Given the natural resource base of South Africa, livestock production is one of the most
important farming practices in the country. Of the approximately 80 % of the land surface being
utilised for agriculture, almost 70 % is mainly suitable for raising livestock.
The South African red meat sector contributed 14.8 % to the total gross value of agricultural
production during the 2008/2009 season with cattle being the main contributor at 10.1 % while
sheep contributed 2.5 % during the same period (DAFF 2010). The long-term average
contribution of the red meat industry to the total gross value of agriculture production (from
1996/1997 to 2008/2009) accounted for 13.2 % and that of beef 9.4 % and sheep 2.4 % during
the same period (DAFF 2010).
The South African primary red meat sub-sector is unique due to the dualistic nature of the
countryâs agricultural situation. There is a clear distinction between the commercial (formal)
sector of the industry and the non-commercial (informal) sector.
Within the ambit of the above the South African red meat sector also has to compete at a global
level. For the South African red meat industry to be on par and potentially become a leader (at
least in the Southern African region) it is necessary to understand the red meat value chain in detail in a holistic manner to (i) guide decision making in the public and private sector domains,
(ii) identify challenges that the industry faces that impedes on its efficient functioning and (iii)
create a foundation for the better understanding of the dynamic forces within the industry to
allow stakeholders to internalise it in order for them to position themselves so that they can
increase their performance at each segment of the industry to the benefit of the entire industry.
Merely providing a descriptive profile of a particular industry is not sufficient any more within a
deregulated and liberalised environment. In order to make any normative judgments regarding
the performance of an industry, an in depth value chain analysis is needed. This is what this
study is set out to achieve for the large (cattle/beef) and small stock (sheep/mutton-lamb) subsectors.
The broader industry was investigated through interviews with different stakeholders in the red
meat value chain. The analysis on the value chain in general shows that the South African cattle
and sheep industries have been growing in nominal terms when considering their contribution
towards the total gross value of agricultural production. However, the percentage contribution
towards total gross value of agricultural production in South Africa of these two sectors has
remained relatively constant during the short term (cattle at 10 % and sheep at 2 %). Critical
variables that affect the performance in the feedlot industry are weaner and feed prices, as well
as the price they receive in the market. The performance at primary processor level is directly
linked to the price of offal, which is highly variable on a geographical level as well as seasonal.
The performance of the retail sector is highly dependent on their ability to cater for specific
consumers in specific geographical areas, while seasonal demand also determines purchasing
and pricing patterns.
This variability in prices as well as the transmission thereof through the red meat value chain is a
big concern in the industry. Price transmission was therefore investigated using time series data
on primary producer- and derived retailer prices data from September 1999 to December 2008.
The following methodological approaches were applied, namely the Engle and Granger
cointegration test as well as threshold autoregressive models. The Granger causality test was
applied to analyse causality. Asymmetry in price transmission (APT) was found in both the beef
and lamb value chains, indicating inefficiencies within the chain. Causality in the case of beef
ran both ways i.e. from producer level to retail level and vice versa depending on supply
conditions while in the case of lamb a change in price at producer level âcausesâ changes at
retail level. APT is not uncommon, especially in agricultural markets and a number of reasons can cause APT in a value chain, however, in the case of the South African red meat industry a
few contributors to APT was identified namely; asymmetry in information flow, menu cost and
inventory cost.
The red meat value chain in the Free State province was investigated by using a value chain
methodology that was derived from different approaches to value chain analysis. Primary data
was captured by means of personal interviews. A total of 143 commercial producers were
surveyed (i.e. 19 % of the total of 745 producers that made up the original producer database
used). The analysis revealed the following important aspects, namely (i) 60 % of total income
generated by commercial farmers is from livestock activities, (ii) productivity is high in the
commercial sector with calving- and lambing percentages averaging 80 % and 93 % for the
cattle and sheep sub-sectors respectively, while the smallholder sector only averaged 30 % and
13 % for cattle and sheep respectively, (iii) older animals within the commercial beef sub-sector
are mainly marketed to primary processors while younger animals are marketed to the feedlot
industry while the majority of animals in the sheep sub-sector are marketed to the primary
processing industry, (iv) market access in the smallholder sector is still limited to regional
auctions, the informal market and to lesser extent direct sales to abattoirs, and (v) the main
constraining factors in the smallholder sector is the lack of proper infrastructure which makes
managing practices difficult. One major concern within the industry is animal losses, i.e. 44 % of
sheep losses in the FS was due to predation. The processor industry in the FS province is
highly integrated, especially in terms of primary processors/abattoirs and butcheries. Abattoirs
are an important marketing alternative, especially in the rural parts of the FS province. All the
role-players in the FS cattle and sheep value chains identified the variability in live animal/meat
prices as their main constraint.
Increasing the productivity of the producers in the smallholder sector should be a major industry
objective. This objective should start with the improvement of infrastructure, education of
extension officers and simplified and easier access to credit.
Given the methodology developed, and the results of the study, it is strongly suggested that the
methodology be applied to the value chains of the remaining red meat producing regions in
South Africa. This will provide a benchmarking platform for the red meat value chain in the
country. This methodology should also be re-applied regularly (every 2 to 3 years) to keep the
information up to date and to provide the means by which the industry can measure change in
the industry. This will be critical from a private and public sector point of view.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:ufs/oai:etd.uovs.ac.za:etd-11112011-120348 |
| Date | 11 November 2011 |
| Creators | Spies, David Cornelius |
| Contributors | Dr PR Taljaard, Prof A Jooste |
| Publisher | University of the Free State |
| Source Sets | South African National ETD Portal |
| Language | en-uk |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.uovs.ac.za//theses/available/etd-11112011-120348/restricted/ |
| Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to University Free State or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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