The prospects for the poultry industry in South Africa appear to have deteriorated further during the past month. The industry has been tightly squeezed by a combination of high feed costs, falling currency, weakening economy and growing competition from imported poultry meat.
Astral Foods assesses poultry industry struggles
Poultry and feed company Astral Foods has announced that these adverse market conditions have worsened to a greater extent than expected. It stated that “a number of mid to large sized independent poultry producers [are] having severe financial distress, and are either currently in the process of closing down their businesses, or are going into business rescue.”
To support its own business and mitigate the risks of shortages and high prices of corn for feed, the group says it has implemented an import program for the commodity.
It also announced further and more severe cut-backs in the poultry production chain. This strategy aims to maintain stock at manageable levels and address the oversupply situation. This will lead to reductions in working hours for the labor force.
“If no relief is forthcoming from the key contributors to the current devastating circumstances being experienced by the poultry industry, more permanent downsizing of production will have to be considered in order to adapt to the current market circumstances,” warns a statement from Astral Foods.
Other South African poultry companies struggling
The situation does not look much better at South Africa’s other large poultry firms, reports BD Live.
In its most recent half-year report, RCL Foods, (owners of Rainbow Poultry), commented that its diversified business had mitigated the business risks but stated its Chicken business unit had recorded a fall of 15.3 percent in pre-tax profit compared with the same period of 2015, attributing this mainly to oversupply of chicken in the domestic market.
Part of Pioneer Foods until two years ago, Quantum Foods announced a 7 percent reduction in operating profit for the half-year to the end of March 2016. For the rest of the fiscal year, the company forecast continuing high raw material costs, and expected its feed and broiler businesses to remain stable contributors to the results of the Group, while the egg business remained under severe pressure.
Earlier in July, Reuters reported that Country Bird Holdings (CBH) had made an offer to acquire Sovereign Foods. The move is scheduled to be voted on at a meeting next week. According to BD Live, if the scheme goes through, CBH will be able to abandon its offer of 900 cents a share, which now looks extremely generous, given the current state and prospects of South Africa’s poultry industry.