Local primary producers in the red meat sector are facing significant headwinds with the persistent drought brought on by El Niño, rising costs and ongoing animal health issues such as foot-and-mouth disease (FMD) contributing to the sector's lacklustre performance this year.
Roelie van Reenen, the supply CEO at Beefmaster Group, said constrained economic conditions and a weak consumer demand have resulted in farmers struggling to get the prices needed to sustain their businesses.
“Our food remains among the most affordable in the world. However, low economic growth, high unemployment, the rising cost of electricity, fuel expenses and inflation are placing immense financial strain on consumers,” Van Reenen said.
This as data reveals that South Africa’s population growth has outpaced economic expansion over the past decade, compounding pressure on resources and services.
“This makes it increasingly challenging for people to access the nutritious food their families need, which in turn impacts the ability of food producers across the supply chain to get their products to market,” he said.
This sentiment is also echoed by findings from PwC, released earlier this month, which found that households are cutting back on food purchases due to financial pressures. In 2023, food and beverage sales volumes per capita at grocery stores and supermarkets fell by 3.2%, despite an overall salary increase of 5% being outpaced by inflation, which averaged 6%.
However, Van Reenen said he is hopeful the economy will improve, which will improve consumer spending power, which may stimulate demand and have positive spin-offs for farmers - thanks in part to the introduction of the Two-Pot Retirement System.
“We are also encouraged by the recent decrease in the interest rate, with signs showing that we may be entering a period of disinflation,” he added.
The latest data from Statistics SA shows that food inflation in September 2024 was 4.1% higher year-on-year, with deflation occurring for beef (rump steak, corned beef, mince, stew brisket, fillet, sirloin), amongst other red meat products.
Meanwhile, Van Reenen refutes the notion that importing live sheep and cattle from neighbouring countries leads to lower prices for South African farmers. “This is simply not true. Data from 2015 to July 2024 shows no correlation between live animal imports and local slaughter prices. In other words, importing live animals does not depress prices for primary producers,” he said.
However, he notes a different scenario when animals are slaughtered in neighbouring countries and the processed meat is imported into South Africa. “In that case, it negatively impacts prices because consumer-driven supply and demand determines product pricing,” he said.
Van Reenen said it was important to prioritise market access for local primary producers, with abattoirs playing a critical role in the supply chain.
Data from the South African Meat Industry Company shows that there were 421 classified and non-classified abattoirs in South Africa in 2016. Today this figure has decreased to 333, meaning that over the last eight years, 88 abattoirs have closed.
Van Reenen said it is in the best interest of all role players in the supply chain to ensure that abattoirs remain operational
“If abattoirs don’t have throughput, they can’t survive. Abattoirs in the Northern Cape are not running at optimum capacity, which threatens their sustainability. Also, if abattoirs are not consistently supplied with animals to process, then they cannot create markets for primary producers’ products. This in turn threatens the slaughter price,” Van Reenen said.
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