South Africa’s pork industry took a heavy blow as the listeria scare sent prices tumbling and created a supply glut that the industry is still struggling to recover from.
Senior agricultural economist at FNB’s agri-business, Paul Makube says the loss to the value chain could exceed R1 billion.
Pork prices fell by almost 30% to 40% as prices dropped from R30 to R23 in a matter of months at Country Meats in South Africa, according to Sernick Group CEO Carel Sernfontein. The listeriosis scare impacted the sales of pork in particular, since fewer pork products were being produced by cold meat producers, he says.
When news of the listeria outbreak surfaced in early March, the Minister of Health called for all processed meat products, including polony and cold meats to be taken off retailers’ shelves as a precautionary measure, which caused an unexpected dent in the pork industry.
The CEO of the South African Pork Producers Organisation (Sappo), Johann Kotze says prior to the announcement, the pork industry was performing well: prices were good, demand was high and the price of feed (maize) had also decreased, meaning that production costs had fallen. However when the minister instructed consumers to avoid all ready-to-eat meats, there was a sudden drop in prices because the perception in the market is that pork is an ingredient in all cold meats.
“The minister never said pork was an issue, but the perception out there was that pork was involved, so we had a sudden drop in price,” says Kotze.
The most heavily-impacted was Tiger Brands with its Enterprise polony and vienna products. The company had to close four of its facilities after traces of the bacteria were found on its premises.
Kotze said people associate Enterprise processed meat products with pork, and when that happened 12% of the pork industry’s slaughtering was affected.
“When you put fear into an industry, people react immediately,” he says.
The flip side to the story, however, is that there has been a renewed appetite for pork products as other meat products appear out of reach.
FNB’s Makube says overall meat prices remain high, and when pork is excluded, meat prices at the producer level are at about 6% higher than last year, however if pork is included it is marginally down compared to last year.
Makube says the decreased price of pork against the higher price of other meat products, will most likely lead consumers to settle for pork as an alternative.
“In the end consumers continue to benefit from the low producer prices for pork, and this is a trend that will hold over the short term with the possibility of a further decrease in the long term,” he says.