Market Synopsis

Meat inflation decelerates further to less than 1%

The latest update on South Africa’s consumer inflation shows headline beating expectations to land at 5.2% in April 2024 from 5.3% in March. Monthly, headline inflation nudged 0.3% higher m/m underpinned by rebound in core items and fuel price pressures.

Senior Agricultural Economist at FNB Commercial Paul Makube says food inflation continued to decelerate and reached the lowest level in 46 months at 4.4% y/y in April 2024 from 4.9% y/y in March. Further deceleration across most food categories, except for fruit and vegetables, unpinned this downbeat inflation outcome.

He says that monthly food inflation lifted 0.2% m/m following a 0.1% m/m decrease in February and March.

“In contrast, global food inflation as measured by the United Nation’s Food and Agriculture Organization (FAO) continued to trend in negative territory with the April update coming in at -7.4% y/y.

“In the meat subindex, prices came in a bit on the downside by slowing for the fourth consecutive month to 0.5% y/y in April from 0.8% y/y in March (figure 1). The monthly trend however shows a third consecutive decrease by 0.3% m/m on the back of higher volumes due to higher slaughter rates and a rebound in production in poultry following the avian flu-induced culling late in 2023.”

Makube said this trend is likely to continue in the medium term due to the seasonal downturn in demand during the winter months and increased availability.

However, he says, the FAO global meat inflation decelerated further to 1.6% m/m in April from 1.8% in March but continued to trend negatively for the sixteenth consecutive month at -0.4% y/y in April 2024.

“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.”

Makube says a drilldown into the meat category shows pork chops and pork ribs posting biggest decreases of 15.2% ( R15.95/kg) y/y and 11.6% (-R12.87/kg) y/y respectively (table 1).

In the beef category, he said, beef rump stake was the biggest loser with a decline of 10% (-R17.95/kg) y/y followed by beef mince and T-bone with decreases of 4.3% (-R4.62/kg) y/y and 4.1% (-R5.54/kg) respectively.

“ What colloquially referred to as “low value” items continued to post tong price grains with beef offal increasing by 0.3% (+R0.13/k) m/m and 1% (+R0.50/kg) y/y, and mutton/lamb offal up by 0.1% (+R0.07/kg) and 0.3% (+R0.19/kg).

“These more than offset gains for chicken meat which remained sticky on the upside across all portions with fresh whole bird prices being the biggest gainer lifting 10.8% (+R6.22/kg) y/y at R63.81/kg. The individually quick frozen (IQF) portions increased by 1.2% (+R1.10/kg) at R93.60/kg (table 2).  However, monthly pressures due to subdued demand coupled with increased stocks saw a slight reduction of 2.2% (-R1.45/kg) and 0.3% (-R0.23/kg) m/m respectively for whole chicken (fresh) and chicken portions (fresh) while IQF fell 0.8% (-R0.23/kg) m/m,” he said.

Beef prices relatively firmer so far in May 2024 despite increased availability

Makube says analysis of weekly livestock prices on the domestic beef market so far for May shows that although under pressure during midmonth, average class A carcass prices for the first three weeks were a bit better relative to the same period last year (figure 3a). Class A carcass prices lifted 1.7% (+R0.91/kg) y/y.

However, the Class C category still trails last year’s by 5.9% (-R2.71/kg).

The weaner market continued to buck the seasonal trend with prices increasing by 3.6% (+R1.13/kg live weight (LW)) m/m and 2.1% (+R0.65/kg LW) y/y.

“We saw a similar trend in the sheep carcass market with average class Cs for the first three weeks of May falling by 1.7% ( R0.91/kg) m/m and 1.9% ( R1.02/kg) y/y as illustrated in figure 3b. Feeder lambs posted monthly gains of 2.6% (+R1.15/kg LW) m/m and were 2.8% (+R1.22/kg LW) higher y/y.

“Except for the IQF which extended losses with a decrease of 1% (-R0.32/k) m/m and still down by 6.3% (-R2.07/kg) y/y, poultry prices are so far mostly on the upside underpinned by the resilient demand (figure 3c). Meanwhile, low value items have enjoyed strong price growth due to the seasonal upswing in demand as we head into the colder months.”

He said monthly pressure in the pig market saw pork and baconer prices falling by 1.5% (-R0.47/kg) and 1.3% (-R0.41/kg) m/m respectively.

“However, the average pork and baconer prices for the first three months of May were up by 5.9% (+R1.76/kg) and 0.3% (+R0.11/kg) y/y respectively as illustrated in figure 3c.”

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