.5% y/y is expected for 2024. In South America, Argentina and Brazilian herd forecasts were reduced by 2.1% and 0.3% y/y respectively for 2024.

The Chinese sow herd is forecast to drop by 3.7% y/y to 412 million herd in 2024 which poses upside risk to international prices due to a potential surge in imports.

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