In a statement, the East Midlands outfit said their decision had been reached “in view of recent events”. The club did not elaborate further.
Local chicken producers are keeping their eye on what they see as worrying trends in the international grain market. An Associated Press wire service story on Tuesday last indicated that US corn prices have been rising steadily since the beginning of 2014 and that the commodity was up by 24 per cent for the year up to April 29.
The story attributed the higher prices to wet weather and planting delays, quoting a crop progress report by the US Department of Agriculture last week which indicated that just 19 per cent of the corn crop has been planted, less than the 20 to 25 per cent the market was anticipating. That’s also below the five-year average of 31 per cent for this time of year, according to Brandon Marshall, a commodity analyst in Minneapolis.
For the year so far, soyabean meal increased by 12.8 per cent, while wheat was up by 19.2 per cent on the Chicago Board of Trade. Corn, soyabean and wheat are the three main components of chicken feed. Robin Phillips, president of the Poultry Association of T&T (PATT), said producers are concerned by current global trends in grain prices. He told the Sunday BG that there is “no immediate need” to increase chicken prices but they are monitoring the situation.
Filling in the background to the situation, Phillips said, “What is going on with the US prices now has a lot to do what is going on in the Ukraine.” The US Grain Council, in April, said that demand for US-origin grain has been rising since farmers in the Ukraine are holding on to their grain to hedge against the nation’s depreciating currency. Since the stand off, traders in the grain market speculate that Russia’s occupation of Crimea would affect grain exports from the region causing increased demand for US Grain.
Ukraine is the third largest exporter of corn in the world behind Brazil and the US and the sixth largest exporter of wheat. Russia is the world’s fifth largest exporter of wheat. If the US harvest in the fall is bountiful, grain prices can decrease. The USDA also cites extreme cold in winter and dry March weather as another reason for the mixed trends. Phillips said, “We are hoping by the time the crop-time comes in September, the crop is very good.”
Cost of producing chickens
There is good reason to hope that the crop is good, as it can lead to a decrease in grain prices. Phillips, who is also the director of marketing and public relations at Arawak, said that 80 per cent of T&T’s grain is imported from the US and Canada, the other 20 per cent comes from Brazil and Argentina. Chicken feed, which is made largely from corn, covers a large portion of the cost of producing chickens.
Phillips calculates it to be around 60 per cent while Ronnie Mohammed, vice president of the Nutrimix Group of Companies puts it at 70 per cent. For both Phillips and Mohammed, the cost of grain has a major impact on the final price of chicken. Mohammed, unlike Phillips, believes the price of grain is currently too low for us need to worry about changes in chicken prices. He said because his cost of production is low, there would be no need to increase his chicken prices.
But Phillips said the cost of grain influences the price of chicken in the long term while demand influences price in the short term. In terms of price points, Phillips described the poultry market as “fairly competitive.” He said: “In the poultry industry, margins are normally small and you depend on your volumes. To maintain volumes you have to be competitive with your price because whether they are in the fast-food sector or the supermarket, consumers are price sensitive.”
He said: "We are involved in an industry where we cannot say we don’t like the price, we will reduce production.” This Phillips attributed to the 90 days between hatching eggs and processing the meat.“For us to respond to anything in the market—whether it is over supply or undersupply—it takes 90 days. “If our price points affect our volumes negatively and we lose sales, that means our chickens are going to stay on the farm. With price of grain where it is today, it is prohibitive to keep them on the farm; it costs too much money.”
Phillips said that keeping chickens on the farm creates additional cost that cannot be recovered and will also prevent farms from restocking as required. “Right now, the cost of grain is going up and the cost of chicken is going down,” Phillips said. He said this is the result of a surplus from the Lenten season. Lent is a period where local chicken consumption traditionally declines.
Statistics from the Ministry of Agriculture indicate that chicken accounts for 85 per cent of all the meat consumed in T&T. With a population of 1.3 million, T&T consumes an estimated one million head of chickens every week, according to the PATT president. Phillips said: “Eighty per cent is produced locally, the other 20 per cent is imported based on import data that we get from the USDA Web site.”
He added: “There has been a big surge in demand since about 2008. Up to 2007, we produced all the chicken locally and we were producing about 750,000 heads a week. We have gone up to about 800,000 locally and still about 200,000 is imported.” Mohammed’s data puts local production at around 775,000 head of chickens weekly.
Phillips said consumption data from 2007 would indicate that T&T's population is more around 1.6 million as opposed to Central Statistical Office statistics that put the population at roughly 1.3 million with little change over the past seven years.
Phillips said: “Owing to the fact that US, Canadian and EU consumers have a preference for white poultry meat (chicken breast) and wings and these products are sold at premium prices in their domestic markets, this results in a back-up of dark poultry meats (leg, thigh, back and neck) in frozen warehouses in these countries, which are then disposed of at prices way below production costs."
He said: “As these products age in frozen warehouses all over the US, Canada and the EU, the prices of these less desirable products plummet dramatically. It should also be noted that the expiry date for poultry meat in these countries is 180 days from date of production after which they cannot be offered for sales in these markets, but these products are approved for export sale into markets like T&T.” He said T&T exports less than 2.0 per cent of its poultry products to foreign markets.
Opportunities in sector
The PATT president said about 60 per cent of the $1.2 billion in sales mentioned earlier, comes from value-added products. Portion packs, boneless chicken, seasoned pre-packed and chicken nuggets are just a few of the value-added products Phillips identified as having good market potential. T&T has four poultry suppliers that are considered to be large processors of the chicken meat used for value added products: Supermix (Arawak), Nutrimix (Nutrina), Warnerville Grain Mills (Fine Choice) and, most recently, Mastermix.
Large processors, according to Phillips, are those that process 100,000 head of chickens per week. These processors have vertically integrated operations comprising hatching eggs, hatchery, broiler farming, feed supply, pluck shop, chicken processing and ready to eat markets. Phillips sees the easiest entry point for entrepreneurs interested in the poultry sector being the areas of broiler farming or pluck-shop ownership.
He said about 40 per cent of the chicken sold locally is sold through the pluck shop. He said it would cost around $1 million to set-up a conventional pen housing 22,000 chickens and approximately $2 million for an environmentally controlled pen.
With reporting by Kwame Joseph