US sees rosy outlook for SA poultry

While the distressed South African poultry industry battles adverse conditions and warns of dire outcomes, the United States Department of Agriculture (USDA) thinks it will make substantial profits, invest further in capacity expansion and export more chicken.

The forecasts are contained in a report in Poultry World, based on a USDA report. Unfortunately, while the industry has promised some additional investment in new capacity, and is gearing up for exports, highly profitable poultry companies are an unlikely prospect this year.

The USDA expects South African production to increase by 2% in 2023, with exports up 4%. It predicts a 3% rise in chicken imports because “local production remains insufficient to meet demand”.

Demand for chicken will increase as consumers switch from more expensive meats like beef and lamb, the report says. Chicken meat production is forecast to return to the pre-Covid growth trend.

“South African poultry companies are expected to yield significant profits in 2022, largely due to the higher prices of poultry internationally as well as domestically. If companies invest profits in production in 2023, the industry can resume its growth trajectory.”

This does not quite tally with a trading update issued in January this year by Astral, the country’s largest poultry producer. It said profits in the six months to March were likely to be 90% lower than the previous year.

Capacity expansion was on hold, funds were being diverted to backup electricity generation (diesel is costing Astral R1 million a day), chicken selling prices were R2/kg below cost and in the first half of its financial year “the poultry division is expected to incur significant losses,” Astral said.

RCL Foods, owner of Rainbow, the second largest chicken producer, reported interim results in February. Revenue was up, but earnings were 21% lower than the previous year. RCL said “volumes and margins are under pressure” and gave no outlook for the rest of the year.

The USDA may find that profits for our chicken producers this year are as rare as hen’s teeth.