LIVESTOCK: BIWEEKLY INSIGHTS

19 February 2018
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Report No. 2 2018

Beef prices are still trading higher at the back of restricted supply of weaners to the market. The beef feedlot profitability ratio is favourable due to the low yellow maize price. However, on the other hand, high weaner prices are threatening the profitability of this industry. Lamb and mutton prices are expected to remain high at the back of restricted supply of lamb due to drought in sheep producing areas. Broiler prices are expected to remain under pressure due to cheaper imports at the back of a stronger rand against the US dollar. The wool industry is also under pressure due to a stronger rand against the US dollar. On the other hand, mohair is enjoying high prices due to improved demand.

         Beef And Calf Prices

In week 6, prices of all classes of beef marginally increased w/w. The price of Class A2/A3 beef increased by 0.2% w/w, while the price of C2/C3 beef increased by 0.9% w/w. This increase in prices can be attributed to tight supply of weaners to the market. It is expected that the weaner prices will remain high due to high demand.

         Beef To Maize

Beef-to-maize price ratio was 24:1. This is above the industry norm of 13:1. The ratio has weakened by 0.2% due to an improved yellow maize price w/w. The price of yellow maize is 33% weaker y/y and the price of beef is 8.8% firmer y/y. It is expected that the ratio will remain high at the back of low maize price.

            Lamb And Mutton Prices

All prices of lamb and mutton have declined w/w, except the price of B2/B3. Declines can be attributed to low demand due to high prices. Class A2/A3 was trading at R72.23/kg, which is 3.6% lower w/w. Prices are expected to remain high at the back of tight supply of lambs due to the drought in the Western Cape, the western and north-western sheep producing areas

               Pork Prices

In week 6, the average porker price declined to R27.4/kg, or 2.6% w/w. On the other hand, the average price of baconers increase by 5.3% w/w. Prices of both porkers and baconers are expected to increase as consumers continue to demand this lower priced red meat.

               Boiler Prices

The average SA frozen chicken and the SA fresh chicken prices have marginally increased by 0.19% and 0.30% w/w, respectively. The average price of the IQF has marginally declined by 0.24%. The decline in the price of the IQF can be attributed to relatively cheaper broiler imports due to a stronger rand.

              Milk Prices

Currently the milk producer price is at R5.10/l. There has been no change in the price w/w. Since October 2017, the price of milk has increased by 10c/l or 2%. The price of milk has increased by 8.5% y/y. The price of milk is currently stable, but it is expected to decline by about 2% to 5% due to a surplus of milk in the market.

The average price movement of the South African and Australian wool

The domestic wool price indicator at the recent auction traded 2.6% lower compared
to the previous wool auction. It closed at R184.96/kg (clean).

  • The domestic wool price indicator at the recent auction traded 2.6% lower compared
    to the previous wool auction. It closed at R184.96/kg (clean).
  • The domestic price of the 19-micron wool and 21-micron wool decreased by 3.1% and
    1.1%, respectively, compared to the previous action results.
  • Market demand for good quality long merino wool remained strong, however, the
    majority of wool on offer was of medium length and fine.
  • The strengthening rand is also estimated to add momentum to the decline in merino
    wool price.
  • The Australian wool price indicator also increased by 3.76%, to R173.42/kg (clean)
    compared to the previous auction. According to the Australian Wool Market report, new
    demand from China was the key driver behind this week’s push in the Australian
    market.

The average price movement of the South African mohair industry

  • The first sale of the 2018 mohair summer season took place on 13 February 2018, with
    63 035 kg of mohair on offer.
  • Good demand was experienced for all types during the auction, despite the Rand
    trading 12% stronger against the US dollar from the last winter sale of 2017.
  • On average the young goats’ mohair traded 8.1% higher compared to the previous
    auction and 27% higher y/y.
  • The strong adults’ mohair traded 4.7% higher compared to the previous auction and
    40% higher y/y. On average the mohair industry traded 5.6% higher compared to the
    previous auction and 32% higher y/y.
  • The second sale of the 2018 winter season will take place on 6 March 2018, with more
    mohair expected to be offered.

Source: Standard Bank

Disclaimer: Standard Bank South Africa accepts no responsibility for any application, use or interpretation of the information contained in this report and disclaims all liability for direct, indirect or consequential damages resulting from the use of this report.


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