Meatco benefits from EU beef price spike

May 18, 2022

The Russian-Ukraine is proving to be a blessing in disguise for Meatco following a sharp increase in global beef prices, especially in Europe where the company exports meat.

“An increase in beef prices is being experienced and this is causing European prices to increase towards those of Norway which is our best paying market. This development also comes as good news for our producers’ and we aim to seize the opportunity,” a company research note stated.

“Albeit the current economic turn of events, Norway remains Meatco's best-paying market and is a quota- based market. And as a result, of the current economic trend, this market provides an opportunity to halt supply for now and thus save quota utilisation while concentrating on channelling supplies into the European Market without major losses in revenue generation. The Norwegian quota can be utilised later in the year when the European commodity prices are expected to stabilise again.”

The beef company expects beef prices to increase by a further 40% until September 2022, driven by demand from China, a market in which Meatco is licenced to export its beef products.

“This is because the major traditional suppliers such as Brazil are diversifying, for example, Australia is holding back a lot of products and channeling them into Europe causing a general decline in supplies to one of the biggest beef importers, China. This trend is causing China to demand more beef, another opportunity that Namibia can take advantage of.”

The beef processor notes that it has accumulated sufficient stocks of beef for the company to take advantage of the surging beef prices.

“As a result of this, and with Meatco’s strategy of getting into production as early as possible and having taken advantage of the Norwegian barbeque season, we have thus accumulated sufficient stock and can fill both these markets during this time when the prices are sharpening up in Europe as well as globally. Meatco is, Therefore, currently taking advantage of these high prices to bring the realisation back to Namibia. We are closely monitoring the price for Norway, the EU and China to determine where we can get the best returns.”

Meatco said it anticipates increased demand for its products and expects its producers to meet the demand.

“Due to the increase in beef prices and the higher demand thereof, we are anticipating more enquiries for the supply of beef from non-traditional markets and this is a welcomed phenomenon. The biggest question will remain whether our suppliers will meet the high current demand. However, we do firmly believe our producers will continue to deliver more quality animals to meet the demand, the company further shared,” the company said.

The company however notes that although the spike in beef prices will allow it to trade positively, rising commodity prices will increase its operating costs.

“Overall, we expect to trade positively financially at least until the third quarter of 2022 based on increased prices. This increase in commodity prices is also expected to increase our input costs with everything else such as transport and packaging boxes. Thus, a balance between input costs and returns must be struck to make this a net gain and not a net loss.”

 

Namibia currently exports meat to the United States, Europe, South Africa and China.

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Last modified on Thursday, 19 May 2022 23:23