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Agri-Weekly
Livestock and Fibre Markets
05 August 2016
1,520
1,780
2,040
2,300
2,560
2,820
3,080
3,340
3,600
3,860
4,120
4,380
07-Aug-15 11-Dec-15 15-Apr-16 19-Aug-16
(SA c/kg)
Graph 1: Beef price trends
Class A Contract
Class C Weaner calf
NZ Cow import parity,D/bn
* last two data points are preliminary
Beef market trends (Graph 1)
International: Weekly country update: US prices fell
sharply under pressure due to slow seasonal demand. Trading activity on the import market was reportedly slow.
The US Department of Agriculture (USDA) reached an agreement with their counterparts in Brazil for access of US beef and beef products for the first time since 2003. This follows the determination that their animal health and food safety protocols meet the requirements of the World Organization for Animal Health’s (OIE) scientific international animal health guidelines.
We see a divergence in domestic cattle prices for Australia and the US during the past few months in graphs 1a and 1b. The seasonal increase in domestic supplies kept cattle prices in check with all categories trending mostly sideways. In the case of Australia, the trend has been upwards due to the reduced cattle slaughter which is reportedly down by 30%.
Source: MLA,
0
120
240
360
480
600
Graph 1a: US Cattle price trends
Cutter 90% lean, US¢/kg cwt Choice Fed, US¢/kg lwt
Feeder - CME Index, US¢/kg lwt
0
100
200
300
400
500
600
Graph 1b: Australian cattle price trends (US¢/kg cwt)
Heavy steer Medium cow Trade steer
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Graphs 1c to 1d illustrate the extent of beef production across the world. Beef production is expected to recover in 2016 while stocks continue to decline as exports are ramped up.
Source: USDA, PSD
Domestic: The beef market saw modest gains on limited supplies and marginal improvement in
demand. Weekly Class A beef prices gained 0.9% w/w and 12% y/y at R38.36 per kg. Contract Class A beef prices increased by 2.8% w/w and 11.6% y/y at R38.35 per kg. Class C beef gained 1.6% w/w and 9.3% y/y at R30.65 per kg. In the weaner market, prices trended sideways due to limited availability. Weekly weaner
calf prices finished the week unchanged at R20.13 per kg live weight but still down 3.9% y/y.
Beef futures on the JSE seem to be confined to a sideways trend as volumes remain low. The Dec-16 delivery contract is currently trading at R41.25/ kg, which is unchanged from the previous week with no daily changes.
Cattle slaughter came in down 14% w/w but still remains way above the levels seen in the last four years due the ravaging drought.
The relatively weaker rand in 2016 has helped lift up exports with latest figures for April showing a 7% y/y increase in shipments. Nonetheless, this is likely to change in the medium term should the rand maintain the current rally of below R14 to the US dollar.
Source: JSE, Trade Map
53,000
54,000
55,000
56,000
57,000
58,000
59,000
60,000
61,000
Graph 1c: World beef and veal production trends (‘000 tons)
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600
700
800
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2,000
4,000
6,000
8,000
10,000
12,000
2010 2011 2012 2013 2014 2015 2016
Figure 1d: World beef import , export & stock trends ('000 tons)
Imports Exports Ending Stocks, RHS
38.00
40.00
42.00
44.00
46.00
48.00
Graph 1e: JSE BEEF CARCASS FUTURES (R/KG
Dec-16
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Graph 1f: South Africa's beef export trends (tons)
2013 2014 2015 2016
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Producer prices The beef market - South Africa
Date 08-Jul-16 15-Jul-16 22-Jul-16 29-Jul-16 05-Aug-16
Class A (R/kg) 38.17 37.93 37.52 38.03 38.36
Class C (R/kg) 29.11 29.70 30.15 30.16 30.65
Contract: A (*Incl.5thQ)(R/kg) 38.06 38.23 37.68 37.31 38.35
Import parity price (R/kg) 38.88 38.03 38.17 37.14 37.46
Weaner calves 19.42 19.27 19.64 20.13 20.13
OUTLOOK It is expected that beef prices will rebound in the short to medium term as supplies
tighten due to the improved production conditions following recent rains.
Source: RMMA; Hides: the August 2016 figure is preliminary
Sheep market trends (Graph 2) International: In New Zealand (NZ), domestic farm gate
prices trended mostly sideways across the most categories with the 17.5kg lamb closing unchanged w/w but still down 4% y/y at NZ$90.50/ head. Mutton prices also steadied at NZ$50.90/ head, but still down by 5% y/y.
On the export front, volumes out of NZ are reportedly tight and prices have started to trend upwards. Nonetheless, these price gains are offset by a stronger currency.
In the US, lamb prices saw further gains on the back of reduced supplies. The lamb carcass cutout values gained 1.5% w/w but still down 0.7% y/y at US$317.90/ cwt. The estimated weekly sheep slaughter fell by 7.5% w/w but unchanged y/y at 37,000 head, with the year-to-date number reaching 1.2m head – almost unchanged y/y. This translates into 1,170 tons for the week (-3.7% w/w and 14.8% y/y) and 37,890 tons for the year to date (-1.3% y/y).
Domestic: Prices ended mixed with the biggest gainer being mutton due to tightening supplies
tightened coupled with a slight pickup in demand during month-end. Weekly mutton prices gained 2.8% w/w and were 3% higher compared to last year at
R47.21 per kg.
0
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6,000
9,000
12,000
15,000
18,000
21,000
24,000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Graph 1g: Weekly commercial cattle slaughter trends (head)
2016 2012 2013 2014 2015
8.0
11.0
14.0
17.0
20.0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Graph 1h: Average hide prices per kg
2016 2011 2012 2013 2014 2015
Graph 2: Sheep price trends
2,260
2,800
3,340
3,880
4,420
4,960
5,500
6,040
6,580
7,120
07-Aug-15 11-Dec-15 15-Apr-16 19-Aug-16
(SA c/kg)
Lamb C lass C
C ont ract lamb N Z Lamb parit yZN M ut t on parit y
* Last two data po ints are preliminary
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Class A lamb also posted good gains, up 1.5% w/w and 9% y/y at R60.13 per kg. Contract Class As were the exception, finishing down 0.5% w/w at R57.49 per kg, but
slightly higher by 1% y/y. Feeder lamb prices trended sideways with most of support underpinned by reduced
availability across markets. Weekly feeder lamb prices steadied at R30.06 per kg live weight, up 4% y/y.
Sheep slaughter continued to increase with latest figures up 9% from the week earlier and 44% higher compared to last year this time.
Sheep slaughter in 2016 is substantially higher compared to last year. The cumulative sheep slaughter numbers are now closer to the 2012 and not far off the 2013 levels. The implications are that supplies will tighten further in the medium to longer term and will exert upward pressure on prices.
Producer prices The beef market - South Africa
Date 08-Jul-16 15-Jul-16 22-Jul-16 29-Jul-16 05-Aug-16
Class A (R/kg) 38.17 58.34 58.70 59.27 60.13
Class C (R/kg) 29.11 44.22 43.54 45.93 47.21
Contract: (*Incl.5thQ) (R/kg) 38.06 57.94 57.65 57.76 57.49
Import parity price (R/kg) 38.88 34.25 33.38 33.62 32.41
Weaner calves 19.42 29.67 29.88 30.06 30.06
OUTLOOK
With the braai months are around the corner, the demand for lamb and mutton is expected to rebound providing support for prices. Supplies are expected to come under pressure as pasture conditions improve.
Source: RMMA
0
10,000
20,000
30,000
40,000
50,000
60,000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Graph 2a: Weekly commercial sheep slaughter trends (head)
2016 2013 2014 2015
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Graph 2b: Cummulative sheep slaughter trends (head)
2016 2012 2013 2014 2015
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Pork market trends (Graph 3) International: In the US market, pork prices fell sharply on
softer demand. The pork carcass values dropped by 6.6% w/w at US$77.97/ cwt, which is 12.4% lower y/y.
The estimated weekly US pig slaughter dropped further to 2.2m head, marginally up on last week and 3.2% higher y/y. The year to date estimated pig slaughter reached 67.85m head with pork production was however still marginally down on last year at 6.9m tons.
In China, the market remains concerned about flooding conditions that occurred in large parts of the country. A lot of animals have reportedly been washed away which is devastating for producers. China is the biggest producer and so far accounts closer to 50% of world production as illustrated in graph 3a. It is also the biggest consumer of pork, so far accounts for 18% of world imports.
Source: USDA,
Domestic: The pork and baconer market showed a mixed trend during month-end with porkers
finishing a tad firmer. Porker prices gained 2.4% w/w and 3.7% y/y to R25.02 per kg. Baconer prices moved slightly lower by 1.4% w/w at R23.59 per kg, but still up 9.8% y/y. In the monthly pork import update, the monthly SARS figures showed a sharp drop in
volumes during June 2016. Pork imports dropped by 28% m/m and were down 56% y/y at 1,812 tons. In spite of a weaker rand untill June 2016, the year-to-date pork imports are sharply down by 33% y/y at 12,040 tons.
OUTLOOK Prices are expected to trend sideways in the short term but with some upward potential in the medium term as demand picks up in the warmer months ahead.
Source: SAPPO, SARS, Own Calculations; *Excludes BNLS countries
42%
44%
46%
48%
50%
52%
0
100,000
200,000
Graph 3a: World pork production trends
World beef production (000tons, LHS)
China-share of world production, RHS
0
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800
0
1,000
2,000
3,000
4,000
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8,000
2010 2011 2012 2013 2014 2015 2016
Graph 3b: Worl pork import, export & stock trends ('000 tons)
Exports Imports Ending Stocks, RHS
0
10,000
20,000
30,000
2013 2014 2015 2016
Graph 3c: Pork Import Trends (tons) Year-to-date: June 2016
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Graph 3d: Pork Monthly Import Trends (tons)
2016
2013
2014
2015
Graph 3: Pork price trends
900
1,280
1,660
2,040
2,420
2,800
3,180
3,560
07-Aug-15 11-Dec-15 15-Apr-16 19-Aug-16
(SA c/kg)
Po rker B aconer
Import p arit y Export parit y
* last two data points are preliminary
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Poultry market trends (Graph 4)
International: Weekly prices in the US broiler complex
trended mostly sideways to lower across the board.
Leg quarters and whole birds were a bit firmer for the week but still down by 3% and 32% respectively y/y.
Breast cuts and wings were the losers for the week and were down 27% and 11% respectively y/y.
Drumsticks were the exception, posting gains of 1.3% w/w but still down by 34% y/y.
According to the USDA, the United States has been restricted from the Chinese market since January 2015 due to highly pathogenic avian influenza (HPAI) outbreaks. Brazil is reportedly the top beneficiary from the absence of US suppliers. The US Attache’ in China revised the 2016 broiler meat import forecast downward to 350,000 tons, an increase of 82,000 tons compared to the USDA’s 2015 official figure. China’s 2017 broiler meat consumption was forecast up 13% y/y from the USDA estimate to 11.6m tons.
Source: USDA, PSD
Domestic:
Prices were down across the board with market activity remaining relatively subdued amidst strong inventory so far.
The domestic supply fundamentals are increasingly changing as margin squeeze force marginal producers to exit the industry amidst rising imports from all over the world.
Weekly medium frozen whole bird prices eased to R20.30 per kg, down 0.7% w/w and 1.1% y/y.
Fresh whole bird prices closed at R21.06 per kg, down 1.5% w/w and 0.6% y/y. The Individually Quick Frozen (IQF) prices also weakened on increased availability.
Weekly IQF prices were marginally down by 0.4% w/w at R16.96 per kg, which is 4.9% lower y/y.
OUTLOOK The short term price outlook remains bearish on the back of high stocks and increased
competition from imports as the rand continues to appreciate. Nonetheless, demand is expected to improve in the medium term as warmer weather returns and the seasonal outdoor activities increase.
0
20,000
40,000
60,000
80,000
100,000Graph 4a: World broiler meat production trends (‘000 tons)
0
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1,000
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3,000
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4,000
4,500
2015 2016
Graph 4b: Major broiler meat exporters ('000 tons)
Brazil
United States
EuropeanUnion
Graph 4: Poultry price trends
1,180
1,300
1,420
1,540
1,660
1,780
1,900
2,020
2,140
2,260
2,380
2,500
0 7- A ug- 15 11- D ec- 15 15- A pr- 16 19 - A ug- 16
(c/kg)
Frozen whole Fresh whole
Imported Leg Quarter (US) IQF* last two data po ints are preliminary
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Source: SARS, Own Calculations; *Excluding BNLS
Producer prices for selected livestock commodities
05 August 2016 Beef Mutton Pork Poultry
Class A/ Porker/ Fresh Whole birds (R/kg) 38.36 60.13 25.02 21.06
Class C/ Baconer/ Frozen Whole birds (R/kg) 30.65 47.21 23.71 20.30
Contract: A2/A3 (Incl.5thQ)/ Baconer/ IQF (R/kg) 38.35 57.49 23.59 16.96
Import parity price (R/kg) 37.46 32.41 26.49 13.47
Weaner Calves/ Feeder Lambs (R/kg) 20.13 30.06
Wool and cotton market trends (Graph 5)
International: Cotton futures rallied on improved export
demand from other countries with the exception of China.
Meanwhile, the government cotton auctions in China continued with the daily rate reported at 30,000 tons per day on the domestic market. Plans are to increase the daily rate and extend sales into September as China sits with a huge amount of cotton according to reports.
In India, and Pakistan, the monsoon has reportedly improved but earlier dry weather conditions had delayed planting in some areas.
US crops in the southern and western Great Plains were reportedly facing stressful conditions in Texas with all parts of the western Great Plains remaining warm and dry.
After slow start to the week, cotton futures on the InterContinental Exchange (ICE) rebounded and trended upwards with the Oct-16 contract finishing up 3.3% at US76.64 c/lb. The Dec-16 cotton futures rose by 3.6% w/w at US76.74 cents/lb.
Source: InterContinental Exchange (ICE)
0
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240,000
300,000
2012 2013 2014 2015 2016
Graph 4c: Poultry Import Trends Year-to-date: June 2016
0
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70,000
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Graph 4d: Poultry Monthly Import Trends (tons)
2016
2012
2013
2014
2015
ICE Cotton Futures 05 August 2016
Dec-16 Mar-17 May-17 Jul-17 Oct-17
Cotton (US c/lb) 76.74 76.97 76.41 75.98 75.13
% Change w/w 3.6% 4.1% 3.7% 3.6% 3.4%
Graph 5: Cotton & wool prices
(SA c/kg)
8,650
9,930
11,210
12,490
13,770
15,050
16,330
17,610
18,890
20,170
07-Aug-15 11-Dec-15 15-Apr-16 19-Aug-16
1,200
1,700
2,200
2,700
3,200
SA Wool Aus Wool Cot t on A-Index ICE Fut ures
* last two data points are preliminary
Wool Cotton
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Source: USDA, PSD;
Wool market: The Australian wool market is currently on a three week recess. The closing sale before the recess saw the AWEX Eastern Market Indicator (EMI) closing at AU$13.20 per kg clean wool with a sales reached 96% of 39,152 bales offered.
Domestic: The wool market is currently on recess and the closing sale for the season saw the Cape
Wools Merino indicator easing to R152.06 clean wool. At this level, the indicator was up 7% compared to the season to date average, and 17.7% higher from the opening sale of the season.
Fibre market prices 05 August 2016
SA prices (R/kg)
Australian prices (R/kg)
Australian futures Jul-16
(AU$/kg)
Australian futures Oct-16
(AU$/kg)
Wool market indicator (R/kg) - -
19 long length wool (R/kg) - - - -
21 long length wool (R/kg) - - - -
23 long length wool (R/kg) - - - -
Fibre market prices 20 May 2016
SA derived Cotton (R/kg)
New York A-Index (US$/kg)
Cotton Futures Dec-16
(US$/kg)
Cotton Futures Mar-17
(US$/kg)
Cotton Prices (R/kg) 25.46 1.84 1.69 1.69 Cotton Futures - InterContinental Exchange (ICE); SA Wool currently on recess
0
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120,000
140,000
Graph 5a: World cotton production trends ('000 480-lb bales)
0
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9,000
Graph 5b: World major cotton importers ('000 480-lb bales)
2014/2015
2015/2016
0
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60,000
Graph 5c: World cotton imports ('000 480-lb bales)
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120
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100,000
120,000
Graph 5d: World cotton ending stocks ('000 480-lb bales)
Ending Stocks, LHS
Stock to Use (%), RHS
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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
FNB Business - Agriculture
Meet our dedicated team of Agricultural Managers in various regions of South Africa
Name Location Cell phone no: Email Add
Grewar, Oosthuizen EASTERN CAPE -Port Elizabeth 071 607 6850 [email protected]
Edmund, De Beer EASTERN CAPE -Port Elizabeth 084 656 5634 [email protected]
David, Dobrowsky FREE STATE -Bethlehem 083 387 7977 [email protected]
Martin, Louw FREE STATE -Theunissen 082 784 8880 [email protected]
Chris, Bekker FREE STATE -Bloemfontein 082 560 1894 [email protected]
Jan, Theron GAUTENG -Pretoria 082 556 7494 [email protected]
Greg, Sparrow KwaZulu-Natal -Pietermaritzburg 071 684 8420 [email protected]
Jurgens, KwaZulu-Natal -Newcastle 076 476 9571 [email protected]
Herman, Claassens LIMPOPO -Tzaneen 082 370 5718 [email protected]
Adolf, Grobler LIMPOPO -Bela-Bela 082 337 6040 [email protected]
Stephan, Scheepers MPUMALANGA -Nelspruit 082 377 8516 [email protected]
Theo, Verwey MPUMALANGA -Pretoria 082 419 6086 [email protected]
Pedrie, Van der Merwe NORTHERN CAPE -Kimberly 071 351 3439 [email protected]
Frik, Coetzee NORTHERN CAPE -Upington 082 497 4769 [email protected]
Johan, De Klerk NORTH WEST -BRITS 082 776 3477 [email protected]
Johan, Strydom NORTH WEST -Potchefstroom 082 497 2274 [email protected]
Johan, Beukes WESTERN CAPE -Caledon 082 372 4656 [email protected]
Lize, Morris WESTERN CAPE -Willowbridge 082 928 8546 [email protected]
Arno, Cloete WESTERN CAPE -Willowbridge 082 302 3621 [email protected]