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

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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. 65 | 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
Research Report: Addressing the Needs, Opportunities and Challenges of Cooperatives and Collectively Owned Enterprises in the Poultry and Related Industries According to a report on the broiler industry supply chain (Louw: 2011), various issues are highlighted by growers, which they experienced as immediate challenges to the poultry industry. These include the following: quality and consistency of feed and associated raw components changes in technology and innovation electricity supply, price and availability input prices other than the cost of feed (e.g. interest rates, labour, running costs ) market degradation of poultry markets transport and road infrastructure disease and the control and containment of outbreaks imports and the inability to control the dumping of poultry products in South Africa skills levels of management and the team, and the farm structure. In order to understand the challenges facing developing farmers, this holistic picture is vital. While cooperatives are able to identify the insufficiencies within their own business, the large picture enables greater forward planning. Additionally, in providing advice to developing farmers, feedback on their own business activities alone is not sufficient. A comprehensive understanding of the challenges of the industry enables the ability to harness positive aspects and ensure that businesses are shielded from potential market threats. Based on the report (Louw: 2011), the following issues and challenges were ranked highly by broiler holding companies as concerns and challenges that they face in the poultry industry: managing the price volatility of inputs imports of poultry meat managing profitability in this dynamic industry exchange rate volatility availability of good genetic material and parent stocks governance structures managing waste material and environment impact studies infrastructure The Department of Agriculture organised a National Agricultural Cooperatives Indaba in 2012, to which various stakeholders were invited. At the indaba various issues affecting cooperatives and smallholder farmers were discussed. It was agreed that smallholder farmer’s cooperatives in South Africa do not have a great deal of negotiating power due to a number of reasons including: the quantum and value of assets that they possess their carrying capacity – both financial and infrastructural volume of operations lack of market information lack of access to formal financing mechanisms in the absence of collateral 66 | 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
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