Meatco’s Producer Price Remains g, Stable

Most producers will have noticed that producer prices at Meatco have remained constant during the last few weeks. The average producer price therefore effectively moved sideways from February to March. Currently, the announced average producer price is N$32.41 for A-grades including the contract premium, which is exactly the same as it was for February and the last period of January. Prices have not changed since mid-January. During that same period the South African parity price moved both up and down. Factors that have an effect on monthly producer price include the market, the average carcass weight, volumes and the exchange rate.

On average, Meatco is N$4.67 above the South African parity price for A-grades for January, February and March. For March, it was N$4.38 above the South African parity price for A-grades. For AB-grades it was N$5.35 higher, N$8.01 higher for B-grades and N$8.47 higher for C-grades. The price for Meatco A-grades has remained stable but in South Africa the parity prices are much lower than we are currently paying. This is especially true for the B- and C-grades. Meatco paid N$8.01 above the South African parity price for B-grades in March, which was slightly lower than earlier this year. In February the difference was N$9.03.The gap has narrowed a little but it is still well above the South African price.

Normally the producer price would have dropped considerably by this time of year due to market trends, when compared to the past four years between the beginning of January up to April. Prices usually drop quite significantly and decline until around June and July, and then towards the middle of August they start rising. This year, Meatco has kept the prices stable. The main reason for it is the additional Norway quota combined with the positive exchange rate.

For the rest of the year there are no significant indications at this stage that suggest the prices will decrease considerably. In fact, Meatco expects a sideways movement for the next couple of weeks. In the long term, as from August and September, a gradual increase in the price is expected based on current market prices.

The average carcass mass south of the Veterinary Cordon Fence (SVCF) is still below what it was last year. In 2013 the average weight was 245.60kg. This year it is 233.25kg, which is a 12.35kg decrease year-on-year. The average weight in February was 225.90kg and in March it was 233.25kg, meaning it has increased by about eight kilograms. This is still below what Meatco slaughtered last year.

The decrease in cattle weight last year came towards the middle and end of the year after the effects of the drought really kicked in. Currently there’s a move back from C-grades to A-grades being delivered to Meatco. For March to date there’s been a decrease in AB- and B-grades as a percentage of overall delivery to Meatco, an increase in A-grades, and a slight increase in C-grades.

What is however much more favourable at this stage, is that Meatco has seen a significant decrease in the 0 and 1 fat grades over the last year. In 2013 the 0 and 1 fat grades SVCF amounted to 36.51% of all cattle slaughtered. This year it is 22.94%. Effectively this is a 13.6 percentage point change from last year. This is most likely due to the veldt conditions and because there has been a bit of a move away from the C-grades towards the A-grades.

In terms of the prices year-on-year, last year this time the average price paid to producers was N$24.86. This year it is N$30.35 which is an average increase of N$5.49 year-on-year. This means our average price this year is much better compared to 2013. Currently, the total number of premiums paid in February and March – the first two months of this financial year – amounts to over N$17 million. This is much higher than the South African price that we have already paid to date and includes the market premium as well as the N$1.50 contract premium.

Source : New Era