South African poultry industry under pressure

According to South African newspaper, The Times, the FTSE/JSE food producers’ index has tumbled from more than 37,500 points in November to about 30,000.

Astral Foods shares have dropped from nearly R155 in December to about R100. According to chief executive of poultry group Astral Foods, Nick Wentzel, the sector suffering from consumers’ belt-tightening.

“Households that used to eat chicken three times a week can only afford it once now. January and February are usually bad months for sales because families need to buy textbooks and they are short of money after the Christmas holidays,” Wentzel says, adding that 2008 is particularly bad because of high interest rates.

Competing poultry group Sovereign Food’s shares have also taken a fall, dropping from about R21 at the start of the year to about R10. According to the company, this was mainly due to delays in the completion of environmental impact assessments and start-up glitches at its new facilities.

Wentzel states that there is currently an oversupply of chicken in the South African market, but that the glut should drive prices down, which is good news for consumers.

The Times also says that when listed food groups publish their year-end results in May the figures are likely to reflect the ravages of the drought experienced in South Africa in 2007.

For crop farmers, a hint that this year’s harvest would be good was given on Monday when the SA Agricultural Machinery Association reported that tractor sales were up 10% and the sales of combined harvesters by 30%.