Overproduction & less consumer spending hits hard

South Africa’s broiler industry is hoping that things will pick up towards the December season’s typical peak chicken-consumption period, following a year of low prices.

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This is despite recent decreases in chicken-feed prices. Major SA poultry producer Astral Foods recently said it had a difficult six months to September. According to the company’s chief executive Chris Schutte this was due to a combination of the current chicken-oversupply situation putting significant downward pressure on prices, as well as weak consumer spending over the period.

Ross Ellis, managing director of fresh chicken producer, Argyle Poultry Farms, said after having a good 2009, they’ve been struggling with significantly diminished profit margins since February due partly to oversupply.“Also, the global economic slump has hampered the growth of South Africa’s black middle-class consumer segment this year. And as consumers feel the financial pinch they’ve had to reconsider their choices of protein in their diets and have started buying protein cheaper than chicken,” explained Ellis.

Kevin Lovell, CEO of the Southern African Poultry Association, said there has been a definite drop in consumer spending on chicken this year. “Whereas South Africa used to be able to employ almost 60% of school leavers, putting disposable income into their pockets, this figure has dropped significantly.” But he said the current chicken oversupply is slight and should be a short-term problem. “We’ve just felt it extra-hard this year because it happened to coincide with the unexpected cutback in consumer spending.”

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