Too chicken for the poultry industry?

Now is not the time to enter the poultry industry, says South African Poultry Association (Sapa) CEO, Kevin Lovell.

According to him, the country’s slow-growing economy is putting a damper on the growth in poultry demand. In an industry that cannot meet local demand, and with a 300 000t gap between poultry consumption and production, it’s hard to believe there isn’t room for more producers.

Over the past five years, poultry consumption has increased 3,53%, while production has risen only 2,36%. One need only analyse the web browsing habits of visitors to the Farmer’s Weekly website to see there is no shortage of interest in chicken farming, especially among smallholder farmers. But too many eager entrepreneurs have failed to take heed of Lovell’s warning and have seen their dreams evaporate.

According to economists, the short-term outlook for the industry certainly doesn’t look rosy. Producer prices are expected to stay low in the short term due to reserve stock, which is seeing an oversupply to the market, while input prices are set to increase. The drought and consequent drop in local maize production will result in an increase in the maize price, and already high input costs are rising even further. Should Eskom’s request for a hike in the electricity price be approved, profit margins for poultry producers will drop even further.

However, if there’s one thing I learned from high school science, it’s that there is always an exception to the rule. Economists’ analysis is only as good as the data they have access to – and there is no credible data on the informal poultry market.

Suppliers of poultry directly to townships cannot keep up with demand. By cutting out the middleman they are getting more rand per kilogram for their produce than they would have selling into the formal value chain. Asking prices are thus on par, and often cheaper than supermarket prices. And there’s the convenience factor of location.

In this competitive market, informal trade must be a thorn in the side of big suppliers. No wonder some people are questioning the somewhat lacklustre attempt at transformation from that side of the industry. Whether or not this is the case, Sapa recently recommitted itself to assisting new entrants to the market.

Africa, with its growing and wealthier population, lies at our doorstep. Rather than cut the poultry market into ever-smaller pieces, why not increase its size? The industry seems to be taking this to heart; SA poultry exports have grown by an average of 25,8% over the past five years.

In the spirit of helping to grow the industry, we’ve put together a few articles which we hope will contribute towards a successful poultry business.

Good luck to all our fledging poultry producers!