SA poultry farms struggle with feed prices

12-03-2008 | |

Poultry producers in South Africa are experiencing further negative affects from increasing poultry feed prices and oversupply, which are proving to dent the industry, say Country Bird and Sovereign Foods.

Business Report stated that while the higher maize price has been a factor
for some years now – exacerbated by a higher global price – both companies say
there was oversupply of chicken in the market, contributing to unpleasant
results.

Sovereign Food in February said that selling prices from
December had been lower than forecast “due to significant import volumes over
this period”. The company added that expected earnings per share for the year to
February to be 35-45% lower than a year ago, as volumes were lower than
expected, which the company attributed to technical production
delays.

Country Bird has stated that the poultry industry has achieved
sustained levels of growth and high margins for a considerable period. However,
high feed input costs together with oversupply has resulted in margins being
reduced across the board. The company managed to boost chicken volumes by 9% in
the six months to December. Net profit was down 14%.

Many chicken
producers nationwide said that they had been unable to pass on higher input
costs to retailers, including supermarkets. A large supermarket chain in the
country, Shoprite, said that until December it had held back passing on high
food inflation in order to remain price competitive, but added that this year it
would be forced to pass on costs.

Imara SP Reid analyst, Warwick Lucas,
said the local poultry industry would probably operate at reduced margins for
most of this financial year.

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