Domestic livestock prices remained elevated during 2017
- Prices in the livestock markets trended at levels above 10% year-on-year (y/y) during the course of 2017 with lamb posting the largest gains.
- The relatively higher livestock prices contributed to meat inflation to remain stubbornly high despite declines across the food inflation basket due to the improved agricultural output. Although meat inflation advanced marginally by 0.8% month-on-month (m/m) during October 2017, it remained sticky up by 15.5% y/y largely due to the supply tightness in both the beef and sheep markets as a result of herd rebuilding. The November meat inflation decelerated to 14.9% y/y, which is still at double digit level.
- While red meat prices helped lift the poultry market, the outbreak of the avian influenza during the second half of 2017 had a major influence on further price increases in this market.
- In the slaughter market, the number of cattle and that of sheep slaughtered since the beginning of the year to the second week of December 2017 dropped by 12% and 16% respectively relative to the same period in 2016. This contraction in slaughter numbers confirm that herd rebuilding has indeed commenced on the back of the improved production conditions across the livestock areas.
- That said the livestock sector continued to benefit from the lower feed grain prices (maize, soybeans) and this coupled with strong meat prices has improved the profitability and ensured better margins in feedlots, poultry and pork. The higher meat prices means producers are expected to continue to make good margins.
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