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

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

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

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

5. 5 World beef exports Source: OECD, 2004

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

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

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

9. 9 World beef trade flows, EU-15, 1995 117 313 73 597 64 205 172 4960 25-50 50-100 100-150 150-200 200-300 300-400 > 400 Vloei in '000 t cwe Based on GIRA figures Source: Spanghero, 2002

10. 10 World beef trade flows, EU-15, 2000 29 155 35 317 48 60 112 279 3925 25-50 50-100 100-150 150-200 200-300 300-400 > 400 Vloei in '000 t cwe Based on GIRA figures Source: Spanghero, 2002

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

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

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

14. 14 World beef trade flows,2005 (GMC)

15. 15

16. 16 Per capita consumption 2006 vs 2016 Source: FAPRI, 2007 Decline

17. 17 Results - Beef finishing Purchase prices (US$ per 100 kg live weight)

18. 18 Results - Beef finishing Short and medium term profitability (US$ per 100 kg carcass weight)

19. 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??

20. 20 Price trends Source: AMT

21. 21 Price trends – focus on beef Source: DoA, 2008

22. 22 Weaner and A2/A3 carcass prices Source: AMT, 2007

23. 23 Price trends Source: DoA More or less in balanceIncreased volatility Period of significant gains and losses

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

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

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

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

28. 28 Producer share in the retail price of chuck Source: STATSSA & own calculations

29. 29 Consumption trends Source: DoA

30. 30 Consumption trends (…continue) Source: DoA

31. 31 Consumption trends (…continue) Source: DoA

32. 32 Consumption trends (…continue) Source: DoA

33. 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. 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. 35 Composition of food and non-alcoholic beverages Source: IES 1995, IES 2000, IES 2005/06

36. 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. 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. 38 Desirable characteristics of beef USA (1=extremely desirable; 5 = not at all desirable) Sitz, Calkins, Umberger, Feuz -U of Neb., 2004

39. 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. 40 Importance of product attributes per Cluster - (Free State Province) Source: Botha, F., Taljaard, P., Jooste, A. & Pelser, A. (2007). UFS.

41. 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. 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. 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. 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. 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

46. 46 Source Roduner (2005)

47. 47 Some value chain influencers

48. 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)

49. 49

50. 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. 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. 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

53. 53 Brasilië – die voedselmandtjie

54. 54 Brazil – the food basket Sources: Agrianual, Pensa, MAPA, CONAB, IBGE * 2003 Crop

55. 55

56. 56 Other influencers Biofuels industry Oil prices Consumer confidence Infrastructure (water, electricity, roads) Exchange rate etc

57. 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

58. 58

59. 59 It is not the strongest that survives, but the most adaptive. Thank you