Select Page

You may be surprised to find out that there is a very tangible, definite link between mealies and steak and it is not biological

You may be surprised to find out that there is a very tangible, definite link between mealies and steak and it is not biological

Another interesting chart, posted by Capricorn Asset Management this week, shows the cyclical nature of yellow maize prices in the United States. Since the US is the dominant yellow maize producer in the world, their local prices, quoted on the Chicago Board of Trade, basically determine all maize prices worldwide.

Called corn by the Americans, what we know as yellow maize is the major ingredient in many animal feeds. The local prices, which are essentially South African prices, are determined by a combination of US prices and so-called parity, in other words the Rand US Dollar exchange rate.

What I have done on the graph is to highlight the seasonality by drawing blue lines across the phases where the US yellow maize price is in recession. It is very obvious that the market cycle is repetitive, regular, and to some extent predictable. It is exactly this characteristic that makes it an attractive commodity for futures traders on international commodity markets.

Every commodities trader knows that corn will be high at a specific point during the year. The reliability of this assumption is borne out by the graph. Furthermore, they know that somewhere in the second semester when the US harvest comes in, corn prices will come down because there is so much of the commodity. Accordingly, they align their futures contracts to these cycles, buying grain in advance from producers, and then selling the coupon at a very specific date to downstream users like millers, feedlots and exporters.

The predictive nature of corn production is further supported by the fact that it is determined by seasonal climate changes. So whatever adverse conditions there may be, it is a given that production will peak in the second semester, whether there is a surplus or not. And with such huge volumes produced, there is a certain natural “liquidity” built into the commodity.

And because America is the overwhelmingly dominant producer, traders do not have to pay too much attention to what production volumes are in South Africa, Argentina, Brazil and the Ukraine. To give some perspective, the US produces around 400 million tonnes of corn in a good year, of which less than one fifth is exported. South Africa produces on average about 12 million tonnes according to the South African Department of Agriculture. So, from the comparative figures it is obvious who is the elephant and who are the mice.

The long and the short is that the price of yellow maize is determined in America and the rest of the world must accept that price whether they like it or not.

In a regional context (SADC) South Africa is the dominant producer even if total production pales in comparison to the US. But the one drawback that South African producers must always contend with, is climate. The South African season is far less reliable or predictable than the American season.

In a good year, South Africa usually produces a surplus and then farmers are very happy because they can export at American parity prices, and if the Rand tends to be weaker, they score. The opposite side of the coin, unfortunately, is that in a poor year yellow maize must be imported, again at parity, and that may be detrimental to the animal feeds industry that depends on yellow maize.

Therefore, at this point it is important to consider what South African production will be since that will determine whether yellow maize must be imported or not.

The South African season started late, as is now generally known but eventually was saved by good delayed rains in the major producing areas. This meant however, that the growth season was short and this has an impact on production volumes. Official estimates now put the expected South African harvest at between 20% and 25% less than last year. This implies a production shortage of roughly 4 million tonnes.

At the onset of the season there were just over 3 million tonnes stockpiled as a surplus from last year, so in all probability around one million tonnes will have to be imported. Right now it is difficult to say with certainty what the exact import need will be but all indicators point to the fact that yellow maize will have to be imported and when that is the case, the exchange rate becomes a crucial determinant.

It is also not possible now to say with any degree of certainty what the exchange rate will be at the end of the year but it is unlikely that it will be below R14 to one US Dollar. Nevertheless, it means that imports will be more expensive in 2019 than what it was in 2016, the last time that any significant volumes of yellow maize were imported.

You may ask, what has all this got to do with food production in Namibia? This is where the picture becomes very interesting.

Namibian red meat producers market the bulk of their cattle to South Africa, either as weaners or as slaughter oxen. And the demand for Namibian weaners by South African feedlots is determined by the price of yellow maize.

When there is an overproduction like last year, the price of yellow maize is suppressed and the margins on red meat production increase. Last year, that pushed up the demand for weaners, and we saw the results. Local weaner prices skyrocketted until something unforeseen happened. That was the detection of Foot and Mouth disease in some cattle from South Africa’s northern provinces, but it effectively lead to all exports being stopped and the demand for weaners dropped.

This is reflected in the weaner price of around N$29 per kilo live as of this week. This sharp reduction from 2018 average prices reflects the lesser demand from South African feedlots as a result of the closed export gates. At some point the situation will normalise and exports will resume but that will probably only be in the second semester, coinciding more or less with the last of the yellow maize harvest.

This harvest will be considerably below average meaning there will probably be a shortage of yellow maize later in the year. This will put pressure on margins and two things will happen. The wholesale price of red meat will go up and the local price for Namibian weaners will go down.

In practice it translates to an incentive for red meat producers to hang on to their weaners and raise them themselves. There is only one huge problem – the current drought. It implies that the cost of fodder will rise (because it is imported) and the local producer price will come down (because of lower demand).

Essentially, what I am arguing is that local producers are facing a conundrum and that financial support to farmers, whether in the form of subsidies or direct financing, will have to increase during the remainder of the year.

Either way, it seems to me that cattle farmers are in for a rough patch this year, and that they have no control over the conditions that create the enormous adversity in their industry.


About The Author

Daniel Steinmann

Brief CV of Daniel Steinmann. Born 24 February 1961, Johannesburg. Educated at the University of Pretoria: BA, BA(hons), BD. Postgraduate degrees are in Philosophy and Divinity. Editor of the Namibia Economist since 1991. Daniel Steinmann has steered the Economist as editor for the past 29 years. The Economist started as a monthly free-sheet, then moved to a weekly paper edition (1996 to 2016), and on 01 December 2016 to a daily digital newspaper at It is the first Namibian newspaper to go fully digital. Daniel Steinmann is an authority on macro-economics having established a sound record of budget analysis, strategic planning and assessing the impact of policy formulation. For eight years, he hosted a weekly talk-show on NBC Radio, explaining complex economic concepts to a lay audience in a relaxed, conversational manner. He was a founding member of the Editors' Forum of Namibia. Over the years, he has mentored hundreds of journalism students as interns and as young professional jourlists. He regularly helps economics students, both graduate and post-graduate, to prepare for examinations and moderator reviews. He is the Namibian respondent for the World Economic Survey conducted every quarter for the Ifo Center for Business Cycle Analysis and Surveys at the University of Munich in Germany. He is frequently consulted by NGOs and international analysts on local economic trends and developments. Send comments to

Following reverse listing, public can now acquire shareholding in Paratus Namibia


20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.