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Load shedding distorts meat prices

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“Meat prices on shop shelves are rising drastically, while the weanling calf prices farmers receive are at a 5-year low”. Dr Jack Armour, commercial manager of Free State Agriculture (FSA), says weaner calf prices are currently 20% lower than a year ago.

The implication of the current market environment is that farmers produce meat at a 2023 cost base, but at best receive an income equivalent to 2018 prices. The fact that the supply and demand for meat products is stable indicates that external factors are distorting the meat industry’s pricing mechanism. One of these factors is load shedding.

Francois Wilken, president of FSA, says the impact of load shedding has an additional overhead effect on the consumer, suppliers and producers of meat products. “Meanwhile, farmers are forced to purchase expensive power generation capacity that increases running costs and requires capital. Suppliers, in turn, are forced to pay lower prices for weanling calves in order to limit the costs of backup diesel-powered machinery.” Wilken believes that consumers who are already at the mercy of inflation pressure are now buying in smaller quantities as meat cannot be frozen for long periods. This and reduced spending in turn place additional eve management costs on slaughterhouses, slaughterhouses and shops.

According to Boy Saaiman, Free State Agriculture (FSA) regional representative in the Kroonstad/ Steynsrus area, the drop in meat prices threatens the viability of many farms. “If the electricity supply problems had been addressed prematurely, the meat industry would not have been in this situation. Load shedding puts an unnecessary cost burden on the entire meat production value chain. The result is that it becomes too expensive for the farmer to supply meat locally and it will become too expensive for the consumer to buy meat”.

FSA is therefore making an urgent appeal to the industry as well as the government to open the export market so that more meat can be exported and producers can benefit from the weak exchange rate. Furthermore, biosecurity and traceability must be revamped to keep the market open and create high confidence in South African meat.