May 18, 2006

African producer gains stellar profits thanks to cheap corn last quarter

In a season when major poultry producers are reeling from multi-million dollar losses, South Africa's Astral Foods operating profit is up 54 percent, with more than half of it coming from its poultry division, according to Astral financial director Tom Pritchard.

Astral Foods Inc is the top animal feeds company in South Africa and the second largest poultry producer in the country. It has 23 percent of the country's poultry market, just behind market leader Rainbow Chicken with 29 percent.

In 2005, Brazilian poultry imports to the nation increased but slowed as the Brazilian real appreciated against the South African rand. US poultry imports were also affected as demand rose in the Chinese and Russian markets .  

In an interview with an African news agency, Pritchard said the company attributed the stellar performance to lower feed prices in the company's poultry division at the end of September 2005 that continued into this year. South Africa had a bumper corn crop of 12 million tonnes last year.

At Astral's animal feed division, the division saw record margins of 8.1 percent from 5.6 percent in 2004. The poultry division saw a record margin of 11 percent from 10.4 percent in 2004.

Strong consumer demand in the first four months of the year also fuelled sales. In addition, poultry prices were raised 7 percent after remaining stable for more than a year.

However, corn prices in the region have increased by 33 percent since the beginning of the year as the African rand weakened against the US dollar.

Pritchard does not expect problems with increased corn prices in the short term, as the company's contracts should be able to guarantee prices for the next two months. However, he expects the effect to weaken the company's performance in the second half of the year.

Noting that in South Africa, Australian lamb is cheaper than South African lamb, Pritchard said that anti-dumping tariffs need to be continued to protect not only meat producers but the entire agricultural sector. The law on tariffs expired in December last year, but extension is automatic.