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Poultry producers under pressure on rising maize prices

Country Bird's share price fell 3.23% to R3 on Tuesday (14 January) as the market worried about the effect of record South African maize prices on poultry producers battling depressed selling prices.

By Andries Mahlangu

15 Jan 2014

Chicken farmers are under pressure as maize prices push up the cost of feed for the birds. Image: Astral Foods.

"Feed makes up about 65% of live bird costs and about 50% of the cost of the frozen portions. The primary ingredients in poultry feed are maize and soya. These prices are set in dollars and the setting takes place through the South African Futures Exchange‚" said Kevin Lovell‚ chief executive of South African Poultry Producers.

Spot prices of white and yellow maize for March delivery contracts have risen 22% and 25%‚ respectively‚ since mid-November because of the patchy rainfall in the country‚ which affected plantings.

These scenarios do not paint a rosy picture for poultry companies‚ which last year had a torrid time.

"I think investors are losing faith in this sector and looking for alternative sectors in which to invest‚ which could put more pressure on their respective share prices. There are little gems though within with sector and I like RCL Foods as it looks to diversify from the chicken industry through Foodcorp," said said Travis Robson‚ analyst at IG SA.

RCL Foods‚ the largest poultry producer by market capitalisation‚ ended 0.63% firmer to R15.99 on Tuesday while Astral Foods (ARL) closed 1.08% lower at R95.26. Both counters have lost in excess of 8% since the start of the year.

Source: I-Net Bridge

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