Cattle farmers under pressure as beef prices look set to remain subdued
Maize prices have shot up because of the severe drought while the outbreak of foot-and-mouth disease in Limpopo has made situation worse
High maize prices and a downward spiral of beef prices are putting pressure on cattle farmers and could see many in the beef industry going out of business.
The situation has been worsened by a debilitating drought, a stagnant economy and the foot-and-mouth disease that broke out in Limpopo in January. The World Organisation for Animal Health temporarily suspended SA’s disease-free zone status.
This has seen neighbouring countries closing their borders. 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 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, the infection of humans is temporary and is not considered a major public health hazard.
“The last few months have not been easy for the South African beef industry, which has been hard hit by a high maize price, a debilitating drought and a stagnant economy,” said Roelie van Reenen, a supply chain executive at Beefmaster group of companies.
According to Van Reenen the rest of the year looks set to continue to be challenging for cattle farmers.
“The crop estimates committee’s forecast for 2019 maize crops sits at 10.5-million tons , which is 16% less than 2017/2018’s harvest production. In addition, the Agbiz/IDC Agribusiness confidence index, released in March 2019, shows that agricultural producers are still downbeat about business conditions.
“Add to this the fact that consumers are under financial strain due to increased fuel prices, higher electricity costs and more pressure on their bottom-line, and the question arises whether the local market is able to absorb the excess beef in production,” said Van Reenen.
The Agriculture Business Chamber (Agbiz), an organisation that represents commercial farmers and agribusiness, recently said in a market update that SA’s meat price inflation could remain subdued in 2019 as a ban in exports could increase local supplies.
Van Reenen said for SA’s beef industry to continue to be a global player, it is critical that it remains competitive, and agricultural export opportunities are met.
“In line with this, it is encouraging that select Middle Eastern countries have now opened trade to SA owing to government reinstating veterinary certificates for beef with these countries, following the outbreak of foot-and-mouth earlier this year. This is good news for local beef producers as the re-established beef trade will maintain local beef prices,” he said.
However, while good progress has been made, more needs to be done to ensure that the trade volumes from beef exports increase to the volumes seen before the outbreak disease, said Van Reenen.
“It is all our responsibility to ensure that the meat industry remains profitable, a stable source of revenue and employment, and stimulates the growth of commercial and emerging farmers, as it greatly contributes to the economy.”
Van Reenen said the industry is strongest when farmers and beef producers combine their efforts.
“There are feasible ways for cattle farmers to hedge against such tough times. Forming the right partnerships with players who recognise and understand the landscape for farmers, will encourage the long-term sustainability of cattle farmers’ business. It is also critical that cattle farmers incorporate mitigating strategies to hedge against pricing and economic pressures, which will ensure their competitiveness,” he said.
Van Reenen added: “Cattle farmers do need support given the many challenges in the industry. However, this is not a call on or responsibility of the government alone. It is vital that all industry players work together in supporting cattle farmers. .
“Specifically, we think that public-private partnerships in which [the] government and the private sector join hands to progress on a common goal, can go a long way to strengthen the local farming industry and create a trustworthy export industry that is renowned for quality beef products.”