Nam Breweries vulnerable to barley prices
Price taker
The Russian and Ukraine conflict is expected to drive up barley prices as the two countries account for 29% of wheat exports globally.
Namibia Breweries Limited (NBL), for the most part, is a price taker for barley and likely to be hit hard unless prices mean revert faster than anticipated, Simonis Storm (SS) said.
This implies that the entity does not have control over barley prices and is forced to accept prevailing prices in a market.
Namibia currently does not have any barley producing operations and therefore remains vulnerable to global barley prices.
This could lead to an increase in beer production costs and ultimately higher consumer prices for different beer products, Simonis Storm pointed out.
Global barley prices have surged between 29% and 67% on average during 2021, already providing upward pressure on beer production costs worldwide and locally. Annual monthly beer inflation has averaged 2.3% in the last two years and could rise further depending on lower global supply of barley, SS added.
The Russian and Ukraine conflict is expected to further drive-up barley prices as the two countries account for 29% of wheat exports globally.
SS also notes that there seems to be a one-year lag, typically by February the harvest has been completed and shipped. The question now is whether seeds are being planted.
“We expect larger costs to come through, as management do, but somewhat delayed, with the bulk of the costs to hit within NBL’s financial year (FY)23.”
“We think this should be a temporary supply driven cost and, in all likeliness, should revert back in the longer-term,” SS [email protected]
This implies that the entity does not have control over barley prices and is forced to accept prevailing prices in a market.
Namibia currently does not have any barley producing operations and therefore remains vulnerable to global barley prices.
This could lead to an increase in beer production costs and ultimately higher consumer prices for different beer products, Simonis Storm pointed out.
Global barley prices have surged between 29% and 67% on average during 2021, already providing upward pressure on beer production costs worldwide and locally. Annual monthly beer inflation has averaged 2.3% in the last two years and could rise further depending on lower global supply of barley, SS added.
The Russian and Ukraine conflict is expected to further drive-up barley prices as the two countries account for 29% of wheat exports globally.
SS also notes that there seems to be a one-year lag, typically by February the harvest has been completed and shipped. The question now is whether seeds are being planted.
“We expect larger costs to come through, as management do, but somewhat delayed, with the bulk of the costs to hit within NBL’s financial year (FY)23.”
“We think this should be a temporary supply driven cost and, in all likeliness, should revert back in the longer-term,” SS [email protected]
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