Baby chick business falls victim to parts imports
The growing importation of cheap chicken parts is taking a toll on one particular element of the business operated by top poultry company Jamaica Broilers: baby chicks. For the quarter spanning May to July the company’s local earnings fell seven...
The growing importation of cheap chicken parts is taking a toll on one particular element of the business operated by top poultry company Jamaica Broilers: baby chicks.
For the quarter spanning May to July the company’s local earnings fell seven per cent. However, the decline was rebalanced by new business in the company’s US market, leading to an overall 16 per cent growth in group profit to $1.24 billion for the quarter.
Since last year, Jamaica Broilers Group Limited, JBG, has been reporting improvements in volume sales for whole chicken and chicken parts on the local market. The Jamaica division of the business has held to its usual volumes on that element of the business with total revenue rising by five per cent year-on-year.
But with cheaper chicken parts entering the market, it has served to dampen demand for baby chicks that it would normally supply to poultry farmers, according to JBG Vice-President Ian Parsard. The implication is that farmers are growing fewer chickens as the market migrates to imports.
Jamaica Broilers’ main operations are in Jamaica and the United States, respectively, but it also sells to markets within the Caribbean.
In the first quarter ending July, earnings from Jamaica fell seven per cent to $1.75 billion, while the US segment climbed by 44 per cent to deliver earnings of $1.17 billion, notwithstanding a three per cent fall in revenue from that market even as volume sales shot up by 56 per cent. The decline in US sales revenue was due to adjusted retail prices.
Jamaica Broilers also said the robust poultry sales volumes served to offset negative market pressures.
Overall, the group eked out a modest two per cent growth in quarterly revenue to $23.4 billion, while profit climbed from $1.07 billion to $1.24 billion.
Jamaica’s poultry importers procure most of their supplies from the United States. Those parts have become cheaper due to gluts in the supply market.
“I think what has happened is that last year there was a challenge in the availability of imported chicken parts and the price of the product in the overseas market. Right now, the situation particularly in the US market for the better part of 2023 is that there has been an oversupply of stock and, as a result, the availability and price are a lot more favourable,” Parsard told the Financial Gleaner.
He added that the quantity of imported parts has increased “significantly” over three months to July, which has a negative impact, particularly on the small farmers who grow chickens for the retail market. The competition from imports has dampened demand for local chicken and as an offshoot of that, farmers have been buying fewer baby chicks to rear.
While large poultry producers like Jamaica Broilers and Caribbean Broilers also sell chicken parts, their supplies in that segment mainly include drumsticks, wings, breasts and thighs.
Jamaica imports roughly US$25 million worth of chicken back and chicken neck each year, but recently the Ministry of Agriculture has been encouraging more importers to apply for importation licences for chicken neck and back, which are the cheapest chicken parts.
It came after the Integrity Commission of Jamaica criticised the ministry for giving preferential treatment to applicants on the basis of prior importation history, suggesting that the integrity of the award process was compromised and hindered competition.
However, Parsard reiterated that it was market conditions and not the award of import licences, policy, per se, that was driving the current level of cheap imports and the concurrent decline in baby chick sales.
“The import system that we operate is not a perfect one,” he said. However: “The industry has had discussions with the technocrats at the ministry and what they have indicated is that no additional permits were issued,” he added.
The prices of imported chicken neck and back are expected to remain low heading into the busy Christmas season, Parsard said.