Pork prices surge as outbreaks spread and state response criticised

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JEREMY MAGGS: South African consumers are experiencing sharply higher pork prices as disease outbreaks ripple through the livestock sector.

Wholesale prices have jumped from around R32/kilogram (kg) to around R40/kg in just a matter of weeks, as African swine fever and foot-and-mouth disease tighten supply in parts of the country. Now, the formal market, I understand, has reportedly lost something in the region of 7 000 pigs.

Listen: Government assigns council to manage foot-and-mouth disease response

In a market that sensitive, even a small shortfall can trigger double-digit price increases. Eskort says its own farms remain disease-free thanks to strict biosecurity, but pricing is set by the national supply and demand process, not individual performance.

So how much worse could this get, and what should consumers be bracing for? Maybe further pressure at the till?

I’m in conversation now with Arnold Prinsloo, who is chief executive officer of Eskort. Arnold, welcome to you. Wholesale pork moving from roughly R32/kg to R40/kg, as I mentioned, are you able to say what percentage of that jump is directly linked to disease?

ARNOLD PRINSLOO: Good morning, Jeremy. Everything could be contributed to African swine fever and foot-and-mouth disease. These are not wholesale prices. These are prices to the farmer.

The farmer used to get R32/kg, and they’re now getting R40/kg. The 20% jump is purely due to a shortage on the market due to the diseases.

JEREMY MAGGS: You say that 7 000 pigs, if I’ve read this correctly, have been lost from formal supply. Arnold, how firm is that number? And perhaps more worryingly, is that number rising week by week?

ARNOLD PRINSLOO: Absolutely, Jeremy, we’ve just received information that another farmer has had foot-and-mouth and another 1 000 pigs a week will be lost due to that.

JEREMY MAGGS: If a 2% shortage can drive prices up considerably, what does it say about the market? Is it structurally too tight?

ARNOLD PRINSLOO: It is too tight. Previously we had a lot of buffer stock in the market, and now that the buffer stock is depleted, the prices are going up.

There is simply not enough pork in the market.

We are importing ribs and bellies; the ribs are obviously for marinated ribs, and bellies for streaky bacon, from all over the world.

Read: South Africa meat-price growth at eight-year high on outbreak

Yeah, we were caught short. So the imports will definitely rise as well, but there’s a lead time of about three months before you can get stock.

JEREMY MAGGS: That is very worrying if the industry buffer stock is gone. You say three months to rebuild supply once a herd is disrupted. But again, three months can add a lot of price, can’t it?

ARNOLD PRINSLOO: Absolutely. Just to give you an idea, shoulder bacon sells in retail for more or less R40/kg. That price will, in the short term, increase to R48. Back bacon sells for R49/kg, that will increase to R59.

JEREMY MAGGS: Now your company says, Arnold, that it’s disease-free. What specifically are you doing that others are not?

ARNOLD PRINSLOO: Our company, we do not have our own farms, but the suppliers that supply us have very high biosecurity rules in place on their farms. You have to have a dry shower before you enter a farm. That simply means that you have to undress all your personal clothes and then get overalls and underwear from the farm.

Thereafter, you would be driven to the house where the pigs are being reared, and on that farm you have to have a wet shower. You enter a cubicle shower, and you exit on the other side and then you get new overalls before you can enter the farm. All farms are fenced and no vehicles are allowed to enter into those farm premises.

JEREMY MAGGS: That sounds like quite a process and also an expensive one. I’ve got to wonder whether these biosecurity standards are affordable and scalable across the entire industry, and obviously it would have an impact on smaller producers.

ARNOLD PRINSLOO: Yes, it’s very expensive, you’re quite right, and for small farmers and communal farmers, obviously that’s not possible.

JEREMY MAGGS: How difficult is it going to be for your company to absorb these increases before they start to flow straight through to retailers and consumers and disrupt the supply chain in that respect?

ARNOLD PRINSLOO: We have absorbed some of the pricing in the last month or so, but we can’t afford it anymore. So obviously your profit declines drastically and we were forced to put our prices up and we’ve given the retailers notice a few weeks ago that we are increasing the prices.

JEREMY MAGGS: Arnold, tell me if the outbreaks continue, what’s the impact going to be? And it’s going to be difficult, surely, for wholesale prices to settle any time this year.

ARNOLD PRINSLOO: I think the balancing factor would be imports. Although imports are quite expensive, the whole industry would have to keep on importing meat to cover the shortage.

JEREMY MAGGS: Does your company have confidence that the agriculture minister (John Steenhuisen) is dealing with this, and this new foot-and-mouth task team, is dealing with the situation to contain the broader outbreak effectively?

Read/listen:
SA to import vaccines to tackle foot-and-mouth disease
State mismanagement drives worst foot-and-mouth crisis in SA history
Farmers head to court as foot-and-mouth disease crisis deepens

ARNOLD PRINSLOO: I think the minister has realised what crisis he is in. He’s moving quicker than before, but I do not think he’s executing properly.

I think the Department of Agriculture is slow to react, and I think it’s just simply the slow bureaucracy in the government.

JEREMY MAGGS: So if he’s not or the department is not executing properly, what does the industry need to make sure that things accelerate to your satisfaction?

ARNOLD PRINSLOO: Well, the minister has called on some of the industry leaders to participate in the advisory board.

But the advisory board is simply just an advisory board, so they can’t execute. It’s solely on the minister to react and to give instructions to his staff to buy the vaccines and to implement the process.

JEREMY MAGGS: So that advisory board you’re suggesting, if I’m hearing this correctly, needs more teeth …

ARNOLD PRINSLOO: More power, absolutely.

JEREMY MAGGS: What would more power look like?

ARNOLD PRINSLOO: Well, it’s difficult, I think a board can’t execute, so it’s basically up to the minister. He should give instructions to his staff to get the ball rolling.

Read: SA agribusiness mood falls on animal disease, tariffs

JEREMY MAGGS: Arnold, you’re a big producer. Are you in contact with government about this? And if so, what sort of response are you getting from the department?

ARNOLD PRINSLOO: We’re not directly involved. The South African Pork Producers’ Organisation, they actually are involved and they liaise with the minister.

JEREMY MAGGS: Just a final one, at what point do higher pork prices start feeding, in your opinion, into broader food inflation?

ARNOLD PRINSLOO: It will definitely have an impact, and it will have an immediate impact. There’s already some research showing that it contributes to food inflation.

JEREMY MAGGS: Arnold Prinsloo, thank you very much indeed, chief executive officer of Eskort.

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