Concern over retail red meat prices

Red meat producers are blaming supermarkets for not passing low prices on to consumers.

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The producers fear that high prices will cause consumer resistance in favour of other meat sources such as chicken. Research done by the University of the Free State has shown that consumer prices for red meat remained high despite the sharp drop in producer prices. Two researchers at the university, Frikkie Maree and Herman Lombard have monitored consumer prices at three supermarkets in Bloemfontein since January and found that supermarket prices remained exceptionally high.

Maree cautioned that supermarkets should not be judged on one carcass cut. “By using a standard block test, including a 30% profit margin and 14% VAT for beef rump steak at a carcass price of R26,50/kg, the price should have been about R98,14/kg.
The carcass price of R32,00/kg at the beginning of 2012 should have realised a retail price of R118,50, but the price then was the same as it is now.

He explained that during times of high carcass prices, the retail sector keeps the price of expensive cuts lower than the suggested block test prices to prevent customer resistance. However, the price for cheaper cuts is increased. This means less profit on high value cuts when the carcass prices are high. The opposite is true when carcass prices are low. Free State RPO Chairman Neels de Villiers explained that producer prices had declined by 20% to 30% since December 2011.

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“I know we are in a free market system, but I call on the red meat retail industry to adapt its prices to prevent further market share losses, said de Villiers.” Vryburg beef cattle farmer Flip le Roux ascribed the drop in production prices to, among others, the surplus of A-grade carcasses and the influx of frozen beef from Botswana. He said Botswana meat was on sale in supermarkets in the Southern Cape.

Coupled with exceedingly high consumer prices, Le Roux sees a difficult time ahead for red meat producers. “The meat from Botswana is not graded and is erroneously marketed as so-called free-range meat. “Our break-even price for weaners is about R15/kg. Weaner prices dropped from R18/kg in October last year to the current price of about R15/kg. We need a minimum price of R17/kg to make a profit,” he said.