Transcript SA Meat and the Global Market

SA Meat and the Global
Market
André Jooste
Senior Manager: Market and Economic Research Centre, National
Agricultural Marketing Council
13 March 2008
1
Structure of presentation





International overview
Price trends in SA
Consumption trends in SA
Pointers
Conclusions
2
World cattle producers
Thousand Metric tonnes
12,200
10,200
8,200
6,200
4,200
2,200
SA ave: 630 000 t
200
2014
2013
Austrtalia
2012
2011
2010
2009
India
2008
2007
2006
EU
2005
2004
China
2003
2002
2001
Brazil
2000
1999
1998
Source: FAPRI, 2004
1997
1996
1995
1994
1993
USA
SA
3
World supply and demand for beef and
veal
28 500
16.2
16
28 000
27 500
15.6
27 000
kg/capita
kt cwe
15.8
15.4
26 500
15.2
26 000
15
2015
2014
2013
2012
Consumption
2011
2010
Source: OECD and FAO secretariats
2009
2008
2007
2006
2005
Production
Per capita consumption
4
World beef exports
Thousand tons
2500
2000
1500
1000
500
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
Year
EU
North America
Oceanea
Mercosur
Source: OECD, 2004
5
Imports projections (beef and veal)
1 400
1 200
('000 t)
1 000
800
600
400
200
2015
2014
South Africa
2013
2012
Russia
2011
2010
Mexico
2009
Source: FAPRI 2006
2008
2007
2006
2005
Japan
South Korea
6
World trade projections (beef)
10 000
9 000
8 000
('000 t)
7 000
6 000
5 000
4 000
3 000
2 000
1 000
2005
2006
2007
2008
World trade
Source: OECD and FAO secretariats
2009
OECD
2010
Developing
2011
2012
2013
2014
2015
Least developed countries
7
World beef trade flows, EU-12, 1990
195
116
126
98
393
92
33
Vloei in '000 t cwe
25-50
50-100
100-150
150-200
200-300
134
300-400
> 400
Based on GIRA figures
Source: Spanghero, 2002
8
World beef trade flows ,EU-15, 1995
313
73
64
172
597
117
49
60
Vloei in '000 t cwe
25-50
50-100
100-150
150-200
200-300
205
300-400
> 400
Based on GIRA figures
Source: Spanghero, 2002
9
World beef trade flows, EU-15, 2000
48
155
35
60
279
317
29
Vloei in '000 t cwe
25-50
50-100
100-150
150-200
39
25
200-300
300-400
112
> 400
Based on GIRA figures
Source: Spanghero, 2002
10
World beef trade flows, AU/NZ - 2005
11
World beef trade flows, EU and North
America - 2005
12
World beef trade flows, S.Am - 2005
13
World beef trade flows,2005 (GMC)
14
15
Per capita consumption 2006 vs 2016
70
Decline
60
kg/per
50
40
30
20
10
0
South
Africa
Russia
EU-25
New
Zealand
2016
Mexico
Canada
Australia
Brazil
USA
Argentina
Source: FAPRI, 2007
2006
16
0
17
ZA-75K
AU-27K
Weaner price
CN-300
CN-940
BR-140
BR-240
BR-340
BR-600
AR-800
AR-2200
Calf price
US-7200
CA-9600
900
PL-12
PL-30
SE-140
SE-230T
UK-35
UK-90
UK-98
IE-185
IT-910
IT-2880T
ES-630
ES-940
ES-6790
FR-45
FR-70
FR-90A
FR-90B
DE-230
DE-260
DE-280
DE-800
DE-525T
AT-25F
AT-35
AT-120
AT-150T
Results - Beef finishing
Purchase prices (US$ per 100 kg live weight)
Backgrounder price
800
700
600
500
400
300
200
100
-400
18
ZA-75K
AU-27K
CN-300
CN-940
BR-140
BR-240
BR-340
BR-600
AR-800
AR-2200
US-7200
CA-9600
PL-12
PL-30
-200
SE-140
SE-230T
UK-35
UK-90
UK-98
IE-185
IT-910
IT-2880T
ES-630
ES-940
ES-6790
FR-45
FR-70
FR-90A
FR-90B
DE-230
DE-260
DE-280
DE-800
DE-525T
AT-25F
AT-35
AT-120
AT-150T
Results - Beef finishing
Short and medium term profitability (US$ per 100 kg carcass weight)
200
100
0
-100
Short-term: Total returns less cash cost
Medium-term: Total returns less cash cost+depreciation
-300
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??
19
Price trends
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
3500
3000
2500
2000
1500
1000
500
0
Oct-03
c/kg
Prices of different meat types
Months
Clas A2/A3 lamb
Porkerprice
Class A2/A3 beef
Fresh chicken
Source: AMT
20
30
2000
25
1600
20
1400
1200
800
10
600
5
400
200
0
0
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
21
Source: DoA, 2008
Per capita consumption
Nominal price
Real price
Kg per capita
15
1000
c/kg
Price trends – focus on beef
1800
1500
1300
c/kg
Weaner and A2/A3 carcass prices
2300
2100
1900
1700
1100
900
700
500
Oct-07
Jul-07
Apr-07
Jan-07
Okt-06
Jul-06
Apr-06
Jan-06
Okt-05
Jul-05
Apr-05
Jan-05
Okt-04
Jul-04
Apr-04
Jan-04
Okt-03
Jul-03
Apr-03
Jan-03
Okt-02
Jul-02
Apr-02
Jan-02
A2/A3 carcass
Weaner
Source: AMT, 2007
22
Increased volatility
Period of significant gains
and losses
Price trends
300
Index 2000=100
250
More or less in balance
200
150
100
50
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Year
PPI-Summer grains
PPI-Cattle slaughtered
PPI-Sheep slaughtered
PPI-Pigs slaughtered
FRPI-Fuel
FRPI-Animal health and crop protection
Source: DoA
23
31
%
Producer share in the retail price of rump
37
y = -0.0059x + 38.082
35
33
29
27
25
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
24
Source: STATSSA & own calculations
T rend
Producer share in retail price
%
Producer share in the retail price of sirloin
39
y = 0.0158x + 12.258
37
35
33
31
29
27
25
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
25
Source: STATSSA & own calculations
Trend
Producer share in retail price
%
Producer share in the retail price of topside
49
y = 0.005x + 35.668
47
45
43
41
39
37
35
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
26
Source: STATSSA & own calculations
T rend
Producer share in retail price
%
Producer share in the retail price of brisket
70
y = -0.013x + 72.256
65
60
55
50
45
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
27
Source: STATSSA & own calculations
T rend
Producer share in retail price
%
Producer share in the retail price of chuck
65
y = -0.0291x + 89.771
60
55
50
45
40
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Dec-99
Sep-99
28
Source: STATSSA & own calculations
T rend
Producer share in retail price
Consumption trends
Total and per capita consumption of beef
900
26
24
22
700
20
600
18
16
500
kg per capita
Thousand tons
800
14
400
12
2004/05
2002/03
2000/01
1998/99
1996/97
1994/95
1992/93
1990/91
1988/89
1986/87
1984/85
1982/83
1980/81
1978/79
1976/77
1974/75
1972/73
10
1970/71
300
Year
Total consumption of beef
Per capita consumption of beef
Source: DoA
29
Consumption trends (…continue)
1,400
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
Thousand tons
1,200
1,000
800
600
400
200
2006/07
2004/05
2002/03
2000/01
1998/99
1996/97
1994/95
1992/93
1990/91
1988/89
1986/87
1984/85
1982/83
1980/81
1978/79
1976/77
1974/75
1972/73
1970/71
0
kg per capita
Total and per capita consumption of white meat
Year
Total consumption of white meat
Per capita consumption of white meat
Source: DoA
30
Consumption trends (…continue)
Total consumption white meat and red meat
1,400
Thousand tons
1,200
1,000
800
600
400
200
2006/07
2004/05
2002/03
2000/01
1998/99
1996/97
1994/95
1992/93
1990/91
1988/89
1986/87
1984/85
1982/83
1980/81
1978/79
1976/77
1974/75
1972/73
1970/71
0
Year
Total consumption of white meat
Total consumption of red meat
Source: DoA
31
Consumption trends (…continue)
2006/07
2004/05
2002/03
2000/01
1998/99
1996/97
1994/95
1992/93
1990/91
1988/89
1986/87
1984/85
1982/83
1980/81
1978/79
1976/77
1974/75
1972/73
50
45
40
35
30
25
20
15
10
5
0
1970/71
Kg per capita
Per capita consumption of white meat and red meat
Year
Per capita consumption of red meat
Per capita consumption of white meat
Source: DoA
32
Short term trends
Beef prices are high and
will most probably
remain firm




Prices low
Consumption on historical
downward trend (prior to
2000)
We know the end result!!
25
1600
1400
20
1200
1000
15
800
10
600
400
5
200
0
0
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970

1800
Aren’t we lucky??
Consumption on the up,
i.e. total and per capita
Alternative scenario:
30
Real price
Nominal price
Per capita consumption
33
Kg per capita

2000
c/kg

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 agrofood 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)
Freshness
USDA unspected for safety
Colour
Price
Leanness
High Quality Grade
Tender
Nutritional value
Coutnry-of-origin labeling
Marbling
Source assurance
Environmentally friendly prod
Raised in Your region in the US
Convienience
Fat content
Organic/natural
0
Sitz, Calkins, Umberger, Feuz -U of Neb., 2004
0.5
1
1.5
2
2.5
3
3.5
38
Desirable characteristics of beef Japan
89
81
72
70
59
52
47
46
41
39
0
20
40
60
80
100
120
% of consumers surveyed
Source: MLA
39
Importance of product attributes per
Cluster - (Free State Province)
6.0
Scale of Importnace
5.0
4.0
3.0
2.0
1.0
0.0
e
Pric
a lit
Qu
y
en
eni
v
n
Co
ce
lth
Hea
s
Con
af e
dS
o
o
F
ty
bi
cea
a
r
T
lity
ti
ok
Co
me
ka
Pac
g
gin
n
Bra
d
st e
Tat
tI
Nu
nfo
Attributes
Inferior Conumer (low nutrition) (34.8%) n = 282
At Home (Basics) (23.7%) n = 192
Balanced Consumer (26.6%) n = 216
Value Added Orientated (12.3%) n = 100
High Frequency Consumer (Broad Product Range) (2.6%) n = 21
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?
Factor
Grading Scheme
USDA
JMGA
MSA
Breed
X
X
Yes
Growth
X
X
Yes
Stimulation
X
X
Yes
Hang
X
X
Yes
Cut
X
X
Yes
Marbling
Yes
Yes
Yes
Ossification
Yes
X
Yes
Meat Colour
Yes
Yes
Yes
Fat Depth
Yes
Yes
Yes
pH
X
X
Yes
pH/temp/pattern
X
X
Yes
Aging
X
X
Yes
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 910%
Food is one of the largest budget items for households



The number of rural households in the middle class



38% for urban households
50% for rural households
7.6 million in 1995
42 million in 2005
This will grow to 199 million in 2015 (McKinsey Quarterly)
48
49
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$25 billion


4th largest in the world
Do not only buy food, but want safe and
sophisticated food.
50
Brazil – the food basket
World
st
1
st
1
nd
2
st
1
st
1
st
1
st
1
rd
3
st
4
rd
3
AGRI-FOOD CHAINS
US$ Million and World
Market Share
SOYBEAN COMPLEX
10,048
(33%)
SUGAR/ETHANOL
3,143
(35%)
POULTRY MEAT
2,595
(35%)
BEEF
2,487 (26%)
COFFEE
2,058 (30%)
TOBACCO
1,38 (27%)
ORANGE JUICE
1,4 (83%)
PORK MEAT
774 (12%)
CORN & PRODUCTS
638
COTTON
407 (5%)
SECEX, 2005
51
Brazil – the food basket
NEW AGRICULTURAL FRONTIERS IN BRAZIL
Belém
Nova Fronteira na Produção de GrãosItaqui
Itacoatiara
World’s Distribution of land:
Santarém
Maceió
Aratu
WORLD
Million of ha
BRAZIL
Million of ha
BOLÍVIA
Vitória
World
Brazil
Santos
Paranaguá
ARGENTINA
Rosário
Imbituba
Porto Alegre
Rio Grande
Waterways
Railways
Ports
New Agricultural
Frontiers
%
TOTAL
13.000
850
7%
Arable
2.900
550
19%
Used
1.500
55
4%
Source: FAO
52
Brasilië – die voedselmandtjie
53
Brazil – the food basket
HARVEST 2003-04
PRODUCTS
Soybeans
Corn
Rice
Beans
Cotton
Wheat
others
Total Grains
Sugarcane *
Potential
Production
Area
Yield
Production
Area
Yield
(million t)
(million ha)
(t/ha)
(million t)
(million ha)
(t/ha)
50,2
42,7
12,9
3,2
3,2
5,9
5,2
120,1
384,4
21,1
12,7
3,4
4,2
1,0
2,7
1,8
46,9
4,9
2,4
3,4
3,8
0,8
3,2
2,2
2,9
2,6
78,4
80,5
165,9
26,4
6,0
5,2
8,0
3,2
290,1
443,3
23,0
23,7
6,6
4,0
1,5
3,5
2,7
65,0
4,9
3,5
7,0
4,0
1,5
3,5
2,3
1,2
4,5
90,0
Sources: Agrianual, Pensa, MAPA, CONAB, IBGE
* 2003 Crop
54
55
Other influencers






Biofuels industry
Oil prices
Consumer confidence
Infrastructure (water, electricity, roads)
Exchange rate
etc
56
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
57
58
“It is not the
strongest that
survives, but the
most adaptive”.
Thank you
59