Chicken Farmers Under Immense Pressure
If your business is chicken then these must be worrying times.
I noticed over the last month or so especially in the States that there has been some issues with chicken egg supplies. I don't know what the underlying factor causing this is as we have had no issues with our eggs or chicken supply. That is up till now as ASTRAL Foods is the largest poultry provider in Africa and is based in South Africa. They have sent out warnings that shortages are on their way.
ASTRAL Foods has 12 different poultry farms under it's umbrella.
This week they handed out a projected profit warning with a drop in 90% which has been unheard of before. They have had a experienced a good few years up until load shedding became an important part in everyone's lives in South Africa.
ASTRAL Foods is the parent company with the household brand names that we all know falling under their umbrella. Currently the company is now losing on average $0.12C (R2) for every kilogram of chicken they sell.
When you think of farming you don't tend to think of the electricity that is used for irrigation systems, poultry farming heating the chicken coop and the lighting required to fool the chickens it is daytime and not night time so more eggs are laid. This al impacts the food supply and this is starting to hit home how badly things are going to become.
Over the last few weeks I have noticed in the shops certain sections of the frozen food freezers are out of stock on various line items. This makes perfect sense now and not something I had considered up until this point. No one is immune to load shedding and to run a large industrial food processing plant is not going to be cheap finding alternative energy. ASTRAL Foods reportedly is burning R1 million (60K) per day on gasoline for their generators. If you are losing 2 hours per day then you can work around this, but when it is 6 or 8 hours this becomes impossible.
This is not a supply chain issue as this is a supply issue as manufacturing cannot take place like it once was. I know firsthand what this is like as we have had our our company slashed by 75% from where we once were.
The chicken farm is a strange one as from chick to table it is 40 days and every day that chicken is not culled it is eating feed and growing bigger. The company has backlogs in the culling process which impacts the overall price per kilogram of chicken. We have experienced load shedding in the past, but this was never daily which has been ongoing for months already. The problem is this problem is here to stay and ASRAL is lucky that they are a big company and can work around this subsidizing their losses formulating another plan. Smaller poultry companies will not be so lucky and will most likely be forced to close doors.
The impact this has on South Africa's economy and job market cannot be underestimated as not only the job losses, but Chicken is the staple diet of the masses. Take away the Chickens or increase the prices which is bound to happen will have a bigger impact on the poor.
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