Margins in the sector are already as thin as chicken skin and now one of South Africa’s biggest producers of poultry, Astral Foods, has warned that its H1 earnings for the six months ending on 31 March 2023 are expected to plunge by “at least” 90%.
These higher feed requirements will certainly have an impact on the division’s performance because feed input costs make up about 70% of the cost of raising a chicken. Astral notes that feed costs increased to about R5,300 per tonne on the back of a weakening local currency and a tight global balance sheet.that maize prices were set by the Chicago Board of Trade so South Africa pays international prices for maize.
The poultry producer said a substantial selling price increase was required to recover the high feed input costs and the impact of blackouts, but it was unable to pass that on to consumers. As a result, Astral was “subsidising” the increased cost of production to its customer base and the consumer. Early last week, JSE equity analyst Anthony Clark of Smalltalkdaily Research predicted H1 would be “terrible” for the sector.