Economic outlook of the beef industry Eastern Cape Elite Beef Production Week MARÉ ET AL. CONSULTING REALISING THE POTENTIAL OF AGRIBUSINESS

Transcription

1 Economic outlook of the beef industry Eastern Cape Elite Beef Production Week REALISING THE POTENTIAL OF AGRIBUSINESS

2 Overview Part 1: Where do we come from? Part 2: Beef production today Part 3: The future of beef production Part 4: The beef futures market FRIKKIE MARÉ TEL:

3 Part 1: Where do we come from? REALISING THE POTENTIAL OF AGRIBUSINESS 3

4 Economics Supply and demand Price FRIKKIE MARÉ TEL:

5 Aug-96 May-97 Feb-98 Nov-98 Aug-99 May-00 Feb-01 Nov-01 Aug-02 May-03 Feb-04 Nov-04 Aug-05 May-06 Feb-07 Nov-07 Aug-08 May-09 Feb-10 Nov-10 Aug-11 May-12 Feb-13 Nov-13 Aug-14 May-15 Supply: Cattle Numbers Source: DAFF (2016) Average Cattle Numbers REALISING THE POTENTIAL OF AGRIBUSINESS 5

6 number of farmers Supply: Number of farmers Year Source: MSSA (2016) FRIKKIE MARÉ TEL:

7 Number of farmers Supply: Number of beef farmers Year Stock farming (beef) Main Stock farming (beef) Secondary Stock farming (beef) Total Source: MSSA (2016) FRIKKIE MARÉ TEL: FRIKKIE.A.MARE@GMAIL.COM 7

8 Demand: Beef consumption Source: DAFF (2016) Beef REALISING THE POTENTIAL OF AGRIBUSINESS 8

9 Demand: Meat consumption Source: DAFF (2016) Beef Sheep Pork Poultry REALISING THE POTENTIAL OF AGRIBUSINESS 9

10 Demand: Meat consumption Source: DAFF (2016) Beef Sheep Pork Poultry Total REALISING THE POTENTIAL OF AGRIBUSINESS 10

11 Beef price: Nominal Source: DAFF (2016) Nominal REALISING THE POTENTIAL OF AGRIBUSINESS 11

12 Beef price: Real vs Nominal Source: DAFF (2016) Real (2014/15) Nominal REALISING THE POTENTIAL OF AGRIBUSINESS 12

13 Part 2: Beef production today REALISING THE POTENTIAL OF AGRIBUSINESS 13

14 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 - REALISING THE POTENTIAL OF AGRIBUSINESS 14

15 Drought General Information South Africa Annual Total Rainfall South Africa - Annual Total Rainfall (mm) (Based on provincial rainfall data) Annual Rainfall Annual Average Annual Total Rainfall (mm) Public Document Page 1 of 4 CLS-CI-GEN-INFO REALISING THE POTENTIAL OF AGRIBUSINESS 15

16 aangesien&`n&verandering&in&dektyd&ook&die&verkryging&van&inkomste&uitstel.&&indien&daar&dus&gepoog&word& om&ander&dektye&op&die&proef&te&stel,&stel&ek&voor&dat&dit&stelselmatig&gedoen&word&met&`n&gedeelte&van&die& kudde&en&daar&dus&vir&`n&paar&jaar&meer&as&een&dektyd&is.&&nie&net&gaan&inkomste&dan&beter&versprei&word& Climate change (calving time) nie,&maar&die&verandering&kan&ook&beter&beproef&word&en&dit&is&dus&makliker&om&terug&te&verander&indien& die&nuwe&dektyd&nie&werk&nie.& & & &!!!! Maart&2011& Maart&2012& Maart&2013& Maart&2014&! & & & & Oktober&2011& Oktober&2012& Oktober&2013& Oktober&2014& &! REALISING THE POTENTIAL OF AGRIBUSINESS 16

17 Large Stock Predation (Commercial) Province Total cost of predation (ZAR) * Western Cape N/A Northern Cape R Free State R Eastern Cape R KwaZulu-Natal R Mpumalanga R Limpopo R Gauteng N/A North West R Total R Source: Badenhorst et al. (2015) REALISING THE POTENTIAL OF AGRIBUSINESS 17

18 Cattle theft (Commercial) Province Number of cattle in the province Total number of cattle lost annually Annual direct costs (R) Free State R Eastern Cape R Total R Source: Lombard et al. (2015 & 2016) REALISING THE POTENTIAL OF AGRIBUSINESS 18

19 Diseases REALISING THE POTENTIAL OF AGRIBUSINESS 19

20 Market conditions (Product price) Index for Jan Feb Mrt Apr Mei Jun Jul Aug Sep Okt Nov Des Bees A2/A3 Speenkalf REALISING THE POTENTIAL OF AGRIBUSINESS 20

21 Market conditions (Input price) R4 500 R4 000 SAFEX YM R3 500 R3 000 R2 500 R2 000 R Jan-12 3-Jan-13 3-Jan-14 3-Jan-15 3-Jan-16 REALISING THE POTENTIAL OF AGRIBUSINESS 21

22 Optimal input use Kg Vleis SDA g/kalf MP TP REALISING THE POTENTIAL OF AGRIBUSINESS 22

23 Optimal input use 1200 R SDA g/kalf TK TI MI MK W SDA R50 / 10g and Carcass R30 / kg REALISING THE POTENTIAL OF AGRIBUSINESS 23

24 Marginal Profit, VMP & MFC (R / Week) Gross Profit (R) Optimal input use: Brahman Week Gross Profit (GP) Marginal Factor Cost (MFC) Value of Marginal Product (VMP) Marginal Profit (MP) REALISING THE POTENTIAL OF AGRIBUSINESS 24

25 Marginal Profit, VMP & MFC (R / Week) Gross Profit (R) Optimal input use: Simmentaler Week Gross Profit (GP) Marginal Factor Cost (MFC) Value of Marginal Product (VMP) Marginal Profit (MP) REALISING THE POTENTIAL OF AGRIBUSINESS 25

26 Land reform Can I afford to invest money in my farming business? What if the government takes my land? REALISING THE POTENTIAL OF AGRIBUSINESS 26

27 Farm murders REALISING THE POTENTIAL OF AGRIBUSINESS 27

28 Part 3: The future of beef production REALISING THE POTENTIAL OF AGRIBUSINESS 28

29 Future A period of time that is to come What will happen to someone or something in the time that is to come - Cambridge Dictionary - REALISING THE POTENTIAL OF AGRIBUSINESS 29

30 Challenges in the future Drought? Climate change? Predation? Theft? Same as the past? Diseases? Market conditions? Land reform? Farm murders? REALISING THE POTENTIAL OF AGRIBUSINESS 30

31 Short to medium term outlook R45.00 R40.00 R35.00 R30.00 R25.00 R20.00 R15.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 Calf 2016 Calf 2017 Calf 2015 A2/A A2/A A2/A Calf Real 2016 A2/3 Real REALISING THE POTENTIAL OF AGRIBUSINESS 31

32 Long term? Megatrends - long-term changes that affects governments, societies and economies permanently over a long period of time. Changing consumers Acceleration in technology Resource scarcity Niche markets Rapid urbanisation Demographic and social change Shift in global economic power REALISING THE POTENTIAL OF AGRIBUSINESS 32

33 Long term? REALISING THE POTENTIAL OF AGRIBUSINESS 33

34 Long term? REALISING THE POTENTIAL OF AGRIBUSINESS 34

35 Long term? Can I afford NOT to invest money in my farming business? What if the government does NOT take my land? REALISING THE POTENTIAL OF AGRIBUSINESS 35

36 Part 4: The beef futures market REALISING THE POTENTIAL OF AGRIBUSINESS 36

37 SAFEX BEEF: Specifications A2/3 Carcasses Carcass conformation of Contract = kg Hedging Months: Mar, Jun, Sep & Dec Final Price = 2 Weekly Moving average of RMAA participants Cash settlement contract NO physical delivery NO transport margin REALISING THE POTENTIAL OF AGRIBUSINESS 37

38 SAFEX BEEF: Example Purpose: Protect yourself against unfavorable price movements Time Action Quantit y (kg) Physical Price (R/kg) Cash flow Action Quantity (kg) Future Price (R/kg) Cash flow Jan Sell Jun R44 R Jun Sell R40 R Buy Jun R40 - R Nett R R4 000 When you have the product you can never loose! But you may burn your fingers when you speculate! REALISING THE POTENTIAL OF AGRIBUSINESS 38

39 Back to the future: Your view, your problem How heavy is this bottle of water? REALISING THE POTENTIAL OF AGRIBUSINESS 39

40 Thank You REALISING THE POTENTIAL OF AGRIBUSINESS CEL: