Windhoek-Meatco expects that slaughter volumes will be low until the end of the second quarter of the new financial year and the corporation will have to rely on the backwards integration initiative to maintain slaughter operations.
This was already the case in the first quarter as farmers began to restock the national herd and the impact of lower cattle numbers meant that Meatco was compelled to offer record prices in order to motivate farmers to deliver stock to the corporation.
This reality after three years of drought is reflected in Meatco’s chairperson, Dr Martha Namudjebo-Tilahun’s annual report released last week. She points out that Namibia’s small, open economy is highly exposed to events on the world stage. International developments are expected to have an impact on how the Namibian economy performs and as a result also how Meatco performs.
“It is imperative to be vigilant regarding instability in the world economy, and particularly to follow trends in our key off-take markets. If the general situation deteriorates more than we have anticipated, it will be reflected in Namibia’s overall patterns of growth, and consequently the prices we can expect for our products,” she notes.
Namudjebo-Tilahun says Namibia’s economy is well managed, and Namibia has established firm macro-economic architecture. The Harambee Prosperity Plan (HPP) highlights that international financial institutions, including the International Monetary Fund and the World Bank, have lauded the manner in which the Namibian economy is managed, she observed.
The European Union (EU) is a major export market for Namibian red meat, fish and grapes, ranging between 40 to 70% of Namibia’s agricultural exports. Preferential access to the EU market to supply premium beef cuts has made it viable for the Namibian red meat industry to upgrade production facilities to meet international standards.
“At the moment, Europe is still overshadowed by Brexit post-financial woes which, among other effects, have triggered a significant devaluation of the Pound. This, in turn, impacts on Meatco’s revenues. In general, Meatco remains vulnerable to exchange rate fluctuations, as the highest value comes from international markets, which include Norway, the United Kingdom, Germany, Denmark and Italy.”
Meatco exports the bulk of its prime cuts (mostly hindquarters) to these countries, because their markets are willing to pay the highest price for the product.
“On the South African front, current political instability does not bode well for a strong Rand and could impact on Meatco’s revenue-generating opportunities with our neighbour.
On the local front, Meatco is concerned about reduced funding of national projects by government, which will affect consumer spending. This relationship highlights the importance of Meatco’s strategy to sell beef to markets not directly affected by local events,” she concludes.