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Consumers face an expensive braai season as they head into the December holiday season with meat prices at record highs, up 14.9% annually since November 2017. What is supporting the current strength in meat prices? A number of factors have combined to drive consumers into a financial crisis, including supply constraints due to livestock farming, declining chicken production in the face of inflation, and surprisingly resilient consumer demand despite consumer financial insecurity.
In addition, livestock producers have faced significant cost pressures due to the increase in the cost of raw feed inputs, which has severely squeezed profit margins and led to cost recovery.
Maize, the main input for feed production, has so far increased by 43% and 28% with white and yellow maize averaging 4,989 tonnes and 4,837 tonnes respectively. Soybean, the main source of plant protein in animal feed, has so far averaged R10,561 a tonne, up 39% year-on-year.
Consumer price inflation
South Africa’s November 2022 consumer price inflation (CPI) eased to 7.4% year-on-year from September’s 7.6%, but still well above the 2022 peak of 7.8% reached in July, according to the latest data. From Statistics South Africa (Statistics SA), the monthly CPI decreased by 0.3% month-on-month (m/m) from 0.4% m/m in November.
After stalling in October, food CPI rose 0.5 percentage points again to 12.8% year-on-year in November 2022 and still the highest level since April 2009, but fell 0.5% month-on-month to 0.9% month-on-month.
On the other hand, as measured by the Food and Agriculture Organization of the United Nations (FAO), the world food price inflation has decreased significantly from a high of 34% in March 2022 to only 0.3% per year in November 2022, remaining in negative territory for the last eight consecutive months. More than offsetting gains in vegetable oil and sugar, prices fell in the cereal, dairy and meat categories.
In SA’s food CPI sub-index, November’s meat CPI was steady but still at a 14-month high of 10.5% year-on-year.
A closer look at meat CPI data shows that beef T-bone steak is up 18% year-on-year to R135.48/kg, while brisket and chick are up 11.8% and 10.4% respectively year-on-year. In the pork category, pork ribs and fillet posted modest gains of 3.9% and 2.8% year-on-year at R94.59/kg and R104.62/kg respectively. However, pork fell by 3.8% year-on-year to R89.55/kg. Lambs increased by 4.8% year-on-year to R195.55/kg. For chicken, there was a 7.2% increase in prices across most categories at R63.85/kg for fresh whole birds (IQF) 2kg portion of chicken up 5.1% year-on-year at R86.69. .
However, we expect some relief for consumers at the start of the new year as low seasonal demand following the December holidays in a strong economic environment may still put pressure on meat prices in terms of electricity and transport costs.
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