Red meat prices may still seesaw for a long time

For the first time in a very long time, the carcass price of C-grade sheep meat is cheaper than that of A-grade beef, and due to several factors contributing to the seesaw of carcass and meat prices, the rapid increases and decreases may continue for a few more months.

By Alani Janeke

The carcass prices for A-grade beef, or super (as the industry refers to it), stood at R70/kg on Tuesday and fell to R68/kg and R65/kg on Wednesday.

“A-grade prices ended up at R85/kg three weeks ago, but earlier this week they dropped to R65/kg,” says Paul van Vuuren, farmer, feedlot owner and managing director of André Kock & Sons Limpopo. 

One of the factors contributing to the higher prices was the high price of animal feed (chop) a few months ago. “Chop was priced between R5 000 per ton and R8 000 per ton six to eight months ago, and feedlots had to manage those high input costs with limited purchase management. It caused a void that contributed to the higher carcass prices.”

Van Vuuren says another factor that has contributed to the current decline is consumer resistance to higher shelf prices, which has led to the current supply and demand situation. The outbreak of foot-and-mouth disease in Karan Beef’s feedlot resulted in their business coming to a standstill for some time, which also had a significant impact on the market.

Consumers Under Pressure

Unlike A-grade prices, which are declining, C-grade prices are rising. Farmers in Limpopo say a rise in C-grade prices traditionally occurs at this time of year because fewer animals are usually available in the market during the winter.

Wynand Viljoen, owner of the Weltevrede abattoir outside Bethlehem in the Free State, says another contributing factor to the rise in prices of C-grade meat is consumers’ increasing demand for cheaper meat products because they cannot afford more expensive A-grade meat. 

“Along with the more expensive A-grade meat price, the price of mechanically deboned chicken, which is usually imported and cheaper on our shelves, has also risen due to the bird flu in Brazil. This, combined with the pressure on the economy, all adds up to consumers buying cheaper meat products. As it is winter, there is also a rise in purchases of meat for stews and cattle tails. I can clearly see these trends in the demand for meat from our abattoirs.” 

“The weekly prices we received on Wednesday, July 9, are that A-grade beef is trading around R80/kg for carcasses, while C-grade sheep meat stands at R76/kg. This is the first time in a very long time that beef is more expensive than sheep. Note, sheep, not lamb.

“Consumers are definitely offering resistance to the high prices,” says Dewald Olivier, CEO of Red Meat Industry Services (RMIS). This means that A-grade products sell more slowly, which puts pressure on carcass prices and causes them to drop rapidly.

Another reason contributing to the higher beef prices is that farmers are currently holding back more cattle to build herds. This comes after the dry conditions of last year prompted several farmers to offer more animals at lower prices in the market, resulting in lower meat prices for farmers.

60% Fewer Cattle Slaughtered This Year

The RMIS’ slaughter figures show that a total of 1 116 196 cattle were slaughtered between January and May this year. This is 60.4% less than the 2 821 701 slaughtered in the same period last year.

“Namibia has certainly been exporting fewer animals to South Africa this year, and this is also contributing to the lower slaughter rates,” says Prof. Johan Willemse, independent agricultural economist. 

Following the good rains in this neighbouring country, cattle farmers are also expanding their herds, while three exporting abattoirs offer more options to farmers.

According to Willemse, even the carcass prices for B-grade beef traded fairly high at R70/kg.

Olivier says there is still no clarity on when Karan Beef will be fully operational again.

“The market can still go up and down for a while,” says Willemse. “Remember, after all the animals have been slaughtered at Karan Beef, regulations require the premises to be vacant for some time, and, among other things, disinfected. So, the situation around meat prices is not going to be resolved quickly in the next few weeks.”