These include: – Ongoing herd-rebuilding initiatives could result in the firming supply of calves over the next 24 months. – Lower feed costs could provide scope for increased feedlot
Looking Ahead The big question that emerges from this is: Are livestock and beef prices set for a downward price trend over the months to come or was the recent price drop simply a blip in a more persistent upward trend? Our view is that carcass prices are likely to remain under pressure due to constrained demand over the coming 12 months. This is also likely to filter through and result in lower calf prices. Fundamentally these views are underpinned by: • High-interest rates are likely to persist, although there might be marginal decreases over the next 24 months (see the dashed line in Figure 2.2 above). This will depress retail demand and, as mentioned above, filter through to lower calf demand from feedlots. • Fuel and food inflation is likely to moderate but it is unlikely that this will free up disposable income for red meat consumers. Price levels for fuel and food are expected to remain elevated due to exchange rate dynamics and cost pressures in food value chains. In the case of the latter,
stocking rates which would add to downward momentum in prices (see grain section below).
Notwithstanding the fundamental issues noted above, the South African livestock market is currently characterised by high levels of uncertainty and erratic price movements. This is centred around disease issues that have, over the past year, resulted in bans on animal movement, cautious bilateral exports, and supply gluts when infected animals, that have been quarantined, are cleared
for slaughter and enter the local wholesale and retail markets.
The South African livestock market is currently characterised by high levels of uncertainty and erratic price movements Global beef market dynamics could provide opportunities and upside scope to our view above, with key markets such as the US, having lower supply due to herd liquidation over the past seasons. The US is a key supplier to markets to which South Africa is also supplying under bilateral agreements. These include China and the Middle East. Over the outer months of the outlook period, room for upward price scope could therefore come from growth in exports, higher global prices, and exchange rate dynamics, but to exploit the opportunities that tighter global markets could bring, disease management in South Africa would have to be on par.
the most notable of these pressures is the increased costs and risks associated with load-shedding.
• Supply-side dynamics could also add to the scope for lower beef prices over the coming months.
20
Made with FlippingBook interactive PDF creator