market diversification opportunities for namibian red meat products: application of a decision...

Market Diversification Opportunities for Namibian Red Meat Products: Application of a Decision Support Model

Ernst Idsardi, David Spies & Ermie Steenkamp

50th Annual AEASA Conference

1 – 3 October 2012, Bloemfontein, South Africa

OUTLINE

• Background

• Approach: a Decision Support Model for identifying

export opportunities

• Results

• Conclusions

2

BACKGROUND

SETTING THE SCENE:

• Namibian meat exports: boneless beef, carcasses of

sheep, boneless meat of sheep

• Small producer niche products: grass-fed, organic

• Disease status exports of de-boned meat / limited

exports from NCA

• Export trends 2000 – 2011:

o Beef exports +16%

o Sheep meat exports + 413%

3

BACKGROUND (2)

SETTING THE SCENE:

• 65% of Namibian beef is exported

• In 2011 58% of all cattle marketed was exported on the

hoof to SA

• In 2011, 86% of sheep marketed was slaughtered at local

export abattoirs

• Agriculture 4.1% of GDP Livestock sector 2.2% of GDP

70% of population to an extend dependent on agric.

4

BACKGROUND (3)

THE ISSUES:

1. Limited export market diversification

South Afica66%

UK24%

Norway6%

Switzerland1%

Other3%

Beef exports

South Afica99%

Norway1%

Sheep meat exports

5

Source: UN Comtrade

BACKGROUND (4)

THE ISSUES:

2. Trade policy

Norway preferential TRQ, although high NTB’s

European Union

o Deadline for full EPA with EU by 2014? termination of

provisional application of IEPA DFQF market access after 2014?

alternative trade regime (= GSP) does not cover meat products

MFN treatment (Tariff implication: frozen, boneless beef 92%)

6

BACKGROUND (5)

THE OBJECTIVE:

Identification and selection of alternative export markets for

Namibian red meat products

1. Excluding EU, Norway, South Africa

2. Agricultural development diversification new

markets / existing products / new products

7

APPROACH

Background:

• Screening of potential export markets

• International market identification and selection method

• Quantitative approach qualitative approach

• Decision Support Model (DSM): Cuyvers (1996) for Belgium,

Pearson et al. (2007), Steenkamp et al. (2009) for SA

adapted for Namibia

8

APPROACH (2)

Framework of the DSM:

Filter 4Filter 3Filter 1

Identified export

opportunities

Political and commercial risk

assessment&

Macroeconomic analysis

(market potential)

Detecting possible export opportunities

Final analysis of export opportunities

Realistic export opportunities

Market accessibility

Index

Market characteristics

Ranking of realistic

opportunities

Short- and long-term

growth

Market size

ONDD, GDP &

GDP/capita

Filter 2

Sequential filtering process

9

APPROACH (3)Scope:

• All countries included, apart from EU countries, Norway and SA (data availability): 214

• Limitations: trade classification provides no detail on specific meat cuts (e.g. forequarters, fillet) or production practices (e.g. organic)

10

APPROACH (4)

Filtering process of the DSM: Filter 1

• Filter 1.1o Country risk scores for political and commercial risks (ONDD, Belgium) rated from 1 to 7

o Cut-off value calculated for filtering criteria

• Filter 1.2o GDP (current US$)

o GDP per capita (current US$)

o GDP growth

o Cut-off value calculated for filtering criteria

o Passes criteria if pass GDP and GDP per capita for two years

• Elimination of 133 countries

11

APPROACH (5)


• Relative market size and -growth:o Per country/product combination: import statistics

o HS 6-digit level

o Imports as proxy for market size

o Import growth in the short and long term

o Cut-off values calculated to determine seven categories:

o Country-product combination in categories 0 and 1 eliminated (6 countries)

Category Short-term market growth Long-term market growth Relative large market size

0 No No No

1 Yes No No

2 No Yes No

3 No No Yes

4 Yes Yes No

5 Yes No Yes

6 No Yes Yes

7 Yes Yes Yes 12

APPROACH (6)


• Market accessibility index (no elimination) weightsParameter Measurement Weight Data source

1. Market concentration for each product per importer Herfindahl-Hirschmann Index (HHI)

10Own calculations / UN

Comtrade

2. Shipping time from Walvis Bay* to the main harbor or capital of the importing country as well as the domestic time required to import a product into a specific importing country in terms of obtaining all the documents, inland transport and handling, custom clearance and inspection, port and terminal handling.

Days 25Shipping companies / The

World Bank

3. Shipping cost from Walvis Bay to the main harbor or capital of the importing country as well as the domestic cost of importing a product into a specific importing country in terms of documentation, inland transport and handling, custom clearance and inspection, port and terminal handling

US$ per 40 foot reefer 25Shipping companies / The

World Bank

4. Average import tariff* faced by Namibia at the border of the importing country for each of the meat products Ad valorem import tariff 15 UN TRAINS

5. Efficiency of custom clearing processes, the quality of trade and transport infrastructure, the ease of arranging competitively priced shipments, the competence and quality of logistical services, the ability to track and trace a consignment, and frequency with which shipments reach the consignee within the schedules time of each importing country

Logistical Performance Index (LPI)

10 The World Bank

6. Technical and non-technical trade measures for each product-country combination

Ad valorem equivalents of non-tariff trade barriers

15 Kee et al., 2008

13

APPROACH (7)


• Final elimination: fresh meats shipping time > 50 days

• Ranking of realistic export opportunities scoring:

1. Market accessibility: getting the product to the market

2. Market performance: is there a market?

14

Results

HS code Product descriptionMarket accessibility Market performance

Market 1 Market 2 Market 3 Market 1 Market 2 Market 3

Beef

020110Carcasses/half-carcasses of bovine animals, fresh/chilled

Switzerland - - KuwaitSwitzerlan

dUSA

020120Meat of bovine animals, fresh/chilled, bone-in

Singapore Hong Kong Thailand Canada USASwitzerlan

d

020130Meat of bovine animals, fresh/chilled, boneless

Singapore Hong KongSwitzerlan

dCanada Singapore Hong Kong

020210Carcasses/half-carcasses of bovine animals, frozen

Bahrain Kuwait MalaysiaSaudi Arabia

Russia Azerbaijan

020220Meat of bovine animals, frozen, bone-in

Singapore Ghana BahrainSaudi Arabia

USA Japan

020230Meat of bovine animals, frozen, boneless

Singapore Hong Kong Philippines Malaysia Russia Egypt

Export opportunities for Namibia per product

15

Results (2)



Mutton, lamb and goat

020410Carcasses/half-carcasses of lamb, fresh/chilled

Hong Kong - - Kuwait - -

020421Carcasses/half-carcasses of sheep, fresh/chilled

Oman - -United Arab

EmiratesKuwait -

020422Meat of sheep, fresh/chilled, bone-in

Singapore Hong Kong Switzerland Canada USA Switzerland

020423Meat of sheep, fresh/chilled, boneless

Hong Kong Singapore Switzerland Canada USA Japan

020430Carcasses/half-carcasses of lamb, frozen

Singapore Malaysia Qatar Qatar USA Lebanon

020441Carcasses/half-carcasses of sheep, frozen

Singapore Philippines Malaysia Jordan MalaysiaSaudi Arabia

020442 Meat of sheep, frozen, bone-in Singapore Hong Kong Australia Canada China Mexico

020443 Meat of sheep, frozen, boneless Singapore Hong Kong China MalaysiaSaudi Arabia

Canada

020450 Meat of goats, fresh/chilled/frozen Hong Kong China Qatar Canada QatarSaudi Arabia 16

Results (3)



Offal

020610Edible offal of bovine animals, fresh/chilled

Singapore Japan Hong Kong USA Japan Hong Kong

020621 Tongues of bovine animals, frozen Singapore Hong Kong Philippines Hong Kong Mexico Russia

020622 Livers of bovine animals, frozen Singapore KuwaitSaudi Arabia

Angola EgyptIndonesia

020629Edible offal of bovine animals (excl. tongues & livers), frozen

Singapore Hong Kong Qatar Hong Kong Indonesia USA

Prepared and processed meats

021020Meat of bovine animals, salted/in brine/dried/smoked

Malaysia Vietnam Switzerland Angola SwitzerlandUSA

150200Fats of bovine animals/sheep/goats, other than of 15.03

China Israel Zambia China Mexico Turkey

160100

Sausages & similar products, of meat/meat offal/blood; food preparations based on these products

South Korea Vietnam Thailand Angola Mexico Albania

160210Homogenised preparations of prepared/preserved meat/meat offal

BahrainSouth Korea

Switzerland Canada Russia Bahrain

160220Prepared/preserved preparations of liver of any animal

Hong Kong Singapore Bahrain Lebanon Hong Kong Bahrain

160250

Prepared/preserved preparations of bovine animals (excl. homogenised preparations), incl. Mixtures

South Korea Ghana Kuwait USA Canada Australia

17

Results (4)

• Market accessibility: Singapore, Hong Kong

• Market performance: Canada

• Ranking:

1. Hong Kong (5)

2. Switzerland (3) (not “new”)

3. Qatar, Bahrain (2)

4. Singapore, Malaysia, China (1)

18

Results (5)

Market accessibility Market performance

Namibia’s relative

specialisationProduct description Market HHI

Time

(days) Dom &

Int.

Cost (USD per 40ft reefer)

Import tariff

(Weighted average

%)

NTB (ad valorem

equivalent %)

LPI (1 – 5)

Short term

import growth

Long term

import growth

Market size for imports

Carcasses/half-carcasses of bovine animals, fresh/chilled

Switzerland 0.58 30 6840 172.4 0.85 3.97 X X

Meat of bovine animals, fresh/chilled, boneless

Singapore 0.43 44 4682 0 0.0017 4.09 X X X

Hong Kong 0.29 48 4826 0 0.0028 3.88 X X X

Meat of sheep, fresh/chilled, bone-in Switzerland 0.38 30 6840 54.3 0.65 3.97 X X

Carcasses/half-carcasses of lamb, frozen Qatar 0.26 62 5201 5 0.25 2.95 X X X X

Carcasses/half-carcasses of sheep, frozen Malaysia 0.51 59 4593 0 0.57 3.44 X X X X

Meat of goats, fresh/chilled/frozen Qatar 0.19 62 5201 2.5 0.46 2.95 X X X

Edible offal of bovine animals, fresh/chilled

Hong Kong 0.83 48 4826 0 1.51 3.88 X X X

Tongues of bovine animals, frozen Hong Kong 0.79 48 4826 0 0.66 3.88 X X X

Edible offal of bovine animals (excl. tongues & livers), frozen

Hong Kong 0.52 48 4826 0 0.28 3.88 X X X

Meat of bovine animals, salted/in brine/dried/smoked

Switzerland 0.93 30 6840 45.3 0.65 3.97 X X X X

Fats of bovine animals/sheep/goats, other than of 15.03

China 0.59 69 4288 4 0.06 3.49 X X X

Homogenised preparations of prepared/preserved meat/meat offal

Bahrain 0.35 46 5867 5 0.18 3.37 X X

Prepared/preserved preparations of liver of any animal

Hong Kong 0.34 48 4826 0 0.53 3.88 X X

Bahrain 0.58 46 5867 5 0.28 3.37 X X

Top priority export opportunities per product “low hanging fruits”

19

Conclusions

• So what? all products, all countries, risk, market dynamics, broad

concept of market access quantitative analysis

• Several realistic export opportunities identified

• DSM = first step of export strategy capitalise opportunities

o Financial attractiveness, consumer preferences per meat cut

o Entry strategy role players, market structure

• Alignment with supply potential NCA, under-utilisation of local

slaughter capacity, live exports to SA20

Conclusions (2)

• Diversification strategy:

1. Namibia is a producer of niche not bulk products

2. “old” products “low hanging fruits”

3. “new” products cost/benefits of supply chain development?

4. Competitive edge: grass-fed, organic

5. Export opportunities for beef better than for sheep

6. Trade creation rather than diversion SA is and will remain an

important market, realisation of proposed changes in EU trade

regime still unclear

7. Critical success factors: shipping times, supply,

profitability21

Thank you for your attention!

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