Meat Industry Overview South African Feedlot Association Annual General Meeting 9 March 2010 David Spies

Contents International trends –Production –Consumption –Trade –Price trends Domestic trends –Production –Consumption –Trade –Price Feedlot –Short term perspective –Scenario’s Challenges 2

International trends 3

Beef and veal: Production 4 SA 685 Source: FAPRI, 2010

Beef and veal: Production Source: OECD FAO,

Beef and veal: Consumption 6 SA 836 Source: FAPRI, 2010

Beef and veal: Consumption 7 Source: OECD FAO, 2010

Overall increase in per capita meat consumption between the period and Source: OECD FAO, 2010

Beef and veal: Per capita consumption 9 SA Source: FAPRI, 2010

Beef and veal: Per capita consumption 10 Source: OECD FAO, 2010

Imports Source: ITC, 2011

Exports Source: ITC, 2011

Beef and veal: Imports 13 Source: OECD FAO, 2010

Beef and veal: Exports 14 Source: OECD FAO, 2010

International meat price index 15 Source: FAO, 2011

International meat price indexes 16 Source: FAO, 2011

Sources:S.A.G.P.y A. (Secretaría de Agricultura, Ganadería, Pesca y Alimentos), A.L.I.C. (Agriculture & Livestock Industries Corporation), U.S.D.A. : U.S. trade exports International beef prices 17

Local trends 18

Local trends: Beef production and consumption 19 Source: BFAP, 2010

South African meat consumption 20 Source: BFAP, 2010

South African meat consumption 21 Source: OECD FAO, % 59% 24% 23% FAPRI, 2010 Beef 21% Chicken27%

Per capita beef consumption vs per capita disposable income 22 Source: SARB & DAFF, kg/year

Per capita sheep consumption vs per capita disposable income 23 Source: SARB & DAFF, 2010

Imports: Beef Source: ITC, 2011

Exports: Beef Source: ITC, 2011

Imports: Live cattle Source: ITC, 2011

Exports: Live cattle Source: ITC, 2011

SA Beef vs calf prices: Long term 28 Source: BFAP, 2010

Local beef price trends: Nominal Feb-10Feb-11Sep-10Sep 10 to Feb 11Feb 10 to Feb 11 Class A2/A %14.9% Class AB2/AB %19.1% Class B2/B %14.8% Class C2/C %15.1% Weaner %14.5% Average 16.1%15.7% Source: AMT, 2011 Good conditions: Rainfall Low maize price Low supply of weaners HOWEVER Winter on the way Supply A2A3 carcass will increase Decreasing price

Local beef price trends: Real (CPI:2008=100) Feb-10Feb-11Sep-10Sep 10 to Feb 11Feb 10 to Feb 11 Class A2/A %11.1% Class AB2/AB %15.1% Class B2/B %11.0% Class C2/C %11.3% Weaner %10.7% Average 14.4%11.8% Source: AMT, 2011

Weaner:A2/A3 beef carcass price ratio 31 Source: AMT & GrainSA, 2011

Provincial price variation 32 A2/A3B2/B3 C2/C3 Weaner

Local price trends: Lamb/mutton: Nominal Feb-10Feb-11Sep-10Sep 10 to Feb 11Feb 10 to Feb 11 Class A2/A %25.3% Class AB2/AB %29.6% Class B2/B %21.8% Class C2/C %33.3% Average 12.2%27.5% Source: AMT, 2011

Local price trends: Lamb/mutton: Real (CPI:2008=100) Feb-10Feb-11Sep-10Sep 10 to Feb 11Feb 10 to Feb 11 Class A2/A %21.1% Class AB2/AB %10.3% Class B2/B %8.7% Class C2/C %15.5% Average 10.6%13.9% Source: AMT, 2011

Feedlot prospects & scenario’s 35

Feedlot margins 36 Source: Calculations based on: AMT & GrainSA, 2011

Maize price trends 37 Source: GrainSA, 2011

Feedlot prospects: Weaner & beef price changes 38 Source: Calculations based on: AMT, 2011 Net negative effect 6.3%

Feedlot scenario’s (economic vs management factors) *Weaner price – Feb 2011 A2/A3 price – May-June 2011 Yellow maize Feb- May 2011 Source: Calculations based on: AMT & GrainSA, 2011 and own estimations Calve: Carcass price ratio of 0.66

Producers Abattoir Adult female (51%) Bulls (35%) Castrated males (41%) Calves (21%) Butchery Adult female (6%) Bulls (5%) Castrated males (12%) Calves (2%) Retailer Feedlot Adult female (7%) Young females (33%) Bulls (5%) Castrated males (18%) Calves (49%) Wholesale/deboning Commercial farms Adult female (10%) Young females (33%) Bulls (45%) Calves (7%) Agents Adult female (14%) Young females (33%) Bulls (5%) Castrated males (24%) Calves (14%) Auction system Adult female (11%) Bulls (5%) Castrated males (6%) Calves (7%) Primary productionProcessing/wholesale & retail Cattle marketing in the FS Source: Spies, Jooste & Taljaard, %

Producers Abattoir Adult female (40%) Young females (50%) Breeding rams (28%) Castrated males (45%) Lambs(41%) Butchery Adult female (9%) Castrated males (9%) Lambs(5%) Retailer Feedlot Adult female (9%) Young females (17%) Breeding rams(11%) Castrated males (6%) Lambs (36%) Wholesale/deboning Commercial farms Adult female (9%) Breeding rams (44%) Lambs(2%) Agents Adult female (10%) Young females (17%) Breeding rams (6%) Castrated males (27%) Lambs (8%) Auction system Adult female (9%) Breeding rams (11%) Lambs (2%) Primary productionProcessing/wholesale & retail Lamb marketing in the FS Source: Spies, Jooste & Taljaard, %

Challenges Pagina billion – in the last 50 years the population has more than doubled 9 billion – forecast global population in % – growth in global demand for meat by % – growth in meat consumption in China in the past 15 years Source: Korver 2010 Big responsibility for food industry: Feed the world & offer more from less

Challenges…. Environment Quality Sustainability Production Productivity Animal welfare Now Future Source: Korver Changing demand and priorities Switch from productivity focused model to food safety & sustainable business model

Challenges… Information availability –Product flow, Financial flow, Information flow at every level of the value chain Producers –Commercial »60 – 70 % non-official »20 – 30 % official –Developing »80 % no source of information »10 % official »10 % non official Processors –100% non-official Retailers –100% non-official Production practices Input use Animal health issues Markets (physical) Prices Product standards Traceability Risk management Source: Spies, Jooste & Taljaard, 2011

Challenges… Stimulate local demand Educate consumers –Quality Guaranteed safety Palatability/eating experience –Experiencing the same eating quality when purchasing a piece of red meat periodically from the same place with the same preparation method. Nutritional information, preparation methods/packaging Increase local supply –Productivity of the emerging and developing producers Commercial producers –Calving percentage (80%) and off-take rate (33%) –Lambing percentage (93%) (and off-take rate (35%) Developing producers in the FS –Calving percentage (30%) and off-take rate (12%) –Lambing percentage (13%) and off-take rate (2.3%) 45 Source: Spies, Jooste & Taljaard, 2011 International beef off-take rates AUS 28% NZ37% EU34% US38% ARG, BRA, UR, PAR20% Scholtz & Bester, 2008)

Dankie Thank you David Spies