Presentation on theme: "1 SA Meat and the Global Market André Jooste Senior Manager: Market and Economic Research Centre, National Agricultural Marketing Council 13 March 2008."— Presentation transcript:
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
16 Per capita consumption 2006 vs 2016 Source: FAPRI, 2007 Decline
17 Results - Beef finishing Purchase prices (US$ per 100 kg live weight)
18 Results - Beef finishing Short and medium term profitability (US$ per 100 kg carcass weight)
19 Background: Evolution of the industry The major transition periods: Opportunity driven (1970s) Production driven (1980s) Cost driven (1990s) Consumer driven (2000 -) Liberalization in 1995 Deregulation in 1997 - Beef industry already started in 1992 IS IT GOOD ENOUGH TO BE CONSUMER ORIENTATED??
33 Short term trends Beef prices are high and will most probably remain firm Arent 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!!
34 Lets 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)
35 Composition of food and non-alcoholic beverages Source: IES 1995, IES 2000, IES 2005/06
36 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.
37 Some pointers: Factors determining buying decisions Factors determining beef buying decisions are changing Economic vs non economic factors This is the trend internationally
38 Desirable characteristics of beef USA (1=extremely desirable; 5 = not at all desirable) Sitz, Calkins, Umberger, Feuz -U of Neb., 2004
39 Desirable characteristics of beef Japan 89 81 72 70 59 52 47 46 41 39 Safe HGP/Chemical free Delicious Juicy Reasonable price Availability Tender Non fatty Nutritional 020406080100120 % of consumers surveyed Purchase with confidence Source: MLA
40 Importance of product attributes per Cluster - (Free State Province) Source: Botha, F., Taljaard, P., Jooste, A. & Pelser, A. (2007). UFS.
41 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.
42 Some pointers: Other factors Is our grading system still appropriate? FactorGrading Scheme USDAJMGAMSA BreedXXYes GrowthXXYes StimulationXXYes HangXXYes CutXXYes MarblingYes OssificationYesX Meat ColourYes Fat DepthYes pHXXYes pH/temp/patternXXYes AgingXXYes Source: MLA
43 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
44 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
45 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
48 China – the growing tiger (the vacuum) Has a fifth of the worlds 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)
50 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$25 billion 4 th largest in the world Do not only buy food, but want safe and sophisticated food.
51 Brazil – the food basket SECEX, 2005 World AGRI-FOOD CHAINSUS$ Million and World Market Share 1 st SOYBEAN COMPLEX10,048 (33%) 1 st SUGAR/ETHANOL3,143 (35%) 2 nd POULTRY MEAT2,595 (35%) 1 st BEEF2,487 (26%) 1 st COFFEE2,058 (30%) 1 st TOBACCO1,38 (27%) 1 st ORANGE JUICE1,4 (83%) 3 rd PORK MEAT774 (12%) 4 st CORN & PRODUCTS638 3 rd COTTON407 (5%)
52 Brazil – the food basket Source: FAO NEW AGRICULTURAL FRONTIERS IN BRAZIL Belém Nova Fronteira na Produção de Grãos Rio Grande Porto Alegre Imbituba Paranaguá Santos Vitória Aratu Itacoatiara Santarém Rosário BOLÍVIA ARGENTINA URUGUAI Waterways Ports Railways PARAGUAI Itaqui New Agricultural Frontiers Worlds Distribution of land: Maceió WORLDBRAZIL Million of ha
56 Other influencers Biofuels industry Oil prices Consumer confidence Infrastructure (water, electricity, roads) Exchange rate etc
57 Concluding remarks From a South African and Southern African perspective this industry vitally important Sustainability (the triple botton line) Where is the quick wins with long run impacts Proper support services Proper information service Relationship building and cooperation Understand the economics and environment as it changes