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
4.1.2.6. Other Challenges
In addition to the results presented by the survey, it is important to note that some of the key
challenges reported on cooperatives in the poultry industry by a number of additional research
sources. These sources provide information on the industry and thus, on the environment in which
cooperatives operate.
According to the South African Poultry Association (SAPA), the poultry industry faces problems
relating to disease control, lack of funding and sanitation. The broiler industry is enduring a
significant margin squeeze brought about by exorbitant increases in raw materials and energy costs.
The following challenges are cited by SAPA as being critical to the industry:
the significant growth in volume of imports into South Africa, which now represents the
single biggest supplier of chicken products
limited disposable income will have a negative effect on per capita consumption growth;
the continuous threat of poultry diseases
higher input costs and combating these through efficiencies. There seems little relief from
high feed prices, and producers will need to overcome this to remain profitable (SAPA,
2011).
SAPA argues that in evaluating the South African broiler industry, it is useful to keep in mind that the
high transport cost of raw materials adds substantially to operational costs incurred by farmers.
There are intrinsic disadvantages in South African for poultry production that inhibit the producers.
These include:
low yield and relatively high prices of grains, aggravated by the buffer effect of domestic and
international freight and duty
poultry production at high altitudes
free movement of (even diseased) culled birds
relatively unhindered imports of poultry meat from many countries.
A report by Andre Louw, lecturer at the University of Pretoria in the Agricultural Economics,
Extension and Rural Development Department contains important information on challenges faced
by the poultry industry. The findings express structural shifts in the feed industry, indicating that the
impact of the contract growers is extreme, especially where feed manufacturers are part of a
holding company chain (Louw et Al: 2011).
Restrictive factors currently being faced by the broiler industry role-players in doing business, among
others, include issues relating to the infrastructure for feed manufacturers (the cost and
competitiveness of doing business). Good infrastructure may assist with optimising the feed industry
at higher levels of operation.
As is further extrapolated in the analysis of stakeholders below, significant barriers to entry exist in
the value chain. This makes it difficult for new and small entrants to compete with existing market
players. These barriers include high capital requirements, relevant experience and track records, the
significance of research and biotechnology in the provision of seeds and economies of scale for other
inputs such as fertilisers.
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