ABSA Agri Trends

31 May 2017 – Livestock and Fibre.

Consumer preferences tilting the butter supply, and spiking prices

 

The dairy industry has been seeing a shortage in butter, and this mainly due to the consumer preferences moving towards “banting” diet, which promotes high fat and high protein intake. The international price for butter has also increased significantly due to higher demand. The local consumer has increased demand for full cream milk, butter and full cream products, reducing the demand for low fat milk and products.

Previously the usage of lower fat milk/cream and other products allowed for excess fat to be used as input into butter. Since trends have moved towards full cream, the lower supply of input has resulted in shortages of butter.

The move towards this trend is favourable for the milk industry, because full fat milk production promotes milk demand, Whereas when people move towards lower fat milk, they eventually stop consuming the product because the taste of low fat milk is less pleasing, resulting in a lower consumption of milk overall.

Highlights

Poultry

  • The outbreak of Bird Flu in Europe resulted in the banning of broiler meat from regions in the EU.  The relief is temporary as it is uncertain when the bans will be lifted. It will however take about 6 weeks on sea for the product to reach South Africa once the bans have been lifted. But until then the decline in broiler meat imports from the EU is an important relieve for broiler producers in the industry. Expectations are that the ban will stay in place at least until the new import tariff is announced. Poultry imports from the EU shifted to the US. In a calendar year the EU has unlimited tariff free access to the South African market but US only 65 000 tons. For the period January to March 2017, 35 290 tons were imported from the US. This means that imports from the US may decline or stop soon.
  • The government is seeking to establish new export markets for the local poultry industry in order to drive competitiveness.
  • The profit margins for the broiler industry are expected to recover. The declining new season maize prices lower feed costs as feed for broilers contain about 70% maize.  On the other hand, the price for broilers has improved. As a result of the bird flu outbreaks which broke in the EU towards the end of 2016, imports from this area were halted, a move which provides support for the local industry. The local producers are enjoying some price support as a result of the banning of low cost imports.

For a detailed update please see attachment