Assessment of Cooperatives in the Poultry Industry - 2013.pdf - Seda

Research Report: Addressing the Needs, Opportunities and Challenges of Cooperatives
and Collectively Owned Enterprises in the Poultry and Related Industries
The need for financial skills is strongly related to the information presented in this graph. Almost all
the categories relate to a need for greater financial management, cash flow problems or a lack of
project management skills. The ‘other’ category includes lack of trust in members regarding finances
and credit problems due to late repayment from customers. Both of these two additional concerns
could be lessened with improved systems of financial management and with management of
customers.
A closer look at where cooperatives are struggling with expenses creates an improved picture on the
causes of financial problems. Table 4-4 below indicates the percentage of responses received for
each of the below categories. It is clear from the table that the overwhelming majority of
cooperatives stated that feed and transport have the greatest impact on their business.
Table 4-4: Expenses with the greatest impact on cooperatives
Expense Item % Incidence Expense Item % Incidence
Salaries and wages 2% Transport 39%
Feed 50% Advertising and Marketing 0%
Administration Costs 4% Security 0%
Electricity 2% Medicine 2%
Source: Urban-Econ Survey, 2013
The high number of cooperatives who reported feed as a major factor in their expenses is indicative
of the large proportion of this cost contributing toward expenditure. In his study on the value chain
for farmers in the broiler industry, Louw (2011) argues that feed generally contributes to around
70% of the total costs of broiler production. In Section 4.1.2.4: (Customers and Suppliers) below
more background into this challenge is given. The high proportion of feed costs to total costs is a
strong factor influencing the competitiveness of South African poultry in the international market.
Countries such as Brazil are able to source feed at lower costs
than farmers in South Africa and this allows them to produce
poultry at a lower cost. The price of grain in South Africa is tied
to international prices, while in Brazil feed prices can be
determined internally due to the high volumes of production.
It has been indicated that cooperatives struggle to transport their goods to the market, this is in part
due to a lack of transport. Additionally, when asked about their location, many cooperatives placed
themselves as equidistant between two larger towns. This would mean that if the rural market in
which they live is saturated, they will have to travel approximately 100 km or further to deliver their
products. While this is not the case for all cooperatives surveyed, it may assist in understanding the
high percentage of transport concerns. Another factor in this regard may be the distance to an
abattoir where cooperatives provide live birds to an abattoir instead of selling to shops or
community members.
52 | P a g e U r b a n - E c o n : D e v e l o p m e n t E c o n o m i s t s
Feed costs account for more
than 70% of the total costs
of broiler production