Poultry firms geared for higher costs


  • Business
  • Saturday, 11 Mar 2006

KUALA LUMPUR: Local fully-integrated poultry producers are well prepared in the event of any increase in prices of raw materials for feed, like corn and soybean meal, on the world market. 

Despite their prices firming up slightly early this month, a source from the Malaysian Feed Millers Association told StarBiz yesterday that major integrated poultry players with feed mill operations, like Leong Hup Holdings Bhd, Farm's Best Bhd and KFC Holdings (M) Bhd, would be able to hedge forward their raw material requirements to minimise the risks of escalating commodity prices. 

“These big-time players are well hedged, given their good manufacturing practices and production standards,” the source said, adding that any potential 5% to 10% increase in the price of raw materials could be easily absorbed by them.  

However, he said, semi-integrated poultry players would be mostly affected, as independent feed millers like Cargill Feed Sdn Bhd, FFM Sdn Bhd, Gold Coin (M) Sdn Bhd and Thailand-based Charoen Pokphand could pass on the increase in raw material prices to them. 

In addition, other poultry players like those in the egg-layers sector, which did not have the facility and avenue to hedge forward their requirement, would also be affected, the source added. 

“Currently, almost 90% of local feed millers' raw materials, like corn and soybean meal, were fully imported,” he said. Corn accounts for almost 50% of the total diet makes for livestock in Malaysia. 

Corn and soybean meal are the main ingredients of the total composition of feed products in Malaysia, constituting about 70%. 

The Malaysian Feed Millers Association has estimated that there are about 25 major livestock feed millers in operations nationwide to-date. 

The source said the local feed mills' total production was about four million tonnes per year, worth about RM3bil to RM4bil. Of the total, broilers take up about 45%, egg layers and pigs 25% and the remaining for ruminants like goats and cows. 

“It is interesting to note that there are no clear-cut market leader in the local feed mill industry, with most players securing not more than 10% share each,” he added. 

In Malaysia, broiler production is about 430 million to 440 million per year. Of the total, 90% is for domestic consumption and the remainder exported mainly to Singapore. 

Farm's Best general manager K.T. Hoh, in an e-mail reply to a StarBiz query, said: “We believe the slightly firm raw material prices should not affect us, as the company has fully hedged its corn and soybean meal requirements for the next few months.” 

He said there were reports indicating that the prices for both commodities were expected to soften by the second half of this year. 

“If we look at the positive side, the recent increase in petrol price will affect many Malaysians as their disposable income will be reduced and, to counter this, Malaysians will need to look for cheaper alternatives for food, clothing and durable goods,” he said. 

He said poultry meat and eggs were not only the cheapest form of protein source but religious-friendly as well. 

“The outlook for the poultry sector will be good. It is undeniable that the recent bird flu has affected consumption slightly in Kuala Lumpur but I am confident consumption of local chicken meat will increase,” he added.  

 KFC :  [Stock Watch]  [NewsLHH :  [Stock Watch]  [NewsFARMBES :  [Stock Watch]  [News]

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