With parts of the Western Cape having received rain and dam levels slowly but surely rising, the drought almost seems to be something of the past. But while the effect of the extended drought on grazing and water sources may not be as noticeable anymore, indications are that markets are still being affected by the herd-building phase.

According to available research, this phase follows the dry period that was marked by a 15% reduction in the national cow herd between 2013 and 2016, while ewe herds were reduced by approximately 16%. At provincial level, the Northern Cape was most affected, with cow numbers reduced by 23%, followed by the North West and Limpopo, where cow herds were reduced by 21 and 17% respectively.

As for sheep, KwaZulu-Natal showed the biggest decline with a 36% decrease in ewes, followed by Limpopo (31%) and the Northern Cape (23%). This article offers a brief overview of the mutton and beef market in respect of slaughter numbers, meat prices and livestock market trends.

Slaughter animal figures

Available figures at the time of writing (Figure 1) indicated that the number of cattle slaughtered monthly is still declining. It appears as though July 2017 was a turning point, as fewer cattle were slaughtered per month – for all subsequent months of the year – than in the same months of the previous year. December 2017 was still the peak month for animals slaughtered, although approximately 12% fewer cattle were slaughtered than in the corresponding month in 2016.

Figure 1: Number of cattle slaughtered, 2015 to date.

The number of sheep slaughtered also indicate a downward trend (Figure 2), with the drop in slaughter numbers noticeable since the beginning of 2016. It seems as if the turning point in the number of sheep slaughtered was reached in 2015 or even earlier. This indicates the possibility that sheep farmers were affected by the drought much earlier and had to reduce their herds quicker than in the larger cattle producing areas of the country.

Figure 2: Number of sheep slaughtered, 2015 to date.

Even in December 2017, the month during which most sheep are traditionally slaughtered during the year, there was a clear decline in the number of animals slaughtered, with a recorded difference of 16%.

Meat prices

If we shift the focus to carcass and weaner calf and weaner lamb prices, the picture becomes rosier. Since the beginning of 2016, beef prices (Figure 3) remained consistently higher than the levels of corresponding months in the previous year. The trend continued in 2017 and even up to March 2018.

Figure 3: Beef and weaner calf prices.

In the following months, the price traded slightly below 2017 levels, albeit not significantly lower. One might well wonder whether the market is beginning to resist these prices – perhaps to some extent due to the slow economic growth that is being experienced.

Weaner calf prices remained quite close in 2015 and 2016 and increased sharply in 2017. As of the beginning of 2018, up until March, the price fell and has since been trading around R34/R35 per kilogram.

Mutton prices (Figure 4) also showed an increase; prices have continued to trade at a higher level since early 2016 compared to the same months of the previous year. Prices in 2017 increased sharply and reached the R84/kg mark by December. In 2018, the price fell slightly from the December levels, but remained higher than 2017’s prices. This trend continued until early June (according to available sources) when the price fell below the previous year’s price for the first time.

Figure 4: Mutton and weaner lamb prices.

Since 2016, weaner lamb prices have continued to trade higher than in the same months of previous years. This trend has not changed. A sharp increase has also been experienced since mid-2017 when the weaner lamb price increased by approximately R5/kg within one month. Although weaner lamb prices fell slightly between January and March this year, it started showing an increase in the following months.

The local livestock market

Stockfarm asked experts in the local livestock market about current market trends. When asked how the number of cattle sold in 2018 compares to 2017, Vleissentraal auctioneer Ian Grobbelaar said: “The number of commercial cows sold this year does not differ much from last year. Farmers are still selling the same numbers. However, there is a shortage of young heifers in the market, which can be attributed to farmers still building their herds after the drought.”

Regarding the 2018 auction prices, he said: “Prices remain high and there has been no prominent decrease since last year. While the maximum price for a cow and calf was around R15 000 in 2017, it has now increased to approximately R18 000. This price increase is not only observed in cows, but also in stud bulls.” He expects prices to increase even more due to producers starting to buy bulls for the next mating season.

Ian’s outlook for the remainder of the year is positive. “To date, this year has yielded some good results and I believe it isn’t going to change soon. The bull market is well on track and from July onward, the demand for bulls will start increasing, bringing with it higher prices for breeding animals. Weaner calf prices should not really be affected, making it an appealing option for farmers to buy cows and heifers.”

According to Mario Kruger of OVK (CMW), the number of commercial and stud sheep sold until now does not differ much from last year’s sales. The high wool price is making the market more attractive to producers and has sparked a higher demand for sheep. This increase in demand is also affecting meat prices somewhat, with an increase in prices observed.

Mario is of the opinion that 2018 is a good year for sellers. “The expectation is that more sheep will be purchased, which will increase the price of breeding animals even more. It is still too early in winter (mid-June when this article was written) to say what will happen with the sheep offer. It can still change significantly, depending on the grazing producers have available for their animals.”

A healthy prospect

The lower slaughter numbers should persist for the foreseeable future, especially if the price of livestock keeps performing well. Meat prices seem to be moving sideways after the increases experienced in the market and will likely keep trading at 2017 prices. Consumer resistance against higher prices almost certainly also played a role and will keep playing a role as long as the economy struggles to gain momentum.

The weaner calf and weaner lamb market appears healthy, with current prices outperforming last year’s prices. This trend is likely to continue as long as the maize price remains low. The sharp increase in weaner lamb prices the past few months is probably partly due to the higher wool price and sheep farmers should use this to their advantage.

Article by WA Lombard and Mario van den Heever, Department of Agricultural Economics, University of the Free State for Stockfarm magazine. For more information, email WA Lombard at wa.veeplaas@gmail.com.