SA meat price inflation to remain subdued due to foot-and-mouth outbreak
Exports ban by several neighbouring and other countries might mean more supply locally and lower prices for consumers
SA’s meat price inflation could remain subdued in 2019 as a ban in exports could increase local supplies, according to the Agriculture Business Chamber (Agbiz), an organisation that represents commercial farmers and agribusiness.
The SA beef industry generated about R2,06bn in exports in 2017.
Foot-and-mouth disease broke out in Limpopo in January, resulting in the World Organisation for Animal Health temporarily suspending SA’s disease-free zone status. Neighbouring countries including Zimbabwe, Botswana, Namibia, eSwatini and Mozambique announced a ban on SA meat imports pending the containment of the disease.
Foot-and-mouth can infect people through skin wounds or the mucous membranes in the mouth after handling infected stock, or by drinking infected milk. But it is not introduced by eating meat from infected animals. Generally, infection of humans is temporary and is not considered a major public health hazard.
In a market update on Monday, Wandile Sihlobo, head of agribusiness research at Agbiz, said in addition to the meat price inflation, beef and sheep slaughtering activity are important data to keep an eye on.
“Figures for January 2019 paint a mixed picture. On the one hand, farmers reduced the number of cattle slaughtered by 29% month-on-month, and 6% year-on-year, whereas sheep slaughtering activity fell by 41% month-on-month, but improved by 2% year-on-year.
“The sharp decline on a monthly basis are more of a correction, following a busy period with higher demand for meat over the festive season. But the annual decline, particularly on beef, is somewhat concerning as it is unclear if farmers reduced slaughtering because of the temporary ban on exports or other events,” said Sihlobo.
“Be that as it may, it is hard to make a call on a one-month data point. We will monitor the activity over the coming months as the decline in slaughtering would also imply that there might not be an increase in meat supply as we initially anticipated, and the same goes for the assumed price decline over the coming months.”
But Sihlobo noted that the fear of a notable decline in SA beef exports in 2019 following an outbreak of foot-and-mouth disease could be eased, after the department of agriculture, forestry & fisheries and the livestock industry released a statement earlier in March indicating that there are ongoing discussions with the Middle East and the African countries to lift the ban on South African beef.
There seems to be some progress, as trade in pork and dairy products have been restored in some markets, said Sihlobo.
Meanwhile, fresh and chilled beef exports increased five-fold over the same period, from 8,292 tons to 18,080 tons. Within the top 10 destinations for SA frozen beef export markets, there are continental markets (Lesotho, Mozambique, Angola, Mauritius, Swaziland and Egypt), the Far East region (Hong Kong, China and Vietnam), as well as the Middle East (United Arab Emirates).
“The outcome of the ongoing engagement will have implications on the meat price inflation in the coming months. Our baseline view has been that SA’s meat price inflation could be subdued this year as a ban in exports could increase local supplies.
“We will closely monitor these developments in order to ascertain the impact on overall food price inflation for the year. So far, we still see SA’s food price inflation at a region of 5%,” said Sihlobo.