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    Economic impact of Covid-19 on the meat industry

    The Covid-19 crisis is wreaking havoc on the economy as well as various sectors in the agricultural industry. The meat industry has been forced to come up with creative solutions throughout different value chains to combat the effects of this global pandemic.
    Karamo via
    Karamo via Pixabay

    As part of a virtual discussion series, Senwes recently gave role-players in the meat industry the opportunity to discuss ways of accessing local and global markets, as well as the impact Covid-19 has had om the overall growth and profitability of the meat industry. Dr John Purchase, CEO of the Agricultural Business Chamber (Agbiz), anchored this series and opened the session by acknowledging that the South African agricultural industry would have to adapt to these unusual circumstances if it is to maintain its global competitive edge.

    "Effective co-operation and collaboration are vital if we want to address evolving consumer patterns and tap into markets that can help to bolster both our industry and the economy," he comments.

    Poultry industry not chickening out
    According to Marthinus Stander, CEO of Country Bird Holdings, the consumption of chicken in South Africa equates to about 40kg per person per year. He adds that chicken meat is always in demand locally due to its affordability and versatility. "If there are any problems in the value chain it is usually on the supply side. At Country Bird Holdings, we firstly want to determine where the market gaps are and which market segments we need to target. We have more of a niche approach as opposed to a low-cost commodity approach. Our focus is therefore on quick-service restaurants and we have designed our value chain to deliver the right bird at the lowest possible price," he explains.

    When it comes to accessing the global market, Stander believes there are plenty of opportunities to do this in the poultry sector, especially in Africa. "We currently do not export chickens from South Africa. Instead, we have been establishing chicken operations in various countries throughout Africa."

    Covid-19: A fox in the henhouse

    According to Stander, they are not currently facing any obstacles when it comes to demand. However, in terms of servicing their niche market of fast-food outlets, they have been jumping over a continuous stream of hurdles. “Several of our chicken operations are closed, which makes it very hard to keep up with payments while also affecting food security. Post COVID-19 we are expecting consumers to be more financially constrained due to the weakened economy, which could ultimately impact our value chain,” he adds.

    Beefing up the feedlot industry

    Dewald Olivier, CEO of the South African Feedlot Association, says there is still ample opportunity to grow their markets, despite current Covid-19 obstacles. "Co-operation between the commercial feedlot industry and the South African government is vitally important if we want to access new markets. The red meat industry has faced huge obstacles over the last few months with regard to foot-and-mouth disease. Amid these trials we’ve learned that there are still markets willing to work and negotiate with us. Our red meat, in particular, has a good international reputation and is still in demand largely because of our marketing approach, our biosecurity protocols and how we present our products on the international market.

    "With regard to the African Continental Free Trade Area (AfCFTA) that is launching in June, we are seeing plenty of new opportunities for the feedlot industry in terms of accessing and penetrating new markets, which may even prove more lucrative than our traditional international markets," he explains.

    Taking the bull by the horns

    Olivier acknowledges that the Covid-19 pandemic has negatively impacted on the entire agricultural industry. However, he also believes that these challenges create new opportunities and that it can ultimately nudge the feedlot industry to go back to basics. "If we look at consumers, for instance, we can see that there is a definite change in demand. Going forward, I think we are also going to see shifts in consumer behaviour, which means we need to change our approach and outlook to anticipate and match these changes.

    "The South African Feedlot Association is re-evaluating its goals and ambitions and is putting plans in place in terms of risk management. Covid-19 is giving us an opportunity to re-invent ourselves and to look forward to a new normal. Establishing beneficial partnerships during this crisis is important and I think we are going to see lots of merges and acquisitions in a bid to remain profitable and keep our heads above water," adds Olivier.

    Blazing new trails in the pork industry

    Johann Kotzé, CEO of the South African Pork Producers’ Organisation, says the pork industry has gone through numerous trials and tribulations the last three to four years. According to him, African swine fever, foot-and-mouth disease and the listeriosis outbreak offered some valuable insight into the resilience of the pork industry. "We have learned that biosecurity is non-negotiable, food safety is of the utmost importance and that expert leadership plays an instrumental role in upholding and supporting any value chain," he says.

    According to Kotzé, the industry’s commitment in striving for excellence and refusal to run away from difficult situations resulted in one of their most lucrative years yet in terms of producing and selling pigs during the listeriosis outbreak. "We are still seeing an increase in pork demand amid disease outbreaks and difficult times. As an industry, we are quite excited to have such a good foothold in the meat market, with more than enough space and opportunity to grow the consumption of pork on a local scale," Kotzé explains.

    He says that penetrating the informal market has been challenging and that there are still a lot to learn when it comes to price, product and cut size in order to truly grasp and cater to consumer preference.

    "I think the Covid-19 pandemic will emphasise the need for consumers to buy locally again so that everyone can contribute to the South African economy. As an industry, we also want to support local production, which is why the informal trading sector is one of our key focus areas when it comes to catering to new markets," he adds.

    How has Covid-19 impacted on pork demand?

    Even though the negative impact of Covid-19 on various value chains in the agricultural industry is evident, Kotzé says there is still a lot to be grateful for. "We have the opportunity to be operational as an industry. Secondly, we are also in a position to feed the nation in these desperate times. This pandemic is forcing farmers to take different and more creative approaches to overcome new hurdles. Biosecurity in our industry is not a new concept, and I think Covid-19 drives that principle home.

    "However, we still have areas where we need to grow. I don’t think we understand the informal sector and market all that well. Up to 70% of the informal sector’s economy depends on informal trading. If we can cater to the traders in this sector, we stand a chance to really grow our sector. There is no lack of demand when it comes to food in South Africa. People’s spendable income may have decreased, but it is still possible for us to adapt to these new circumstances.

    "On the farmers' side, we are doing well. We are battling prices, but we are still in production. The abattoirs have put regulations in place to ensure that they stay operational. The processing side has taken every precaution to promote and manage the health of their employees. The only downfall is at the retail side of the value chain. Retailers are battling to get stock and they are also struggling to anticipate an accurate level of demand because of Covid-19," concludes Kotzé.

    Source: AgriOrbit

    AgriOrbit is a product of Centurion-based agricultural magazine publisher Plaas Media. Plaas Media is an independent agricultural media house. It is the only South African agricultural media house to offer a true 360-degree media offering to role-players in agriculture. Its entire portfolio is based on sound content of a scientific and semi-scientific nature.

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    About Claudi Nortjé

    Claudi Nortjé, Plaas Media is author at AgriOrbit.
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