Business Daily (Nairobi)

20 July 2011

Kenya: Hatcheries Feel the Heat As Orders for Day-Old Chicks Drop

The high cost of chicken feeds has seen farmers halve orders for day-old chicks, hurting hatcheries and future prospects of poultry farming.

Kenchic Limited says the cost of production has more than doubled since February and that their sales of one day chicks have dropped by 50 percent. Kim's Poultry Farm echoed the sentiment, adding that sales fell 60 per cent.

Besides hurting the margins of the hatcheries, the drop in demand is set to lead to reduced supply of chicken and eggs in the Sh5-billion sector as investors cut back on poultry farming setting the stage for a spiral in product cost due low production and high feed prices.

Kenchic Limited has already increased the price of a fully grown broiler chicken by 11 per cent to Sh600.

"Prices of maize for instance went up in February, March and June bringing the production cost for an average farmer per chicken to Sh250 from about Sh180 in January," said Humphrey Mwangi, the head of marketing at Kenchic Limited.

He added that farmers are shying away from poultry farming, leading to a drop in demand for day-old chicks.

While Kenchic has a capacity to produce 500,000 day-old chicks and 30,000 parent stock -layers targeted for breeding-- they are running on half their output.

The surge in chicken feeds is linked to maize prices which have risen from Sh1,200 for a 90-kilogramme bag last December to Sh4,200. The weak shilling has further added to the millers cost of doing business.

The cost of chick mash has increased 40 per cent to Sh3,500 for a 70-kilogramme bag while layers mash rose to Sh2, 700.

"Kenyan farmers are surrendering this business, saying they cannot sell the chicken after the feeds doubled," said Mr Kim Khwan, the Chief Executive Officer at Kim's Poultry Farm, "We are currently relying on exports to Ethiopia but demand is also suppressed".

The reduced interest in poultry farming looks set to hurt future supply of eggs and chicken meat, a prospect that would hurt hotels and other institutions that are already grappling with other rising costs of production.

The price of a kilogramme of chicken meat has increased from Sh240 in December, to the current Sh300 while a tray of eggs is now retailing at Sh320 from Sh240 in the same period.

These price hikes also reflect in Kenchic eateries, adding fresh impetus to the cost of living currently running at 14.49 per cent.

Players in the sector reckon that the high cost of doing business is set to slow down the poultry business. This hurts a sector that has doubled in value over the past five years.

The value of eggs and chicken sold in the economy increased from Sh2.1 billion in 2006 to Sh5 billion last year, according to the 2011 Economic Survey.

But the government's move to allow importation of cheaper maize to ease the ongoing shortage and the upcoming harvest season is offering hope that the run-away prices of chicken feeds will soon come down.

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