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SA Meat and the Global Market

SA Meat and the Global Market

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SA Meat and the Global Market

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  1. SA Meat and the Global Market André Jooste Senior Manager: Market and Economic Research Centre, National Agricultural Marketing Council 13 March 2008

  2. Structure of presentation • International overview • Price trends in SA • Consumption trends in SA • Pointers • Conclusions

  3. World cattle producers SA ave: 630 000 t Source: FAPRI, 2004

  4. World supply and demand for beef and veal Source: OECD and FAO secretariats

  5. World beef exports Source: OECD, 2004

  6. Imports projections (beef and veal) Source: FAPRI 2006

  7. World trade projections (beef) Source: OECD and FAO secretariats

  8. 126 393 116 195 134 98 92 33 Vloei in '000 t cwe 25-50 50-100 100-150 150-200 200-300 300-400 > 400 Based on GIRA figures World beef trade flows,EU-12, 1990 Source: Spanghero, 2002

  9. 117 313 172 597 205 60 49 73 64 Vloei in '000 t cwe 25-50 50-100 100-150 150-200 200-300 300-400 > 400 Based on GIRA figures World beef trade flows ,EU-15, 1995 Source: Spanghero, 2002

  10. 279 155 112 317 25 60 39 35 29 48 Vloei in '000 t cwe 25-50 50-100 100-150 150-200 200-300 300-400 > 400 Based on GIRA figures World beef trade flows,EU-15, 2000 Source: Spanghero, 2002

  11. World beef trade flows, AU/NZ - 2005

  12. World beef trade flows, EU and North America - 2005

  13. World beef trade flows, S.Am - 2005

  14. World beef trade flows,2005 (GMC)

  15. Decline Per capita consumption 2006 vs 2016 Source: FAPRI, 2007

  16. Results - Beef finishingPurchase prices (US$ per 100 kg live weight)

  17. Results - Beef finishingShort and medium term profitability (US$ per 100 kg carcass weight)

  18. Liberalization in 1995 • Deregulation in 1997 • - Beef industry already • started in 1992 Background: Evolution of the industry • The major transition periods: • Opportunity driven (1970s) • Production driven (1980s) • Cost driven (1990s) • Consumer driven (2000 -) IS IT GOOD ENOUGH TO BE CONSUMER ORIENTATED??

  19. Price trends Source: AMT

  20. Price trends – focus on beef Source: DoA, 2008

  21. Weaner and A2/A3 carcass prices Source: AMT, 2007

  22. Increased volatility Period of significant gains and losses More or less in balance Price trends Source: DoA

  23. Producer share in the retail price of rump Source: STATSSA & own calculations

  24. Producer share in the retail price of sirloin Source: STATSSA & own calculations

  25. Producer share in the retail price of topside Source: STATSSA & own calculations

  26. Producer share in the retail price of brisket Source: STATSSA & own calculations

  27. Producer share in the retail price of chuck Source: STATSSA & own calculations

  28. Consumption trends Source: DoA

  29. Consumption trends (…continue) Source: DoA

  30. Consumption trends (…continue) Source: DoA

  31. Consumption trends (…continue) Source: DoA

  32. Short term trends • Beef prices are high and will most probably remain firm • Aren’t we lucky?? • Consumption on the up, i.e. total and per capita • Alternative scenario: • Prices low • Consumption on historical downward trend (prior to 2000) • We know the end result!!

  33. Let’s look at this from another angle • Red meat industry realized that much must be done to change the image of red meat • R&D on consumer behaviour • Promotion • Competitions • However, a closer look shows: • Total per capita red meat consumption more likely to be 23.96kg • Beef down to 15.73kg, • Pork down to 3.27kg, • Sheep down to 3kg.  • Turn around in macro-economic conditions (Econ growth) • Mainstreaming economic activity of blacks (“black diamonds”)

  34. Composition of food and non-alcoholic beverages Source: IES 1995, IES 2000, IES 2005/06

  35. Time to rethink our orientation?? • Although the industry transformed with positive results one can safely postulate that being consumer orientated (in theory) is not sufficient • It falls short of international developments in agro-food chains.

  36. Some pointers: Factors determining buying decisions • Factors determining beef buying decisions are changing • Economic vs non economic factors • This is the trend internationally

  37. Desirable characteristics of beef USA(1=extremely desirable; 5 = not at all desirable) Sitz, Calkins, Umberger, Feuz -U of Neb., 2004

  38. Desirable characteristics of beef Japan 89 Safe 81 72 70 Purchase with confidence HGP/Chemical free Delicious 59 Juicy 52 47 Reasonable price 46 Availability Tender 41 Non fatty 39 Nutritional 0 20 40 60 80 100 120 % of consumers surveyed Source: MLA

  39. Importance of product attributes per Cluster - (Free State Province) Source: Botha, F., Taljaard, P., Jooste, A. & Pelser, A. (2007). UFS.

  40. Some pointers: Other factors • More sophisticated consumers and linking it with product development • E.g. Checkoff program in US – 500 new products between 03 and 04 • In SA probably not even a 100 since 2003 to date • Lack of internationally acceptable traceability system • Problem/impact compounded if one considers guarantees to comply with increasing and more stringent standards set at the retail level, as well as to export.

  41. Some pointers: Other factors • Is our grading system still appropriate? Source: MLA

  42. Some pointers: Other factors • Transparent, accurate and timely red meat information system is basically non-existent. • The result is far from optimal chain sequencing putting pressure on chain governance and relationships. • Dualistic nature of beef industry • Growing informal market • Policing of regulations and health standards very difficult • Puts the whole industry at jeopardy since poor quality product can now reach the market undetected. • Very difficult to manage and control diseases

  43. Let me repeat: • No/very little information flows • Traceability lacking • Slackness in the industry to create uniqueness • Problems with industry structure • Most notable is the dualistic nature of the industry • This at a time when: • Productivity is increasing • Improved technology (slaughtering and processing) • Continued investment in “uniqueness” • Traceability • Information systems

  44. Therefore: • A value chain orientation (in practical terms) is necessary, e.g. • Relationships • Info systems • Some companies/chain players are responding, but overall industry response lacking • Challenge for organised structures in red meat industry to respond and maintain momentum

  45. Source Roduner (2005)

  46. Some value chain influencers

  47. China – the growing tiger (“the vacuum”) • Has a fifth of the world’s population and GDP gorwth at 9-10% • Food is one of the largest budget items for households • 38% for urban households • 50% for rural households • The number of rural households in the middle class • 7.6 million in 1995 • 42 million in 2005 • This will grow to 199 million in 2015 (McKinsey Quarterly)

  48. China – the growing tiger • As living standards increase they are curring back on staple foods such as rice and wheat. • Consumption of dairy, fish, wine and processed food on the increase. • Food imports in the region of US$25 billion • 4th largest in the world • Do not only buy food, but want safe and sophisticated food.