Beefed-up meat prices show high cost of drought

South Africa’s devastating drought is starting to hit wallets hard as the cost of essential protein sources such as chicken, eggs and red meat look set to increase dramatically this year.

Meat producers were briefing parliament’s portfolio committee on agriculture on the impact that the drought was having on them.

Increasing maize prices have hit farmers as they use yellow maize for animal feed.

And while the global outlook for maize is positive, importing maize at the current exchange rate is more expensive, and increased storage and transport costs are likely to push up consumer prices.

Andy Crocker of the South African Poultry Association said in times when an economy was strong, consumers could be relied on to “fund” the drought.

But, he said, “the South African consumer cannot carry the cost of the drought”.

All meat producers called for varying degrees of government assistance through the drought, the impact of which is likely to be felt for at least another two seasons.

The poultry association’s Dr Charlotte Nkuna said the retail price for South Africa’s most popular chicken – a 2kg quick frozen bag – had already increased by about R7, from R45.60 in the last quarter of 2015 to R52.28 this quarter.

It is estimated to reach R53.96 by the end of the year.

If new brining regulations are brought in, consumers could pay an additional R7 a bag.

Fresh eight-piece braai packs, which retailed at R35.90 at the end of last year, are retailing at R40.65 this quarter, and expected to reach R41.84 by year-end.

Nkuna said eggs would cost R1.65 more to produce per dozen, but said farmers would likely not pass on this whole cost to consumers.

The association said it was still too early to tell whether American chicken imports, authorised as part of the Agoa negotiations, would have any impact on chicken prices.

But, the committee heard that while these bone-in chicken pieces were still a good quality protein source, the chicken was older on account of it being not sold in the US, and as a result, would be less tasty than local chicken.

The retail price of beef has also crept up considerably this year.

Vice-chairman of the Red Meat Producer’s Organisation Dr Pieter Prinsloo said that while it was impossible to determine future prices, beef prices were expected to rise by between 12% and 14% in total this year.

The prices have already increased by 9.3% between the second week of January and the third week of February, he said.

But Prinsloo said the increase in beef prices, while affected by the drought, was largely driven by demand.

South Africa, having been declared a foot and mouth free zone, was in demand as an export supplier, exporting to 42 countries.

Prinsloo said there had already been an estimated loss of about 5% of the total national beef herd of 13 million due to slaughter.

Slaughter rates for cattle in November and December had increased by 28%, 27% for sheep and 12% for pigs.

Chairman of the South African Pork Producets Organisation James Jenkinson, meanwhile, said they expected the price of pork to increase by around 25% this year, driven by the drought, and the costs associated with a high rand dollar exchange rate.