Categories: NewsPublished On: 18th March 2024

Beef prices resilient despite load shedding and consumer pressure – Absa AgriTrends Report 2024

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Beef prices, which have historically been sensitive to increases in the frequency and intensity of load shedding, have responded favourably to a surge in consumer demand over the festive season, despite an escalation in the occurrence and severity of load shedding.

This is according to the Autumn edition of the Absa AgriTrends Report, which predicts that beef prices are likely to follow an upward trend over the medium term, supported by improved export prospects to markets such as Saudi Arabia.

“Stronger links into global markets will also provide scope for more aggressive price growth as herd liquidation in key markets such as the US is likely to limit demand support for global prices of beef over the coming months,” says Dr Marlene Louw, Senior Economist at Absa AgriBusiness. “Locally, demand is expected to show some recovery as interest rates come down and load shedding eases.”

Now in its third year, the biannual Absa AgriTrends Report serves as a pivotal guide, offering stakeholders across the agricultural value chain unparalleled insights into the evolving landscape, empowering them to make informed decisions to foster sustainable growth.

Previous editions of the report 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 can be attributed to three factors:

  • Consumers in high income households have 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. This trend is confirmed by customs data that show that South Africa imported five times as many electricity storage batteries in 2023 as it did in 2022.
  • Lower fuel costs during the second and third quarters of last year, which resulted in some reprieve as it pertains to the cost of living
  • A stabilisation of interest rates, albeit at a higher level, is likely to bring some relief for consumers during the second half of 2024

The release of the 2023 Integrated Resource Plan in January notes that despite new generation capacity coming online, load shedding is likely to be a feature of the South African economy up to 2027.

“Our analysis suggests 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. The increased cost of this, combined with minimal economic growth due to electricity constraints, is however likely to limit the upside of price increases, underpinned by stronger demand, over the medium term,” Louw concludes.

On the supply side, the current heat and dry weather is a developing issue that presents some upside risk to the subdued demand prospects explained above. Maize prices have increased by 15% since the start of February, which could add upside pressure to prices over the coming months.

Average producer carcass and weaner calf prices (2020-2023) and price forecasts (2024-2026)*

Class A (R/kg) Class C (R/kg) Weaner Calf (R/kg)
2020 46.41 40.30 33.00
2021 52.48 45.41 38.77
2022 59.60 48.20 37.90
2023 53.80 47.60 34.32
2024 57.30 49.50 36.10
2025 59.60 52.10 37.50
2026 61.10 54.00 38.67

Source: Absa AgriBusiness

*Forecasts indicated in red

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