Livestock market trends- ABSA - South Africa- 25th January 2020

Beef market trends

International beef market

Prices in the international beef market traded mixed this week. The price of topside, rump and brisket increased by 4.0%, 3.8% and 0.8% respectively week on week. The price of striploin and chuck declined by 6.1% and 0.4% respectively week on week. In the US, the high prices in December and the ample supplies of low-priced pork and chicken have created some short term downward pressure for beef cuts at retail, with rump, and some beef cuts substantially down from a year ago.

Local beef market

Week on week, beef prices were mixed in the different classes. The average Class A price declined by 0.3% to R44.85/kg and Class C prices moved 0.2% higher to R39.38/kg week on week. Namibia is not expected to sell any cattle to SA anytime soon, following the good rains they received; the cattle farmers in the country will be busy with their herd rebuilding process. Locally, the demand for weaners in SA is up slightly at the feedlots. Prices are generally at the same price levels as December. The uptake from consumers is still at low levels, which is in line with seasonality. The national ban of auctions continues to place producer cash flows under pressure.

Outlook

The global market expects an increase in demand from export markets for all protein; however, higher retail prices might reduce beef competitiveness vs. other proteins. The longer-term global protein demand which depends on global economic growth and consumer preference is looking stable to strong. Locally, the closure of all auctions in South Africa amid the FMD outbreak continues to cause uncertainty and puts producers under strain. Local beef prices are expected to follow a downward trend after the December period based on seasonal trends.

Sheep meat market trends

International sheep meat market

The international price of lambs and ewes decreased by 2.8% and 4.1% respectively week on week. The price of mutton ribs and shoulders remained unchanged week on week. Lamb slaughter prices continue to fall in New Zealand, with lamb kills taking priority during this off-peak season.

Local sheep meat market

This week, lamb and mutton prices traded mixed when compared to the previous week. The national average Class A carcass lamb price decreased by 3.2% to R70.12/kg and the average Class C carcass price increased by 4.4% to R54.83/kg. The price of merino skins remained unchanged at R45.71/skin this week. The Dorper skin price was up by 7.1% week on week at R30.74/skin. Compared to a year ago the price of dorper skins is 3.6% lower and the price of merino skins is 7.11% lower. Sheep meat prices are currently under pressure, which is in line with seasonality. Grazing conditions have improved over most of the Northwest Province, Free State, Mpumalanga, Limpopo and KZN after some beneficial rains during December and the first few weeks of January 2020. However, severe drought conditions continue over most parts of the Northern and Eastern Cape.

Outlook

Looking forward, the reduced sheep flock and strong demand from China is likely to keep global lamb prices supported in 2020. Locally, lamb and mutton prices remain subdued due to the availability of cheaper protein alternatives. Prices are expected to decline which is normal in January due to constrained demand.

Pork market trends

International pork market

The international pork market traded mostly positive this week with only the US loin price declining by 1.7% week on week. The US pork carcass price, US rib prices and US ham price increased by 1.7%, 2.1 and 4.6% respectively week on week. The import parity price for pork ribs increased by 2.8% and the import parity price of ham increased by 4.4% week on week. The phase one US-China trade deal will open up opportunities for US exporters to increase shipments to China. The US pork export demand is expected to be robust in 2020, due to expectations of increased exports destined to China and Japan, following the implementation of the trade agreements.

Local pork market

The local pork prices traded lower this week due to subdued demand. The consumer demand for red meat was low across the board, and that slipped through to pork too. The average porker price is 2.4% lower at R26.47/kg, while the average baconer price declined by 1.4% to R25.42/kg. The average cutters prices were 1.9% lower at R25.88/kg and the average heavy price was 2.1% lower at R24.61/kg. The sausage price was 5.9% lower at R18.83/kg. Pork prices are expected to follow beef and mutton prices lower according to seasonality. Pork remains among the cheaper protein alternatives available on the shelves, which usually attracts consumer uptake.

Poultry market trends

International poultry market

The international poultry prices traded mostly lower this week. The price of US whole birds and breasts decreased by 1.1% and 5.1% respectively week on week. The price of fresh MDM increased by 1.3% and the price of frozen MDM decreased by 0.9% week on week. Compared to a year ago the price of US whole birds and US chicken breasts are lower by 9.5% and 19.6% respectively. The price of US leg quarters increased by 0.7% and the price of EU leg quarters decreased by 4.7% week on week. Compared to a year ago the price of US leg quarters is 11.6% higher and the price of EU leg quarters are 20% higher. The US domestic and export demand is light to moderate and generally following typical seasonal movement. Supplies in the US are sufficient for current needs.

Local poultry market

The average poultry prices traded negatively this past week. The average price for frozen birds declined by 2.1% to R26.22/kg, the average prices for fresh whole birds also declined by 2.0% to R27.76/kg and IQF poultry prices were down by 1.2% to R24.40/kg week on week. After Brazil and the US, Poland is the third largest exporter of poultry to South Africa. The SA government has temporarily suspended imports from Poland, because of a bird flu outbreak in the country. This coupled with lower yellow maize prices due to expectations of a good local maize crop production will bode well for the poultry industry.

Outlook

Global feed prices might face some potential risks with the US-China trade negotiations, ASF, and weather. The signing of the phase 1 trade deal might support better access for US grains & oilseeds to China, which could be bullish for prices, while a worse ASF situation could be a upside risk for price. The recently agreed poultry masterplan will be positive for the poultry industry. ITAC was requested to investigate tariff protection since Q1 2019, the long-awaited tariff ruling is signed and the industry is awaiting the news to be published in the Government Gazette. The outlook on poultry is bullish supported by lower grain prices, a potential amendment to the import tariff and a suspension of imports from one of the largest importing countries.

Hide market trends

Local hide market

The current average hide price is R1.35/skin, this is 4.6% lower than last week's price of R1.42/skin.

Outlook

The current price is 4.6% lower than prices were a month ago and is 55.0% lower than prices were a year ago. The local market remains under pressure with prices ranging from very little to R2/skin depending on quality.