Sustainable red meat production during challenging economic times Dr Frikkie Maré Department of Agricultural Economics October 14, 2019.

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Presentation transcript:

Sustainable red meat production during challenging economic times Dr Frikkie Maré Department of Agricultural Economics October 14, 2019

The good, the bad and the ugly

The good, the bad and the ugly: Beef 20% Increase 2018: The Bad 2% Increase 2019: The Ugly Decrease?

The good, the bad and the ugly: Lamb 23% Increase 2018: The Bad 1% Increase 2019: The Ugly Decrease?

Price determination

Demand, supply and equilibrium ≠ Static Demand Shifters P of complimentary goods P of substitute goods Income levels Tastes and preferences Expectations Population Supply Shifters P of factors of production P of other goods Technology Taxation Expectations Number of firms

Shifters: Slaughter Numbers Source: RMLA (2018)

Shifters: Feed prices Source: Grain SA (2019)

Shifters: Substitute products (pork) Source: RMAA (2019)

Shifters: Economic Growth (GDP) Source: STATS SA (2019)

Shifters: Economic Indicators (CPI, PPI & Prime) Source: STATS SA (2019)

Shifters: unemployment Source: STATS SA (2019)

Shifters: Meat consumption

Shifters: FMD

Shifters: exports Beef Exports = 3 000 t /month = 3 000 000 kilogram / month = 15 000 000 Steaks / month (200g) Mutton/Lamb Exports = 400 t /month = 400 000 kilogram / month = 4 000 000 Chops / month (100g) Why Export  Domestic Market Small Topside Exports to Kuwait: 24 ton container $4.55/kg = R66/kg Shipping cost on exporter Profitable?

Price determination: Market

Market participants Supply Producers Feedlots Market Abattoir Demand Wholesalers Retailers Consumers

Abattoir prices: a spanner in the works

price: beef

price: mutton

- Cambridge Dictionary - challenge “The situation of being faced with something that needs great mental or physical effort in order to be done successfully and therefore tests a person’s ability.” - Cambridge Dictionary -

Playing the profitability game

Optimal input use – concept of marginality

Optimal input use – concept of marginality

Output planning What to produce? When to produce? For whom to produce? Where to produce? The concept of value adding… Vertical integration Innovation Coordination

Concept and influence of opportunity cost Opportunity cost is the value of an item in its highest alternative use: Feed calf vs. Sell calf Buy cattle/land vs. Other investments and returns Land for own production vs. Land rental income Farmer’s farm labour vs. Alternative work 10 Bulls for breeding vs. 1 Bull for AI vs. Semen straws Holding back replacement heifers vs. Buying pregnant heifers vs. Contract Heifer Growing

The future

Thank You Dankie Dr Frikkie Maré (PhD) Academic Department Head Department of Agricultural Economics MareFA@ufs.ac.za T: +27(0)84 446 6787