BEEF & MUTTON MONTHLY REPORT APRIL Compiled by Pieter Cornelius E mail: NEXT PUBLICATION 7 MAY 2017

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1 Enquiries: Dr Johann van der Merwe Cell: Web: E mail: johnny@amtrends.co.za Compiled by Pieter Cornelius E mail: pieter@amtrends.co.za NEXT PUBLICATION 7 MAY 2017 BEEF & MUTTON MONTHLY REPORT APRIL 2017 ALL RIGHTS RESERVED Clients only not for distribution No part of this publication may be reproduced or transmitted in any form or by any means including recording or by any information storage and retrieval system, without permission in writing from AMT. Although everything has been done to ensure the accuracy of this information, AMT does not take responsibility for the accuracy or the opinions contained in this publication. Results of actions based on this information, will not be the responsibility of AMT.

2 AMT MONTHLY BEEF AND MUTTON REPORT APRIL BOTTOM LINE Beef In March 2017 year on year, the average producer prices of Class A2/A3, Class B2/B3 and Class C2/C3 beef increased in total by respectively 12,8%, 13,4% and 20,1%. For April 2017, an increase is predicted in the average price of Class A2/A3, and based on the price information of the past 19 years, the probability is 68,4% that the average price of the A2/A3 s is going to be higher compared to the previous month. For April 2017, a decline is predicted in the average price of weaners, and based on the price information of the past 20 years, the probability is 50,0% that the average price of weaners is going to be lower or higher in April compared to the previous month. The average yellow maize price (all contracts on JSE SAFEX) was 31,9% lower in March 2017 year onyear. Over the same period the average price of medium light weaners increased in total by 42,2% in March. In March 2017 year on year, the import parity price of Australian cow meat was 15,0% lower compared to an increase of 20,1% in the average price of Class C2/C3 beef. In March 2017, the number of beef cattle slaughtered was in total 4,7% more compared to the previous month, 17,5% less than in March 2016 and 11,8% below the long term average over the period March 2014 to March In November 2016, South Africa imported tons of beef from Namibia (including live animals), which was 66,9% less than in the same month in In December 2016, South Africa imported 277 tons of beef from Botswana, which was 33,4% less than the same month a year ago. In December 2016, a total of only one ton of beef (excluding offal) was imported from overseas, which was 99,6% less than the same month in Mutton In March 2017 the number of mutton and lamb slaughtered was 0,6% more compared to the previous month, 38,6% less compared to March 2016, and 36,5% down compared to the long term average over the period March 2014 to March The average producer prices of Class A2/A3, B2/B3 and C2/C3 increased in total by 12,1%, 18,2% and 16,3% in March 2017 year on year, the and the average price of all classes was 15,8% higher than the average over the period March 2014 to March For April 2017, a decline is predicted in the average price of Class A2/A3, and based on the price information of the past 20 years and the probability is 60,0% that the average price of the A2/A3 s is going to be lower in April compared to the previous month. In March 2017 year on year, the import parity price of Australian lamb increased in total by9,3% and the average price of AU mutton increased by 31,9%. In November 2016, South Africa imported tons of mutton and lamb from Namibia (including live sheep), which was 172,0% more than in the same month in In December 2016, a total of 346 tons of mutton was imported from overseas, which was 29,5% less than the same month in

3 PRODUCTION INFORMATION FOR THE MONTH OF MARCH 2017 Item Mar 2017 Previous Mar 2016 Forecast month Apr 2017 May 2017 BEEF Abattoir selling prices (c/kg) A2/A3 s AB2/AB3 s B2/B3 s C2/C3 s Net weaner price (c/kg) Slaughtering index (Ave.=100) 88,2 84,2 106,9 Import parity AU cows (c/kg) MUTTON Abattoir selling prices (c/kg) A2/A3 s AB2/AB3 s B2/B3 s C2/C3 s Slaughtering (Ave.=100) 63,5 63,2 103,4 Import parity AU mutton (c/kg) Import parity AU lamb (c/kg) BEEF INDUSTRY Slaughtering of beef cattle INDEX OF MONTHLY SLAUGHTERED OF CATTLE Index Base year Average Mar 2014 Mar 2017 = Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Cattle slaughtered 2 Aggregate slaughter Information received from of Red Meat levy Admin only available till January 2017 with preliminary slaughter based on information from the Red Meat Abattoir Association for February and March For the month of February and March we have to rely on the percentage change in the total slaughter against the previous month of the approximately 20 abattoirs which provide the information for the price analysis.. The slaughter index in the graph is based on the total slaughter of Red Meat levy Admin in South Africa, and gives a good indication of what is happening on the production side. The horizontal 100 line on the graph represents the long term average monthly slaughter of beef cattle from March 2014 to March 2017.

4 In March 2017, the slaughter of beef cattle seems to increase in total by 4,7% compared to the previous month, 17,5% less than the same month a year ago, and 11,8% below the long term average based on the period March 2014 to March The slaughter curve shows a downward trend from May 2016 to March Price movements of beef Long term trends in beef prices LONG TERM TREND IN THE PRODUCER PRICE OF BEEF c/kg Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Class A2/A3 Class B2/B3 Class C2/C3 In March 2017 year on year, the average producer prices of Class A2/A3, Class B2/B3 and Class C2/C3 beef increased in total by 12,8% 13,4% and 20,1%. The average price of the A2/A3 s was 23,1% above the long term average over the period March 2014 to March Price of Class A2/A3 beef versus slaughter Index Base month Mar 2016 = 100 CLASS A2/A3 BEEF PRICE VERSUS SLAUGHTER Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 Class A2/A3 RSA Slaughter From March 2016 to March 2017, the average producer price of Class A2/A3 beef increased in total by 12,8% and over the same period national slaughter declined in total by 17,5%. 3

5 Price prediction for Class A2/A3 beef PREDICTION OF BEEF PRICES (A2/A3) FOR APRIL TO SEPTEMBER 2017 c/kg Jan Feb Mar Apr May Class A2/A3 (2016) Jun Jul Aug Sep Oct 3-year average prices Nov Dec Class A2/A3 (2017) Prediction April to September 2017 In March 2017, compared to the previous month the average price of Class A2/A3 beef increased in total by 2,0%. For March an increase in the average price for Class A2/A3 beef was predicted, which was incorrect, and it was based on a probability of 73,7% for an increase according to the price information over the past 18 years. The actual beef price in March was 1,5% (R0,65/kg carcass weight) lower compared to the price predicted for March in the previous monthly report. For April 2017 an increase is predicted in the average price of the A2/A3 s and according to the price information over the past 19 years, the probability is 68,4% for an increase in price from March to April each year. The JSE futures price for April is 4 300c/kg which 4,2% lower compared to the predicted price for Class A2/A3 beef carcasses for April. The JSE futures price for June is 4 407c/kg which is 3,9% higher compared to the predicted price for June. Price prediction for Class B2/B3 beef PREDICTION OF BEEF PRICES (B2/B3) FOR APRILTO SEPTEMBER 2017 c/kg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 4 Class B2/B3 (2016) 3-year average prices Class B2/B3 (2017) Prediction April to September 2017

6 In March 2017, compared to the previous month the average price of Class B2/B3 beef increased in total by 0,8%. For March an increase in the average price for Class B2/B3 beef was predicted which was correct but based on the price information over the past 19 years, the probability is 52,6% for a decline. The actual beef price in March was 0,2% (R0,08/kg carcass weight) higher compared to the price predicted for March in the previous monthly report. For April 2017 an increase is predicted in the average price of the B2/B3 s, and according to the price information over the past 19 years the probability is 63,2% for an increase in price from March to April each year. Although not being shown in the above graph, the average producer price of Class C2/C3 is expected to decline in April. MONTHLY AVERAGE ABATTOIR SELLING PRICES OF BEEF CARCASSES EXCLUDING V.A.T. Monthly prices (c/kg) Oct 2016 Nov 2016 Dec 2016 Jan 2017 Feb 2017 Mar 2017 Class A2/A Class AB2/AB Class B2/B Class C2/C Medium Light weaners Weaner ( kg) price movements WEANER CALF PRICE TRENDS c/kg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec? Weaner price year average Weaner prices (2017) Prediction April to September 2017 The net price (farm gate price) of medium light weaners ( kg) increased in total by 3,1% in March 2017 compared to the previous month and increased in total by 42,2% year on year. The prediction of a decline in the average price of weaners for March 2017 was incorrect and was based on a probability of 80,0% over 20 years to be lower in March compared to the previous month. The real price for March was 7,5% higher (R1,86/kg) higher than the predicted price for March in the previous monthly report. For April, a decline is predicted in the average price of weaners, and based on the price information over the past 20 years, the probability is 50,0% for the average weaner price to be lower or higher in April compared to the previous month. The prediction of a decline may be prevented by the following supply factors. 5

7 A big lost occurred in the female herd over the past year due to the drought, which resulted in less weaners available for the 2017 marketing year. Due to good rains that fell over most of the beef producing areas, producers will start rebuilding their herds, which will reduce the number of weaner heifers available for the feedlot industry. Beef producers will tend to operate as buyers at auctions to rebuild their herd due to excessive grazing on their farms and by doing so will increase the demand for weaners. The maize/weaner break even price BREAK-EVEN PRICES OF WEANERS AND YELLOW MAIZE PRICE TRENDS Yellow maize R/ton Prediction Mar-15May-15Jul-15Sep-15Nov-15Jan-16Mar-16May-16Jul-16Sep-16Nov-16Jan-17Mar-17May-17Jul-17Sep-17 Weaner break-even price Yellow maize Light weaners Weaner price & break-even c/kg The average yellow maize price in March 2017 was in total 22,1% lower compared to the previous month, and 31,9% lower compared to the same month a year ago. The expected break even price of weaners for April 2017 is based on the predicted future price of Class A2/A3 beef in July 2017 and the SAFEX price for yellow maize in April 2017 (based on all March 2017 contracts Randfontein). With a predicted meat price (Class A2/A3) of R42,15 per kilogram in July 2017 and an average maize price (JSE SAFEX) of R2 116 per ton in April, for a feedlot to break even in April as far as the price beef and the price of maize are concerned, the weaner price should not higher than R28,48 per kg live weight in April, which is 8,3% higher than the average predicted weaner price of R26,30/kg for April. Or based on the expected average weaner price of R26,30 per kg live weight for weaners in April and a maize price of R2 116 per ton in April, by selling these animals in July 2017, the price for Class A2/A3 beef should not be less than R40,00 per kilogram, which is 5,1% lower than the predicted price R42,15/kg for Class A2/A3 in July Weaner price versus maize price INDICE OF WEANER PRICES VERSUS MAIZE PRICE 160 Base period: Average from Mar 2014 to Mar Indice Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Weaner/maize price ratio Weaner price Maize price

8 The above graph shows clearly the effect of a lower maize price on the weaner/maize price ratio. March 2017, the weaner/maize price ratio improved in total by 32,3% against the previous month and year on year, the weaner/maize price ratio improved in total by 108,9% due to a decline of 31,9% in the maize price and an increase of 42,2% in the average price of weaners. Imports of beef IMPORTS OF BEEF Overseas imports (Ton) Namibia imports (Ton) 0 0 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Overseas imports Namibia Botswana Import information from Namibia is only available till November 2016 and from Botswana and overseas only available till December In November 2016 South Africa imported tons of beef from Namibia, which was 172,9% more than in the previous month and 66,9% less than in the same month a year ago. These imports include live animals and canned meat. In November year on year, total beef imports from Namibia constitutes for approximate 2,5% of the total South African commercial slaughter. In December 2016, South Africa imported 277 tons of beef from Botswana, which was 10,6% less compared to the previous month and 33,4% less compared to the same month a year ago. In December year on year, total beef imports from Botswana constitutes for approximate 1,1% of the total South African commercial slaughter. In December 2016, South Africa imported 1 ton of beef from overseas, which was 99,1% less than in the previous month and 99,6% less than in the same month a year ago. The beef import data from overseas exclude tongues, hearts and livers. In December year on year, total beef imports from overseas constitutes for approximate 0,4% of the total South African commercial slaughter. In December, the main export country from overseas of beef meat to South Africa was USA (100,0%). When liver, hearts, offal and tongue were included, the total imports amounted to tons and the main export countries were Australia (56,3%), U.S.A (17,6%), Britain (9,4%), Argentina (5,6%), New Zealand (3,7%), France (2,7%) and Denmark (0,9%). 7

9 International markets and price movements of beef. The import parity price situation IMPORT PARITY PRICE OF AUSTRALIAN COW MEAT VERSUS SA CLASS C2/C3 c/kg Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 Import parity AU cow meat Class C2/C3 Class A2/A3 In March 2017, the average price of South African beef (A2/A3 and C2/C3) was 4 416c/kg and 3 677c/kg compared to the derived import parity price of Australian cow meat of 6 134c/kg. The import parity price is thereby 38,9% and 66,8% higher compared to the average price of Class A2/A3 and C2/C3 beef. In March on year, the import parity price of Australian cow meat was 15,0% lower compared to an increase 12,8% and 20,1% in the average producer price of Class A2/A3 and C2/C3 beef. Beef trade overseas Australia April EYCI begins with a bang The Eastern Young Cattle Indicator (EYCI) began April with a bang, lifting 29 /kg cwt above week ago levels to finish yesterday at 656 /kg cwt. Significant disruption to cattle numbers in the wake of ex tropical cyclone Debbie has been part of the cause, but more so is reinvigorated restocked interest for young cattle. Widespread rainfall across large swathes of the east coast during March is now likely to carry market momentum right through April and well into May the time of year when prices seasonally decline. One foreseeable short term inhibitor to the EYCI s potential comes from April containing three short trading weeks, with Easter and ANZAC Day public holidays. These, combined with some temporary plant closures after cyclonic damage, will result in subdued processor activity for the next few weeks. However, this will more than likely recover from May onwards. Nevertheless, with the strong restocking intent expressed in the current premiums for young cattle, combined with female cattle slaughter sitting at near record lows (averaging only 42% of the total adult kill from November to January), the wheels for rebuilding the national herd are certainly in motion. While short cattle supplies have led to April beginning with a bang, the longevity will be dictated by when the current withheld numbers eventually start flowing through the system. MLA s update of the 2017 Cattle Industry Projections will be released on 18 April, detailing the recent cyclonic influences on herd numbers, cattle slaughter, beef production, exports and cattle prices. 8 SOURCE Reproduced courtesy of Meat & Livestock Australia Limited MLA Market News, 4 April 2017

10 THE MUTTON INDUSTRY The National Sheep herd NATIONAL SHEEP HERD ('000) Commercial (1) Preliminary Source: NDA Based on the latest information from the National Department of Agriculture, total sheep numbers, which include sheep from the non commercial sector, are in the order of 24,1 million for Over the last ten years the national sheep herd of South Africa declined in total by 4,0%. Slaughter trends Long term trends in sheep slaughter TREND IN THE MONTHLY NUMBER OF SHEEP SLAUGHTERED 160 Base year : average Mar.2014 to Mar 2017 = Indice Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Sheep slaughtered Poly. (Sheep slaughtered) Slaughter of Red Meat levy Admin in South Africa only available till January The slaughter index in the graph is based on the total slaughter of Red Meat levy Admin in South Africa, and gives a good indication of what is happening on the production side. For February and March we have to rely on the percentage monthly change in the total slaughter data from the RMAA which represents approximately 20% to 30% of RSA abattoirs. In March 2017, the preliminary indication is that the number of sheep and lamb slaughtered seems to be 0,6% more compared to the previous month, 38,6% less year on year and 36,5% down on the average over the period March 2014 to March

11 Producer prices of mutton Long term trends in mutton and lamb prices Imports of mutton IMPORT OF MUTTON Namibia (ton) Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 0 Dec-16 Overseas Namibia Overseas Import figures from Namibia are only available up to November 2016, and overseas up to December In November 2016, South Africa imported tons of mutton from Namibia, which was 172,0% more than in the previous month and 170,6% more than the same month in In total from November 2015 to November 2016, mutton imports from Namibia constitutes for approximate 12,3% of the total South African commercial slaughter. In December 2016, South Africa imported 346 tons of mutton (excluding offal) from overseas, which was 64,0% more than in the previous month and 29,5% less compared to the same month in In total from December 2015 to December 2016, mutton imports from overseas constitutes for approximate 3,9% of the total South African commercial slaughter. In December, the main export countries of mutton (offal excluded) to South Africa from overseas were Australia (79,4%) and New Zealand (20,6%). When offal is included tot al imports was 584 tons and the main export countries of mutton to South Africa were Australia (69,0%), New Zealand (26,7%) and Estonia (4,3%). International mutton prices INTERNATIONAL PRICES FOR MUTTON AND LAMB BASED ON IMPORT PARITY AU mutton (clkg) AU lamb (c/kg) Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar AU mutton 21kg AU lamb 15Kg

12 In March 2017 on year to year, the import parity price of Australian lamb increased in total by 9,3% and Australian mutton increased by 31,9%. In March, the import parity price for Australian lamb and mutton were respectively R88,52 and R56,52 per kilogram based on the Rand/A$ exchange rate. World mutton and lamb meat market review Australia Sheep and lamb grids continue to rise Widespread rain across the eastern seaboard last week helped lift over the hook lamb and mutton indicators this week, compounding the impact of a smaller 2016 lamb crop and an already tight sheep supply. The performance of these indicators for the year to date has been the highest since MLA began reporting, with NSW, Victoria and SA trade lambs (18 22kg cwt) averaging 599, 627 and 602 /kg cwt, respectively, so far this year. In NSW, over the hook indicators for trade weight lambs averaged 644 this week, more than 20 /kg cwt higher week on week. While medium weight (18 24kg cwt) sheep indicators are yet to surpass year to date 2011 average levels (384 ), they are on the trajectory to, averaging 379 for the year so far and 392 /kg cwt this week. Equally, in Victoria trade weight lamb indicators increased week on week, at 653, 123 /kg cwt higher year on year. Medium weight sheep rates have outdone 2011 average levels (400 ) for the year todate, averaging 411, and remained firm this week at 427 /kg cwt. Similarly, SA trade weight lamb indicators lifted week on week, to average 647, and are also 117 /kg cwt higher year on year. SOURCE Reproduced courtesy of Meat & Livestock Australia Limited 4 April