Pork and broiler industry supply chain study with emphasis on feed and feed-related issues

Abstract

The animal feed industry is of strategic importance to the beef, milk, poultry, sheep and pork, other animal and pet industries in South Africa. These subsectors are major buyers, processors and suppliers of processed commodities to the retail sectors and the end-consumer markets. These markets are exposed to various risks, including input-commodity price volatility, high capital requirements, the inherent business and climatic risks of different subsectors, and various other challenges. These factors have major impacts on decision-making, affecting from large to micro role players in the agricultural supply chains, especially in the feed and livestock markets. The main purpose of this study was to understand the feed and feed-related issues experienced within the supply chains of the pork and broiler subsectors. Special attention was given to the different parties in the input and feed (own and commercially manufactured) industries. To understand problems in the feed supply chain, a value chain analysis of feed in the pork and broiler subsectors including all the links, was needed in order to produce a study that would benefit the industry and stakeholders involved. Interviews, using structured questionnaires, were conducted to obtain accurate information from feed manufacturers and the major role players and organisations within these subsectors The main issues within the feed supply chain were, among others, the various parties involved in feed inputs, manufacturing and procurement, the competitiveness and profitability within the animal feed supply chain, and their overall impact on the pork and poultry markets. Barriers to entry exist in these value chains, which include high capital requirements, relevant experience and track records, and the significance of research and biotechnology in the provision of seeds. High levels of vertical integration as well as concentration levels increase the level of competition between the larger organisations. In the South African feed industry, there are a small number of role players who together control the largest market share (more than 90 percent). The feed industry, especially in the South African context, is a complex and very dynamic, growing agricultural industry. Producers face various challenges on a daily basis within a dynamic, everchanging environment, which increases risk to such a degree that, in order to be able to farm sustainably, a competitive advantage in the form of lower-cost and higher-quality produce must be established. Recommendations suggested at the end of the paper can be viewed as guidelines for industries, for use in panel discussions and at annual general meetings. These recommendations could be used in setting up strategic plans for future expansion and development of the industries concerned.