Lamb And Mutton Rally, But Profits Are Not Guaranteed

Low sheep supply, coupled with low feed prices, have led to a welcome recovery in the profitability of lamb and mutton, but consumer resistance to high prices remains a major risk.

The average lamb Class A carcass price in February 2018 was R72,74/ kg, a decrease of 4% month-on-month, but an increase of 8% year-on-year. Lamb and mutton prices reached record levels during 2017, and still remain high on average (see Graph 1).

Prices have, however, followed a downward trend after peaking in December 2017. This is in line with the seasonal trend of prices falling after increased consumer spending over the festive season.

However, the increase in VAT from 14% to 15% as of 1 April 2018 will increase the cost of living, and this may put pressure on consumers’ disposable income. This could have an impact on lamb and mutton prices as these products are considered luxury items.

The past few months have seen considerable demand for weaner calves, with prices increasing significantly to almost those of feeder lambs. Feeder lamb prices did not experience the same spike, showing only modest increases during 2017.