Until the end of December the monthly rainfall distribution mimicked the rainfall pattern in 2016. However, maize producers in the western production regions manage to increase plantings during January. Although the amount of hectares planted is very similar to that of the 2017/18 production season, production may suffer due to insufficient heat units and the possibility of colder weather and frost. During the 2016 drought and the season thereafter the increased price levels maintained the gross producer value of production. It is expected to be the case in 2019 as well and higher income levels will support the value of collateral assets such as land. Although the impact of the drought is severe the impact on agriculture in general will be softened by increased prices. Having said this, the cash flow of individual producers without a crop will be impacted the most severe. It is key to remember that production will recover after a drought and often at increased price levels resulting in an increased gross production value to the producer in the next season. The weather outlook for February, March and April looks favorable to support yields (given the late plantings) and this may lower the total required imports of 1,1 million tons. Consequently, the outlook for less expensive animal feed may improve as the season develops thereby improving the outlook for the intensive livestock industries as well.
Highlights
The price declines in the livestock industry reached a bottom. It is expected that prices will start to recover in the coming week.
Beef
After the sharp decline in local beef and weaner calf prices, prices start to recover as widespread rainfall improve grazing conditions for weaner calves. Producer resistance against lower prices limited supply. Both beef carcass and weaner prices will continue to trade higher.
Mutton
The more favourable weather conditions improving the outlook for maize production, resistance against low price bids for feeder lambs and the recovery in beef carcass prices will lead feeder lamb prices to trade sideways to higher in the coming week.
Pork
The local decline in beef and mutton prices levelled out as the growing conditions and rainfall start to improve. Secondly, resistance to lower beef carcass prices and lower weaner calf prices provide underlying support to lower prices and as a result pork prices should follow the firm beef and mutton prices sideways to higher in the week to come.
Poultry
Although 11% weaker than a year ago the Rand strengthened by 7% over the past month allowing the imports of more competitive poultry products. The strong Rand negates the positive impact of improved rainfall conditions in the grain producing areas on future animal feed cost increases. Local poultry prices remain under pressure.
Wessel Lemmer -Senior Agricultural Economists, Absa group
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