FMD crisis drives up beef and pork prices

South Africans are set to pay more for beef and pork as foot-and-mouth disease (FMD) disrupts the meat value chain and fast food restaurants pass the price hikes on to consumers.

The surge in beef and pork prices is also likely to have a negative impact on inflation.

Val Nichas, CEO of Spur Corporation, one of South Africa’s largest fast food chains, said the spread of FMD, which President Cyril Ramaphosa earlier this month deemed a national crisis, had impacted its business, particularly its beef-reliant RocoMamas brand.

“Further disruptions with FMD [in South Africa] were followed by outbreaks in Zimbabwe, Botswana and Eswatini, where we also trade,” Nichas said on an investor call releasing the group’s interim results.

“We are pleased that with our strong supplier relationships, we acted promptly to secure increased volumes of alternative proteins such as chicken and pork.

“The FMD has certainly impacted our business, with brands having to pass on some big increases in prices to consumers, particularly with brands like RocoMamas, who rely on freshly prepared beef smash.”

Double digits

FMD, a highly contagious viral disease affecting cloven-hoofed animals (cattle, sheep, goats and pigs), has disrupted the beef livestock industry, creating supply shortages and driving meat prices up by double digits.

The consumer price index released two weeks ago showed rising meat prices continue to place pressure on consumer wallets.

The December inflation print showed the annual rate for meat accelerated further to 13.5% from December’s 12.6% — the highest print for the category since December 2017.

Three beef products recorded the highest annual rates of all 391 products in the consumer inflation index basket. Beef steak surged 31.2%, while beef mince spiked 28%, and beef stew went up 30.3%.

On Thursday, Eskort CEO Arnold Prinsloo warned consumers and retailers that they would now also have to contend with high pork prices on the back of African swine fever and FMD outbreaks tightening supply across the formal market.

Prinsloo, who presides over an organisation that accounts for about 10% of South Africa’s pork supply, said his warning comes on the back of a communique from the South African Pork Producers’ Organisation (Sappo), which has communicated disease outbreaks affecting commercial piggeries in the Free State, North West, KwaZulu-Natal and northeast of Pretoria.

“South Africa slaughters roughly 72,000 pigs a week across the formal and informal sectors,” Prinsloo said. “The formal market has lost approximately 7,000 pigs due to the combined impact of ASF and FMD outbreaks.

“While this represents a relatively small percentage of total supply, even a 2% shortage can drive price increases of around 10%. This is the reality of pork’s price elasticity.

“Until recently we were able to hold prices stable because the industry had surplus stock that served as a buffer. That buffer has now been depleted, and we’re seeing the same supply-and-demand dynamics that recently affected the beef industry.”

Prinsloo said pork prices have moved significantly in recent weeks, with wholesale prices rising from about R32 per kilogram to R40.

Until recently we were able to hold prices stable because the industry had surplus stock that served as a buffer. That buffer has now been depleted, and we’re seeing the same supply-and-demand dynamics that recently affected the beef industry.

—  Arnold Prinsloo, Eskort CEO

“Further increases are expected as the effects of disease outbreaks work through the supply chain,” he said.

The cabinet statement on Thursday said the first batch of locally produced FMD vaccines was handed over two weeks ago.

“This milestone will contribute to urgent steps to curb the outbreak of the FMD currently ravaging over 14-million livestock in the country and causing untold devastation to the farming community,” the statement reads.

“Cabinet is confident that the rebuilding of local vaccine production capacity within the state-owned ARC and OBP will also contribute to the goal of reclaiming South Africa’s FMD-free status from the World Organisation for Animal Health.

“Cabinet extends its appreciation to the farming community, who have worked tirelessly to complement the efforts of the department of agriculture to curb the current outbreak of the FMD.”