Johannesburg – Red meat prices are expected to rise as high as 15% by December, according to projections by FNB.
Paul Makube, agricultural economist, said the increasing trend is due to the tightening supply of livestock. This is as a result of the drought last year, forcing farmers to “liquidate” their cattle herds, he explained. As farmers await rainfall, they are expecting to rebuild their herds.
“If the numbers increase then the production cycles will increase,” he said. Red meat slaughtering has been substantially higher this year compared to the past three years as a result of the drought. According to FNB, the cumulative sheep slaughter number is currently 111% higher than in 2015.
Rising consumer demand is also another factor contributing to the higher pricing ahead of the festive season. Demand outpaces supply. If the opposite was true then it would lead to lower prices, as a result of exports.
READ: Why meat prices are rising
For beef, a seasonal price increase of between R3.4 per kilogram and R5.7 per kilogram for Class A beef is expected. “Consumers that prefer to braai lamb can expect to pay between R5.6 and R9.4 per kilogram more for Class A lamb over the festive period,” stated Makube.
The rising red meat prices could benefit demand for pork, he explained. “Consumers would switch to more affordable meat,” he said. However, the same is not necessarily true for poultry, as imports may impact its pricing.
Trends observed in the previous year indicate that consumers are still able to “absorb” the increase in meat prices, explained Makube.
“Consumers have managed to maintain their consumption,” he said. Some consumers have opted to buy in bulk, to outweigh price increases.
Makube said this also depends on where you buy meat, because marketing costs are also incorporated in the pricing.
Impact of rainfall
Given the effect of La Nina, the counterpart to El Nino, rainfall levels are expected to normalise. Forecasts project neutral conditions for the 2016/2017 season. This will be good for farmers as this will improve pastures, explained Makube.
“If the supply of grass improves then farmers will be able to rebuild their herds, using grass which is less expensive than feed,” he said. This can help farmers reduce costs in the long term and improve margins and profitability levels.
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