Rikus Grobler | Jan 16, 2018 | 0
Where is the so-called cheap meat?
Dear Mr Steinmann,
Your editor’s column in the edition of 15 March refers.
Your prognosis is disturbing and unsettling. If meat prices do indeed go to the level you suggest, producers will definitely battle with operational as well as financial restrictions as the year carries on. The scenario you describe is similar to the information I obtained from other producers and from auctioneers and it looks as if this situation prevails over most of the agricultural districts.
Given this sharp reduction in meat prices, why is it that we, the consumers still have to pay around N$95 for a kg of a decent cut of beef cut, and around N$55 per kg for a mixed bag of mutton. How long will it take for all elements in the distribution channel to pass the lower prices onto consumers?
Basic rules of supply and demand dictate that producers must come down, as they have, and as you have indicated. But basic rules of input price versus wholesale prices also dictate that eventually retail prices must also come down.
I have great sympathy with the producers. I also understand the dynamics of a supply chain and that it must capture profits at several links. But if input costs for the supplier come down, then in all fairness, that reduction must be reflected on the retail shelf too.
A cynical view of the current meat scene would expect wholesalers and retailers to hold on to their current price levels for as long as possible. The abattoirs do not see any benefit as they have to publish their prices to producers on a daily basis. So we know they are not reaping the profits. The wholesalers, on the other hand, are under no obligation to make public what they charge the retailers and this is where the opportunity is created to continue exploiting consumers.
Do the many players in the supply chain not realise everything they produce and process depends on the consumer. No consumer, no profit, no distribution, no market.
This time it will not be that easy to milk the consumer. From what you predict, it looks like the meat industry is in a crunch and the expected downward adjustment in meat prices is so large, it will not escape the attention of diligent consumers. At some point, the producers of fresh meat and meat products will be forced to give a breakdown of their price structures.
If they don’t, the disparity between producer prices and retail prices will create an ideal environment for arbitrage and farmers will start selling to butcheries directly. Then with immediate effect, retail prices will half, butcheries will increase their own margins, and producers will get more than the subdued prices they are forced to accept.
This sounds like a win-win for every link in the chain, except the abattoirs, processors, and wholesalers. Effectively they will no longer be part of the chain.
(Translated from Afrikaans – Ed.)