Tough times force consumers to buy cheaper meat

Tough times and increased red meat prices are forcing local consumers to substitute beef and lamb for chicken, the Competition Commission wrote in its latest Essential Food Price Monitoring Report (EFPM) released this week.

“Faced with increased red meat prices, consumers have substituted beef and lamb for chicken to ease budgetary constraints.

“During the last few weeks of 2022, market indicators pointed to the risk of increases in the price of meat, particularly poultry products. Specific risk factors were high domestic and international feed costs. In addition, the spread of Avian influenza [flu] across Europe, the US and Mexico; import tariffs on poultry imports; and the rand depreciation were all cited as other contributing factors,” the report said.


The Department of Trade, Industry and Competition’s poultry master plan found several long-term challenges hampering the poultry sector.
These challenges include feed costs, scale of production, imports of certain chicken pieces, inability to export, and slow pace of transformation throughout the value chain.
In addition, the poultry sector is highly concentrated and dominated by vertically integrated firms. Five firms comprise 70% of chicken production, and the top two comprise half of the market.

“Such a market structure raises concerns that these firms could use their market power to achieve anti-competitive prices,” the commission said.
According to the watchdog’s forecast, poultry raw material costs might fall during the first half of 2023.
“The commission will monitor how these reductions are transmitted to feed and chicken prices at the retail level,” the watchdog added.
The commission has monitored essential food prices since the start of Covid-19 in March 2020.

“South African consumers were subjected to unjustified price increases of sunflower oil, white and brown bread, and opportunistic price increases in maize meal over two years. Accordingly, the commission remains concerned about food inflation and, more specifically, whether the prices are justified by increasing costs,” said the commission.
The food sector is critical for the watchdog as poor consumers spend much of their income on food.

“While the effects of the pandemic on many markets have largely subsided, food prices are elevated and vulnerable to supply shocks,” the watchdog said.
“A recent example is the disruption following the Eastern European conflict. Domestically, worsening load shedding affects the operations of businesses throughout the food value chain,” the commission said.

The maize meal price increased by 32% from January to December 2022, and the commission expressed concern about opportunistic behaviour.
The watchdog said the public had complained about the sunflower oil price.
“Our analysis found that there has been a significant increase in the producer price of sunflower oil starting in March 2022,” the report said.

The commission said from June to December 2022, the wholesale price of sunflower oil fell drastically.


“The spotlight on conduct by processors of cooking oils in the August EFPM report likely contributed to this decline. Those companies remain under investigation,” the watchdog said.
The conduct of processors and retailers in 2022 resulted in consumers paying far more for cooking oil than in 2021.

“The commission remains concerned about the cooking oil value chain pricing and is investigating,” the commission said.
The report also said the retail prices of white and brown bread increased by 20% and 19% from January 2022 to December 2022 respectively, while the wholesale prices rose by 15% and 14% respectively.

The watchdog said onion prices increased from January to August.

“However, prices shot up from August to November before coming down slightly in December,” the report said.

On the other hand, fruit prices tracked by the commission fell last year. Avocado prices fell the most, followed by oranges.

“Most price declines occurred from January to July 2022, after which prices for all fruits started to rise. Avocados and oranges increased the most, with avocados going from R10.16 per kilogram (kg) in August to R18.34 per kg in December, an outcome of their seasonality. Oranges increased from R2.71 per kg in August to R7.29 per kg in December,” the commission said.

The watchdog said it would conduct a market inquiry into the fresh produce sector starting from this month.

 

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