Why beef costs what it does: Industry expert explains price shock

Red meat is a luxury product, as it is expensive to produce.

Prices have risen sharply over the past year, but industry experts say consumers may now be seeing a necessary price correction, rather than runaway inflation.

Red Meat Producers Organisation CEO and agricultural economist Dr Frikkie Maré says beef prices, which have increased by about 40% year-on-year, are high but not unprecedented – having last reached similar levels in 2018 and 2019.

He explains that prices remained artificially low for several years, while production costs continued to rise, placing sustained pressure on farmers.

"Six years ago, we saw exactly the same meat prices, but then the economy with COVID started to decline, interest rates after that started to increase, a lot of things happened, and meat prices actually came down the past six years while producer costs remained on the increasing path. The year-on-year shock to consumers was quite big, but is beef expensive at this stage? I think to a consumer it might seem like that, but as I said, we previously saw those prices."

He states that current prices more accurately reflect the cost of producing beef, particularly given the long production cycle and disruptions caused by foot-and-mouth disease, which continues to affect the supply chain.

Looking ahead, Maré does not expect further sharp price hikes.

"If I have to make a prediction, I would say that prices basically have stabilised. It will stay around these levels. We will see the normal seasonal increases and decreases as demand increases and decreases during the year, during the different festive periods, etc. It might even be that if we can get the supply chain back to normal functioning again, we might see a bit of a decrease. I don't think there's any further shocks in terms of prices that consumers will see."

To listen to Dr Frikkie Maré in conversation with John Maytham, standing in for CapeTalk’s Lester Kiewit, click the audio below: