Chicken producers forced to cut jobs

By Bloomberg Time of article published Aug 27, 2012

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Bloomberg

Astral Foods cut 150 jobs as it reduced output after the price of grains, its biggest cost, surged to a record and cheaper imports of the birds increased, the country’s second-biggest chicken producer said

The reductions were “directly related to ‘cutbacks’ on production”, chief executive Chris Schutte said in response to questions last week. “Further cutbacks and possible retrenchments will follow.”

Local prices of grains, which comprise as much as 75 percent of the cost of producing chickens, rallied to a record last month as the worst US drought in almost 50 years damaged crops and raised world prices. Poultry imports to South Africa are at a record according to Astral, which employs more than 12 000 full-time and contract employees.

Poultry producers might have to cut jobs as companies struggled to pass expenses onto consumers, the SA Poultry Association said.

“Some of them have already retrenched, but they are planning to retrench in the order of 3 000 people over the next month or so,” association chief executive Kevin Lovell said earlier this month. “Disposable incomes are stretched… as much as we know we need to raise prices, we also know that the chances of being able to do that are rather limited.”

The economy will probably frow 2.6 percent this year, according to the International Monetary Fund, less than the Treasury’s February estimate of 2.7 percent. The government said it needed 7 percent growth to cut the jobless rate to 15 percent by 2020 from 25 percent now, the highest of more than 60 nations tracked by Bloomberg.

Rainbow Chicken, the nation’s biggest poultry producer by volume, said earnings a share in the year to June probably fell as much as 35 percent compared with the previous 15-month period. Astral’s profit for the six months to March dropped 17 percent, it said.

Rainbow had not cut any jobs as a result of the state of the chicken industry, it said.

Country Bird’s Supreme Poultry unit also had not cut jobs, managing director Jack Searle said.

“Uncontrolled cheap chicken that is being dumped into South Africa from Brazil, Argentina and the EU is detrimental to the local poultry industry and if left unchecked by the South African government will lead to job losses,” he said.

Astral shares fell 0.45 percent to R109.50 on Friday, while Rainbow fell 1.39 percent to R14.20 and Country Bird rose 2.39 percent to R4.29.

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