Stronger links into global markets would also provide scope for more aggressive price growth as herd liquidation in key markets such as the US was likely to limit demand support for global prices of beef over the coming months. Picture Courtney Africa/ Independent Newspapers.
Beef prices were likely to follow an upward trend over the medium term, supported by improved export prospects to markets such as Saudi Arabia, according to the Autumn edition of the Absa AgriTrends Report.
The report, issued yesterday, said, historically, beef prices had been sensitive to increases in the frequency and intensity of load shedding, but had responded favourably to a surge in consumer demand over the festive season, despite an escalation in the occurrence and severity of load shedding.
Dr Marlene Louw, a senior economist at Absa AgriBusiness, said stronger links into global markets would also provide scope for more aggressive price growth as herd liquidation in key markets such as the US was likely to limit demand support for global prices of beef over the coming months.
“Locally, demand is expected to show some recovery as interest rates come down and load shedding eases,” Louw said.
The biannual Absa AgriTrends Report, now in its third year, serves as a pivotal guide, offering stakeholders across the agricultural value chain insights into the evolving landscape.
The report’s previous editions highlighted that increases in the frequency of load shedding negatively impacted consumer income and consumers’ ability to afford beef.
In addition, the risk of wastage as a result of prolonged periods without power also meant that consumers were somewhat less likely to buy beef, adding pressure to prices. In recent months, however, this trend has reversed.
According to Louw, this price resilience could be attributed to the fact that consumers in high-income households had made a structural adjustment to mitigate the effects of load shedding, with analysts pointing to an increase of more than 300% in rooftop solar during 2023.
She said this trend was confirmed by customs data that showed that South Africa imported five times as many electricity storage batteries last year than it did in 2022.
She said lower fuel costs during the second and third quarters of last year were likely to bring some relief for consumers during the second half of this year.
The report noted that despite new generation capacity coming online, load shedding was likely to be a feature of the South African economy up to the year 2027.
Absa AgriBusiness said its analysis suggested that consumers and value chains have, to a large extent, invested in technologies that would mitigate the risk of waste and facilitate the flow of goods through the value chain.
Louw said the increased cost of this, combined with minimal economic growth due to electricity constraints was, however, likely to limit the upside of price increases, underpinned by stronger demand, over the medium term.
On the supply side, the current heat and dry weather was a developing issue that presented some upside risk to the subdued demand prospects.
“Maize prices have increased by 15% since the start of February, which could add upside pressure to prices over the coming months,” it noted,
According to Standard Bank’s Livestock Biweekly 2024 Report Number 4 published on Friday, the beef prices were largely bearish week-on-week (w/w).
“The average price of class A2/A3 remained the same w/w at R54.95 and the average price of class AB2/AB3 increased w/w 0.9% to R53.61/kg. The average prices of class B2/B3 and C2/C3 decreased w/w by 2.8% and 1% to R47.89/kg and R45.22/kg, respectively,” said the report.
On average, beef prices were said to be 2.5% lower year-on-year (y/y) due to subdued demand.
The average weaner price was said to have decreased w/w by 3.8% to R33.39/kg due to a weaker demand for weaners on the market. The report said in the previous week, the average beef-to-maize price ratio decreased by 4.5% to 13.14, as the average yellow maize price increased by 4.6% w/w.
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