Oktober 2013
86
Focus on livestock
Taking a look at
global meat prices
MARYNA BRITS, RPO
Global meat prices have increased significantly over the past three years,
as higher income and increased urbanisation in developing economies
drives aggregate demand even higher.
According to the agricultural outlook (for the period 2013 to 2022) of the
Bureau for Food and Agricultural Policy (BFAP), the beef supply response
has been limited by depleted stock numbers in key production regions. At
the same time, the high cost of feed grains has reduced carcass weights,
further limiting supply.
While sheep numbers reached record lows in 2009/2010, flocks have in-
creased again over the past two years as a result of improved market
conditions, with the lamb price reaching record levels in 2011. Improved
weather conditions in Australia and New Zealand have further supported
the recovery in flock size. New Zealand and Australian lamb prices have
declined steadily through 2012 and 2013 as a result.
The OECD Food and Agriculture Organisation (FAO) outlook projects
that world consumption of meats over the next decade will continue to
expand at a moderate rate compared to the past decade. While consump-
tion growth in developing countries remains strong, demand in devel-
oped countries seems to have reached saturated levels. World poultry
consumption is projected to grow by 1,9% per annum over the next
decade, followed by pork (1,4% per annum), beef (1,4% per annum) and
sheep meat (1,2% per annum).
Other projections by the OECD-FAO include the following:
The recovery in meat prices has already induced a phase of rebuild-
ing stock numbers and over the long run production will expand fur-
ther in order to match consumption of meat. Stock rebuilding over
the past two years is evident, with production expected to increase
by 1,4% in 2013.
Whereas beef prices are expected to trade sideways from 2013 on-
wards, pork markets are expected to follow a downward cycle to 2017,
before trading largely sideways for the rest of the outlook period.
The price of lamb is projected to decline sharply in 2013 from record
levels in 2011 as supply out of major exporting countries such as
Australia and New Zealand increases, with demand from the EU de-
clining following the debt crisis. Over the rest of the outlook period,
the price is expected to trade sideways, with a slight annual increase
from 2015 onwards.
South Africa
South African lamb prices show a strong correlation with international
lamb prices, due to reliance on imports in order to meet domestic de-
mand. After increasing significantly on the back of soaring international
prices due to limited exports out of New Zealand in 2011, lamb prices fol-
lowed the sharp decline in international prices in 2012. The depreciation
in the rand provided some protection, leading to the decline in domestic
lamb prices being slightly less than international prices.
The domestic beef market has been rather volatile in recent years, as
supply and demand fluctuates based on extreme weather conditions,
combined with changes in economic prospects. The price increased in
2010 as South Africa’s hosting of the Soccer World Cup, combined with
an economic recovery, domestically drove demand higher. Significant
increases in feed costs in 2011 and 2012 pushed the price up further, de-
spite a much slower growth in the demand. Extremely dry conditions in
the beginning of 2013 have induced significant stock reduction, pushing
the price down.
Calf prices increased significantly in 2011 before easing again in 2012
as high feed grain costs resulted in smaller feedlot margins compared
to 2010, when feed grains were cheaper and the demand for beef was
strong. With the cost of feed grains still high, feedlot margins will remain
under pressure in 2013, resulting in a further reduction in calf prices. As
the effect of stock reductions becomes evident, calf prices are expected
to increase again from 2014.
Over the next decade, the growth in the consumption of chicken meat
(47%) is projected to outpace the growth for all the other types of meat,
mainly due to its competitive price relative to other proteins. Beef con-
sumption is expected to grow by 27% (compared to the 10% of the
period from 2002 to 2012). Although the sheep meat market is relative-
ly small, a growth of 16% (compared to a contraction of 18% over the
period of 2002 to 2012) is expected over the next decade.
In the long run, the demand and supply of beef is projected to grow at a
constant rate, improving on the growth that was recorded over the past
decade. The typical cycles will recur as the restocking of herd numbers
takes place on the back of significant increases in prices (as in the 2011
season), which will be followed by a period of slower growth in prices due
to increased supply. Poor weather conditions often cause unexpected
changes in herd numbers, creating volatility in the price.
Continued on page 89
SA Graan/Sasol Nitro
photo competition
–
Louis Jacobs 2011
