Paul Makube: pmakube@fnb.co.za 24 JANUARY 218 Agri-Weekly: Livestock Markets International beef market update: Brazilian beef exports continue to be very strong, with December levels continuing to break 1, tonnes. With the Russian ban on Brazilian beef still in place, the expanding export volumes from this country could be a concern going forward. In the United States, trading activity on imports was reportedly slow to moderate with prices mostly moderate to sharply higher, instances firm. Beef prices found support from limited import volumes and the improved demand. The seasonal cow slaughter was lighter than anticipated in New Zealand and export sales went sharply higher. Domestic beef market update: In the weekly slaughter update, cattle slaughtered during the week ended 12 January 218 dropped sharply by 19% w/w and 34% y/y to 8,762 head. The cumulative year-to-date slaughter number still trails last year s by a whopping 3% at 19,563 head which is a reflection of herd rebuilding that is underway (Figure 1d). Figure 1c: Beef price trends (R/kg) Figure 1d: Weekly commercial cattle slaughter trends (head) 3 52,2 25 39,2 26,2 2 15 1 5 13,2 2 Jan 17 26 May 17 29 Sep 17 2 Feb 18 Class A Contract Class C Weaner calf NZ Cow import parity,d/bn NZ Cow import parity,jhb *Last two data points on figure 1a are preliminary 1 4 7 1 13 16 19 22 25 28 31 34 37 4 43 46 49 52 218 212 213 214 215 216 Beef prices maintained a sideways to softer trend on seasonal decline in demand post the December holidays. See table 1a for further details prices of various categories. In the weaner calf market, the price trend remains sideways to lower with last week s closing at R35.53 per kg live weight (LW), weekly weaner calf prices are still 37% higher relative to last year.
FNB Agri-Weekly: Livestock & Fibre markets Page 2 Table 1a: Beef producer prices Beef market - South Africa Date 19 Jan 18 % Δ w/w % Δ y/y 12 Jan 18 5 Jan 18 29 Dec 17 Class A (R/kg) 48,19 -,3% 18,2% 48,33 48,59 48,78 Class C (R/kg) 43,77 -,3% 26,1% 43,89 44,23 44,54 Contract: A (*Incl.5thQ, R/kg) 47,33 -,4% 2,8% 47,53 47,78 47,89 Import parity (R/kg) 44,78,9% -1,4% 44,39 44,25 45,36 Weaner calves (R/kg LW) 35,53 -,6% 37,% 35,76 36,19 35,26 LW Live Weight; *Fifth quarter. Source: USDA, JSE, FNB Agric The New Year began on a negative note with high temperatures putting pressure on natural pastures across most areas. Drought conditions persists in some areas with the Western Cape hard hit. Nonetheless, the overall rainfall outlook still points to some improvement in production conditions as we head into the winter period. The short to medium term price outlook for beef is generally positive on the back of tight supplies due to herd rebuilding. While maize prices seem to be drifting slightly up on concerns over the production conditions, the bullish maize supply outlook is expected to limit further price increases therefore, feeding margins are still expected to remain relatively good largely. Weekly summary of the sheep market International sheep market update Australian lamb prices posted modest losses last week with the Eastern States Trade Lamb Indicator (ESTLI) closing 5.7% but still 2.3% higher y/y at Au$6.23/kg cwt. On production outlook, Meat and Livestock Australia (MLA) projected a decline in mutton production for 218 as producers continue to rebuild the national flock. This together with strong international demand will lift lamb and mutton prices. In New Zealand, the 17.5kg lamb and mutton prices were up 34% and 5% higher relative to last year at NZ$119.4/ head and NZ$94.5/ head respectively. NZ lamb slaughter was reportedly 12% above historical trends during December 217, which will have an impact on supplies in 218 as the high turnoff of mutton as well has reduced the breeding flock. 93, 83, 73, 63, 53, 43, 33, Figure 2a: Sheep price trends (R/kg) 6, 5, 4, 3, 2, 1, Figure 2b: Weekly sheep slaughter (head) 23, 13 Jan 17 19 May 17 22 Sep 17 26 Jan 18 Lamb Class C Contract lamb NZ Lamb parity *Last two data points on figure 2a are preliminary Domestic sheep market update ZN Mutton parity Lamb and mutton prices sowed towards midmonth under pressure due to the seasonal decline in demand across markets. The current prices are however sharply higher relative to the 217 levels. In the feeder lamb market, prices decreased slightly in line with weakness in carcass prices and limited demand. Currently, the weekly average feeder lamb prices are still trending closer to R4./ kg at R4.3/ kg live weight (LW) which is 25% higher relative to 217 and 24% above the 3-year average for this time of the year. Table 4a: Sheep producer Sheep market - South Africa prices Date 19 Jan 18 % Δ w/w % Δ y/y 12 Jan 18 5 Jan 18 29 Dec 17 Class A (R/kg) 73,47-2,2% 9,9% 75,14 75,51 75,88 Mutton (R/kg) 59,74-1,1% 16,7% 6,4 62,49 61,71 Contract: A (*Incl.5thQ, R/kg) 81,28 -,8% 23,% 81,94 84,23 83,67 Import parity (R/kg) 59,96-5,4% 2,8% 63,4 63,25 65,22 Feeder lambs (R/kg LW) 39,89-1,% 25,2% 4,3 42,59 42, LW Live Weight; *Fifth quarter. Source: USDA, JSE, FNB Agric, 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 218 215 216 217
FNB Agri-Weekly: Livestock & Fibre markets Page 3 It is however expected that prices will rebound slightly on improved demand during the month end period. Weekly pork market International pork market update USDA showed an expansion in the US pork sector in December Quarterly Hogs and Pigs report with animal inventories, litter rates, and producer farrowing intentions coming in higher on a year-over-year basis. Pork production in 218 is forecast at about 27 billion pounds, more than 5 percent above production last year. On the export front, the report indicated a 5% y/y increase in pork exports for November 217 despite lower shipments to Mexico. Table 5: Pork producer prices Pork market - South Africa Date 19 Jan 18 % Δ w/w % Δ y/y 19 Jan 18 12 Jan 18 5 Jan 18 Porker (R/kg) 31,48 -,6% 1,5% 31,48 31,68 31,43 Baconer (R/kg) 29,16-2,2% 1,1% 29,16 29,81 3,5 Import parity (R/kg) 27,29 4,9% 4,1% 27,29 26,1 24,95 Source: USDA, JSE, FNB Agric 37, 32, 27, 22, 17, Figure 3c: Pork price trends (R/kg) 12, 2 Jan 17 26 May 17 29 Sep 17 2 Feb 18 Porker Baconer Import parity Export parity *Last two data points on figure 3a are preliminary Domestic pork market update Weekly pork and baconer prices weakened early in the New Year due to the softer demand associated with the post December holiday period. Nonetheless, prices were stronger relative to last year (see table 5 for further details). The domestic pig slaughter numbers for the week ended 12 January 218 decreased by 3% w/w and 6% y/y at 2,224 head. The cumulative total pig slaughter for the first two weeks of 218 reached 39,34 head, which is 17% lower relative to the same period last year (See figure 3d). During November 217, the volume of pork imports increased sharply by 19.1% month-on-month (m/m) and but still down by 16.7% y/y at 2,224 tons. The cumulative year to November 217 pork imports were however still way ahead of the 216 levels by 16.4%, reaching 24,93 tons. Figure 3d: Weekly commercial pork slaughter trends (head) 35 3 25 2 15 1 5 1 6 11 16 21 26 31 36 41 46 51 218 % change (w/w), RHS % -1% -2% -3% -4% -5% -6% -7% -8% -9% -1% 4 3 Graph 3e: Pork Import Trends (tons) Year-to-NOVEMBER 217 5 4 3 Graph 3f: Pork Monthly Import Trends (tons) 217 214 215 2 2 216 1 1 214 215 216 217 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Source: SARS, *Excluding BNLS The short term price outlook remains bullish on good seasonal demand and the spill over strength in the red meat market. Producer margins are expected to continue to improve as grain prices remain depressed in the short to medium term.
FNB Agri-Weekly: Livestock & Fibre markets Page 4 Weekly poultry market update International poultry market update The USDA raised its US broiler production estimate for 217 on higher than expected production and weights in November 217. Early January price data supported increased 218 projections noted the USDA. Table egg production resumed expansion in November, and exports were robust as expected. Projected egg production was increased, and price surges in December contributed to higher 218 projections. The turkey production forecast for 217 was reduced by 1 million pounds to 5.987 billion pounds; the 218 forecast was reduced 25 million pounds to 6. billion pounds. Figure 4c: Poultry price trends (R/kg) 34, 29, 24, 19, 14, 9, 2 Jan 17 26 May 17 29 Sep 17 2 Feb 18 Frozen whole Fresh whole Imported Leg Quarter (US) IQF Figure 4d: Poultry/maize price ratio 16, 16 14, 14 12, 12 1, 1 8, 8 6, 6 4, 4 2, 2-6 Jan 17 12 May 17 15 Sep 17 19 Jan 18 Meat/maize ratio Break-even, LHS *Last two data points on figure 4a are preliminary Domestic poultry market update Broiler prices drifted lower post the December holidays due to the seasonal decline in demand. Nonetheless, the tight domestic stocks help limit further declines and have bucked the yearly trend as most categories are sharply higher y/y (table 6). Import parity prices however trended modestly lower due to the combination of a stronger rand and lower international prices. This has opened the gap between the domestic and international prices which may lead to the increase in the volume of exports. Feeding margins remain relatively favourable which indicates the improved profitability. The positive margins are largely due to the good chicken prices and relatively lower maize prices which are used as a proxy for feed costs. Figure 4d illustrates the recent trends in the chicken meat/ maize price ratio. Table 6: Poultry producer prices Poultry market - South Africa Date 19 Jan 18 % Δ w/w % Δ y/y 12 Jan 18 5 Jan 18 29 Dec 17 Fresh whole birds (R/kg) 27,3 -,9% 8,6% 27,54 27,96 28,42 Medium Frozen whole birds (R/kg) 26,93-1,% 11,9% 27,19 27,56 27,73 Individually Quick Frozen (IQF) (R/kg) 25,23 -,9% 7,% 25,45 25,76 26,1 Import parity (R/kg) 15,31-5,7% -1,6% 16,24 16,8 16,35 Source: USDA, JSE, FNB Agric In the latest SARS trade data update, poultry imports continued to slow down with the total for November 217 falling by 1% month-on-month (m/m) and 1% y/y at 45,864 tons. The cumulative poultry imports for the eleven months of 217 reached 58,133 tons, which is however still 3% lower relative to the same period last year (See figure 4e and 4f). Broiler meat which accounted for 94% of the total imports fell by 1% m/m and 9% y/y at 43,164 tons. At 478,79 tons, the total year to November broiler meat imports still trails that of last year by 4%. 6 55 5 45 4 35 3 25 2 15 1 5 - Graph 4e: Poultry Import Trends Year-to-date: NOVEMBER 217 213 214 215 216 217 7 6 5 4 3 2 1 Graph 4f: Poultry Monthly Import Trends (tons) 217 214 215 216 Source: SARS, *Excluding BNLS BROILER POULTRY JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
FNB Agri-Weekly: Livestock & Fibre markets Page 5 The short to medium term price outlook indicates a sideways to firmer trend due to the short domestic supply situation and the relatively stable to strong red meat prices. Profitability will remain positive due to the favourable feed prices. To find out more or to speak to one of our agricultural specialists, please contact us. Name City Cell Email Grewar, Oosthuizen Eastern Cape - Port Elizabeth 71 67 685 grewar.oosthuizen@fnb.co.za Edmund, De Beer Eastern Cape - Port Elizabeth 84 656 5634 edebeer1@fnb.co.za Martin, Louw Free State - Theunissen 82 784 888 mlouw1@fnb.co.za Chris, Bekker Free State - Bloemfontein 82 56 1894 cbekker@fnb.co.za Jan, Theron Gauteng - Pretoria 82 556 7494 jantheron@fnb.co.za Marc, Strydom KwaZulu-Natal - Pietermaritzburg 82 497 4781 mstrydom@fnb.co.za Greg, Sparrow KwaZulu-Natal - Pietermaritzburg 71 684 842 greg.sparrow@fnb.co.za Jurgens, du Preez KwaZulu-Natal - Newcastle 63 688 9146 jurgens.dupreez@fnb.co.za Sarah, van der Merwe KwaZulu-Natal - Pietermaritzburg 82 371 14 sarah.vandermerwe@fnb.co.za Adolf, Grobler Limpopo - Bela-Bela 82 337 64 agrobler@fnb.co.za Stephan, Scheepers Mpumalanga - Nelspruit 82 377 8516 sscheepers2@fnb.co.za Theo, Verwey Mpumalanga - Emalahleni 82 419 686 tverwey@fnb.co.za Pedrie, Van der Merwe Northern Cape - Kimberley 71 351 3439 pedrie.vandermerwe@fnb.co.za Frik, Coetzee Northern Cape - Upington 82 497 4769 frik.coetzee@fnb.co.za Johan, De Klerk North West - Brits 82 776 3477 jdeklerk2@fnb.co.za Johan, Strydom North West - Potchefstroom 82 497 2274 cstrydom@fnb.co.za Johan, Beukes Western Cape - Stellenbosch 82 372 4656 johan.beukes@fnb.co.za Lize, Morris Western Cape - George 82 928 8546 lmorris@fnb.co.za Arno, Cloete Western Cape - Willowbridge 82 32 3621 arno.cloete@fnb.co.za Philip,Voutsas Gauteng - East 82 82 422 pvoutsas@fnb.co.za Disclaimer: This report may contain certain opinions, predictions and assumptions and has been compiled from a variety of sources. Accordingly, you use the information in this report ( this information ) at your own risk and should not rely on it as a substitute for obtaining any specific professional advice you require. Accordingly, First National Bank, a division of FirstRand Bank Limited ( FNB ) provides no warranties or undertakings of any kind, whether express, implied or otherwise, concerning this information, its accuracy and/or reliability. Neither FNB nor its holding company, subsidiaries or other group companies will be liable to you for any claims, demands, expenses, losses or damages, of whatsoever nature, which you may suffer or incur by using this information.