- Pork imports from Germany have been blocked due to an outbreak of African swine fever in that country.
- Germany is an important – and some suppliers think nearly irreplaceable – source of ribs for South Africa.
- That could see prices jump significantly enough that the owner of the Steers and Wimpy chains has warned investors about the potential impact.
- For more stories go to www.BusinessInsider.co.za.
Pork rib prices in South Africa could spike as much as 40% over the next few weeks as an outbreak of African swine fever (ASF) in Germany, Europe’s biggest pork producer, constrains global supplies of the popular pork cut.
Germany accounts for 61% of South Africa’s pork rib imports.
The country first detected ASF in wild boar populations on 10 September, prompting China, Japan and South Korea to ban pork imports from that country in the same month. South Africa’s Department of Agriculture, Land Reform and Rural Development (DALRRD) communicated its own trade restrictions on raw pork imports from Germany on 14 September, forcing local importers to source pork from other countries that can now charge higher prices knowing that supplies from Germany are restricted.
“We’ve had to look at importing from other markets like France, the UK and Ireland but a lot of the pricing is insane,” says Jacques Talpert, commercial director at BRM Brands, one of the country’s biggest pork rib producers.
“Since Germany has closed, our import costs have risen by 40% and a lot of that will be passed on to the consumer. We’ve decided that we’re going to take some pain ourselves but we can’t absorb it all as the margins are small in this industry and we’d out of business.”
Talpert says he expects the price increase to filter through to consumers over the coming weeks and months, with pork rib prices in particular expected to rise as much as 40% over that timeframe. Other cuts like bacon and pork chops will also be affected by constrained global supplies, although local prices will be less impacted as domestic pork production can meet that demand, he says.
BRM processes approximately 20,000kg of pork ribs a day whereas South Africa’s domestic pork industry only produces about 50,000kg of pork ribs a week from the approximately 60,000 pigs slaughtered in the country on a weekly basis. Talpert says ribs typically constitute less than 1kg of the average 80kg animal.
“We have to import because if we didn’t we’d pretty much use up all of South Africa’s weekly rib production in a few days,” says Talpert. “Nobody is self-sufficient in the domestic pork rib industry. The domestic pork industry is very efficient but it just isn’t big enough to meet local pork rib demand. We’ve got a real love for pork ribs in this country.”
Consumers will bear the brunt
BRM is not alone in feeling the effects of higher pork import prices. Famous Brands, which owns popular fast food outlets like Steers and Wimpy, announced in its interim results presentation on 26 October that it too would be affected.
“Particularly concerning is the outbreak of African Swine Flu in Germany, which will prevent pork imports to SA from September,” said Famous Brands. “Germany is a key supplier to the business and while alternative markets are being explored, we anticipate limited supply and higher prices from other export countries.”
While Famous Brands declined to comment further when contacted, Business Insider is in possession of a letter from the DALRRD that outlines the restrictions on imports of frozen German pork. Reggie Ngcobo, a spokesperson for the DALRRD, could not be reached on his cell phone for comment.
South Africa was importing as much as two million kilograms of pork ribs a month just prior to the lockdown, according to data from the SA Pork Producers’ Organisation (SAPPO).
However, that figure plummeted to 407,000kg by June as Covid-19 disrupted trade and South Africa’s hard lockdown shut restaurants. While imports have steadily recovered, the detection of ASF in Germany, South Africa’s biggest source of pork imports, means importers have to source pork ribs from alternative markets that typically charge higher prices.
“Over the next couple of months the price of imported pork ribs will rise and consumers will bear the brunt of it,” says Paul Matthew, CEO of the Association of Meat Importers & Exporters of South Africa (AMIESA). “Pork rib is a very popular cut in South Africa and the local market can’t meet demand.”
While AMIESA data shows that the free on board (FOB) price, or landed cost, of pork ribs in South Africa was back at levels last seen before Covid-19 of R36.68/kg in August, this must be looked at in the context of a 40.8% slump in pork rib imports between January and July 2020 due to disruption caused by Covid-19. More importantly, the last price recorded by AMIESA in August was prior to Germany’s 10 September announcement that it had detected ASF within its borders.
Not only Germany
The subsequent trade restrictions imposed on pork imports from Germany, by far South Africa’s biggest source of imported pork ribs, means importers will need to turn to alternative markets like Brazil, France and the Netherlands where prices are higher. In fact, the average landed cost of pork imported from Brazil exceeded the R50/kg mark even before the restrictions imposed on German pork.
Matthew says the situation is further exacerbated by ASF outbreaks in Poland, Russia and China which will place additional strain on global pork supplies. China, the world’s biggest pork producer, had culled approximately 40% of its entire pig herd by August last year to stop the spread of ASF, which has no vaccine and has an almost 100% fatality rate. Mongolia, Cambodia, Vietnam, South Korea, Nigeria, and Romania have together culled millions of the animals to stem the spread of ASF. In South Africa, the disease has been detected in the Eastern Cape.
“Because large pork producers, particularly China, have culled so many pigs the rest of the world has to pay a premium as all the global exporters are trying to meet Chinese demand,” says Matthew. “In the end that gets passed on to the consumer.”
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