Meat prices going down
Namibian cattle producers will soon start to feel the impact of lower red meat prices if the local trend follows the direction set by meat prices in South Africa. Drought conditions in southern Africa have lead to a dramatic increase in the number of animals sent to abattoirs with a marked effect on prices.
This will be exacerbated when the effect of a weaker Euro begins to show in the export prices of red meat.
According to Meatco, Namibian red meat prices have only dropped N$0.26c/kg in the same period that meat prices in South Africa dropped by an average of N$2.02/kg.
The price for B-grades, which is what the majority of Namibian producers deliver off the veldt, has dropped by 7.04% in South Africa, compared to 1.81% in Namibia.
Meatco said however, it does not expect to see the severe price drops as in the 2013 drought year.
Late this week Meatco said producer prices are being held up by the Norway market quota and a strong even though unstable European exchange rate compared to 2013.
Meatco spokesperson Mario Poolman, said that this year will be particularly challenging to farmers, envisaging declining prices for producers. “Many producers will have noticed that Meatco’s prices are slowly declining and if all environmental factors remain the same, this situation will continue.”
But the national cattle marketer is confident that the industry will make it through intact by stabilising local cattle prices as much as possible, and softening the decline in prices as best as possible.
“The European economy is still under pressure and prices remain relatively stagnant” Poolman said, commenting on the start of the European Central Bank’s quantitative easing which will increase the supply of money in the Eurozone by 60 billion per month, starting this month. Another 1 trillion is to be released into the market by September 2016.
An unstable revenue stream to Meatco for exported meat is the result of the instability in the Euro exchange rate which the company attributes to client prices remaining unchanged. This weaken returns for Meatco and for Namibian producers.
“As with all resources, an increase in the supply of money usually results in a decrease in value. Many investors therefore expect the Euro to fall because of these actions, giving rise to further instability in the currency.”
Meatco said that it is consistently keeping an eye on the market, looking for new opportunities to broaden their reach.
“Markets are invariably cyclical and we need access to as many of them as possible, to rotate our products to the most profitable areas in the interest of our producers.”
Meatco’s increasing Norway qouta is helping a great deal as more products are placed into a highly lucrative market which is currently supporting Namibian producer prices
With Europe being one of Meatco’s highest value markets in a questionable state, another concern is the local and South African markets both showing the effects of oversupply due to prevailing drought conditions. Meatco said this will inevitably lead to an increase in livestock marketing and abundance of meat in the region.
“This leads to lower prices and lower returns for Meatco and our producers. About 65% of our product is sold in Namibia and South Africa, by far the largest volume of our product, which makes the impact of reduced prices in these markets significant.”
Meatco said that South African consumers are also under enormous pressure and that their economy is becoming increasingly unstable for a variety of reasons.
An alternative option to mitigate the risk of marketing to South Africa is the Russian market.
But Meatco said this is not a viable option due to the Russian currency, the Ruble, falling by nearly 50% to its lowest point in years. This takes Russia out of the picture for the moment, Poolman said.