RCL Foods, the branded foods, poultry, and sugar group, said last week that its plans to bring production volumes at its Hammarsdale primary processing plant to pre-2017 levels were on track.
This follows the group last month announcing it was reinstating a second shift at its Hammarsdale primary processing plant in Durban, and returning the plant to full operating capacity.
In an interview last week, the group said: "Our initial goal is to bring our production volumes at the plant back to pre-2017 levels and to incorporate new technology to improve our ability to produce fresh products for our designated customers.
"As part of the project, we are upgrading our H3 hatchery and a broiler farm, while taking on a number of new broiler contract growers to meet our expanded bird volume needs," the group said.
According to the group, the planned additional volume will come on stream in October.
"Operating a processing plant at only 50% of its designed capacity is not financially sustainable. By increasing our volumes, we will achieve economies of scale, which will help to bring down processing costs. It will also help create much-needed jobs in KwaZulu-Natal, which is an important part of the poultry sector master plan," it said.
Independent analyst at Small Talk Daily, Anthony Clark, said the market was perplexed as to why Rainbow (RCL’s chicken brand) was expanding.
"Possibly a push ahead of its unbundling for RCL, I and others say, but given Astral Foods (ARL) has also heavily expanded due to (Minister Ebrahim) Patel’s poultry master plan – which he threw under the bus when he suspended duties – ARL and Rainbow might end up in a market share war as Astral took Rainbow's market share due to its genetics mess up," he said.
RCL is operating in a market where the poultry industry has been experiencing major global and local challenges.
The group said the entire poultry industry, Rainbow included, was facing challenges ranging from historically high prices of maize and soya, which are key inputs in feed production, to a weaker rand, load shedding and related water cuts, and increasing pressure on consumers.
"Dumped chicken imports continue to present a challenge to the local industry. If bird flu were to break out in Brazil, it follows that import volumes into South Africa should decrease," it said.
Meanwhile, Hume International managing director Fred Hume said it was not a matter of if, but when Brazil would face a bird flu outbreak – and the consequences may prove to be dire for South Africa’s poultry supply.
"As a result, South Africa urgently needs to agree on a heat treatment protocol for mechanically deboned meat in case of a bird flu outbreak, such as the protocol currently in place for pork sourced from approved markets abroad.
"Imported chicken provides a crucial complement to local production for satisfying local demand. For example, Hume International alone imported roughly 60 000 metric tons of poultry last year, while South Africa as a whole imported three times as much poultry as it exported in terms of nominal value," he said.
Hume said that as a result, the global bird flu outbreak was posing a significant risk to the country’s food security, especially given the dependence of many households on chicken as an affordable protein.
"The outbreak has already reached countries such as Argentina – which represents real cause for alarm, given that the country is neighbours with Brazil, the biggest source of imported chicken in South Africa," Hume said.
Hume said a sharp rise in prices from chicken suppliers, or a marked shortage of supply, would have a devastating effect on South Africa's economy and lead to increased food scarcity.
"Usually, local producers can offset import food shortages and slow runaway prices with local supply, but South Africa simply does not produce enough poultry to meet local demand and be price competitive. Additionally, the local industry is facing enormous cost pressures as a result of power, water, and infrastructure challenges," he said.
On exports, RCL Foods said potential opportunities existed, and it was speaking to the Department of Agriculture, Land Reform and Rural Development on the testing and verification standards required by the specific countries it was targeting.
BUSINESS REPORT