The beef industry is a cornerstone of agriculture in South Africa. Louw van Reenen, former CEO of the Beefmaster Group, believes that to ensure its continued growth and competitiveness, beef producers must look beyond domestic consumption and tap into the immense potential of beef exports. In this article, he shares why beef exports are crucial for the industry’s sustained growth and how achieving export goals can bring numerous benefits.
The GDP growth in South Africa is too low for the feedlot industry to expand. Beef exports are the only way in which the industry will really grow and be competitive, and the aim is to export 20% of local production.
The beef industry is currently faced with the reality that growth will not be achieved with the normal demand. The only other possible growth which can be achieved is in terms of numbers, but that is not sustainable. The feedlot industry doubled in size during the past 20 years, but it is not possible to carry on like that.
The beef industry is exposed to cyclical weather patterns and droughts. That means that farmers have to be more productive to survive. South African farmers are among the best in the world in terms of productivity.
Looking at the numbers
A main problem for the feedlot industry is the fact that it is very difficult to get hold of real data in order to determine what the situation really is, and where we are going.
Data from SARS indicates a huge decline in exports because the industry lost some of its biggest markets, like China, due to foot-and-mouth disease (FMD) outbreaks. Where beef was exported to 42 countries, it is currently being exported to only 28 countries.
Slaughter numbers reflect a decline of 2.2% in beef slaughtering for the past eight years, while an increase of 6.2% was seen in prices. This is attributed to the fact that the feedlot industry has been under financial pressure for a number of years.
Data shows that export numbers declined on average by 4% during every outbreak of FMD. Although this may not seem like a huge decline, it is the critical 4% which is lost.
Low prices, exports
South Africa is currently sitting with the cheapest weaner calves in the world. During 2016 and 2017, South Africa was close to having the most expensive weaner calves in the world.
One of the major problems is the fact that our prices are about 50% below the world price. It was during the past ten years the cheapest meat in the world. It is definitely more expensive during times of higher exports.
The current low prices can in no way be attributed to Namibia and Botswana but are only due to the fact that our exports are too low.
If more beef is exported, higher weaner prices will be the result. If the South African beef industry reaches a point where 20% of local production is exported, the current weaner price of R35,00 will increase by 50%.
Opening meat markets
The department of agriculture, land reform and rural development plays an important role in opening meat markets, and exports to China are once again possible. However, this market is only relevant to a few, illustrated by the fact that Beefmaster was the only exporter to China for almost two years.
If significant volumes are not exported, it will be to the detriment of emerging farmers because they are struggling to get access to markets if there is less demand, which was the case in the past year.
- Louw van Reenen is the former chief executive officer. He is also one of the youngest leaders to have taken the role of executive chairman of the industry body in the red meat industry. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or positions of Food For Mzansi.
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