Feed prices put pressure on South African poultry industry

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.