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Relief, then grief for red meat lovers

| Economic factors

Although the prices of red meat are expected to fall over the next two months due to the persistent dry weather conditions, consumers must be aware that the prices are expected to increase significantly from about March next year.

Paul Makube, senior agricultural economist at FNB, said on Tuesday that the prices of red meat are expected to fall in the short term, because farmers are reducing their livestock as a result of deteriorating pastures due to drought - the worst in more than 20 years - and the current high feed-grain prices.

Consequently, the price of red meat at a retail level is expected to fall by 8% to 15% between December and January next year, as more animals are being slaughtered by farmers, leading to an oversupply of meat in the short-term, Makube explained.

On average, beef and sheep prices at farm level are already marginally down by 1% and 2% respectively, with further declines expected as grazing conditions deteriorate due to a lack of rain.

He expects the low price of meat to be sustained in January next year due to an expected lower demand from cash-strapped consumers, who are likely to cut back on spending following the holidays and facing new expenditures like school requirements in the new year.

Despite the temporary relief on meat prices, consumers should not be misled, warned Makube, as the drought conditions affecting the agricultural industry will have negative consequences on food prices in the longer term.

He said red meat prices are expected to significantly increase from March and April next year as farmers start re-building their herds.

"Herd-building takes time. This will inevitably lead to a shortage in supply in the long term, because of a limited number of animals entering the food supply chain," said Makube.  

"Therefore, the increasing price of meat at farm level, coupled with a contraction in meat supply, will ultimately result in retailers passing on costs to the consumers."

In contrast, consumers who prefer pork and poultry can expect to pay more in December as prices are expected to trend slightly upwards due to the increased demand ahead of the festive season, said Makube.

Meanwhile, South African consumers should also brace themselves for an increase in maize and wheat prices amid the countrywide drought and continued rand weakness, Grain SA warned last week.

South Africa had a R12bn loss in maize production last year and the drought could see the country become a net importer of the crop for the first time in seven years, Grain SA CEO Jannie de Villiers told Fin24. This could translate into a significant increase in maize and ultimately food prices.

Agri SA and the SA Agricultural Business Chamber (Agbiz) have also warned that the drought has an extensive reach that will have further socio-economic and food security ramifications at regional level.

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