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Presentation to poultry supporters and enablers
Tuesday, 24 May 2005
“How can we make the chicken
industry fly?”
Contents of this presentation
Introduction to the team (Jake)
An introduction to poultry and initial insights (Mariam)
What are we trying to achieve here? (John)
The global chicken market and a vision for Mozambique (John)
So, how exactly do you sell more chickens? (John)
Northern and Central Mozambique: Profiles and analysis (Rakesh)
Maputo and Southern Mozambique: Profiles and analysis (Neville)
Some key issues and recommendation one: the Development Group (Rakesh)
Recommendation two: Soya beans and USDA (Neville and Mariam)
Closing recommendations and discussion (John)
Who is this team?In order of appearance …
John Foong
Australia
Project leader
Rakesh Gupta
India
Process Expert
Neville Slade
Kenya/UK
Farming Expert
Mike Davies
England
Industry Expert
Mariam Fakir
Mozambique
Analyst
Note: this information was verbally presented in a 2.5 hour presentation to a selected group of enablers. For further information on any of the slides, please
contact the team
LEGEND
Farmers
Oil producers
Feed producers
Livestock producers
Abattoirs (processors)
Crop market
Meat market
Oil market
Soap producers
Agricultural input suppliers
Chemicals suppliers
Other feed input supplies
meat
seedchemicals
tools
caustic soda
vitaminscarbsfats
other rotated crops
oil
soapcake
cowsgoats
Chicken marketchickens
sesame seedsunflower seed
soya beancotton and maize
various feeds
oil cake
x
x
x
Supplier to process
Key producer (focus)
Market (purchaser)
Product transferred to next stage
cake
Two months ago, I challenged this team to understand the livestock feed and oilseed industry
Source: team analysis
The last month, the team have focused on how to stimulate the poultry industry
Phase
Duration
Description
Understand the five sectors from farming to meat processing
Analyze the specifics of the poultry value chain
Develop next steps towards a strong Mozambican poultry industry
2 weeks4 weeks 2 weeks
Investigate existing operations at each step of the value chain, and how profitable they are
Financially analyse the barriers to profitability, identifying key levers that affect the barriers
Develop a plan to overcome the barriers to success and influence those people who can make a difference
We are here
Work with key enablers to refine and implement actions
3 weeks
Work together with you – the enablers – to implement meaningful actions that will stimulate the economy
Key outcomes
Key actions (to be shared today)
Poultry is a key opportunity for Mozambique
Focusing on feed costs and integration
Putting it into action!
Contents of this presentation
Introduction to the team (Jake)
An introduction to poultry and initial insights (Mariam)
What are we trying to achieve here? (John)
The global chicken market and a vision for Mozambique (John)
So, how exactly do you sell more chickens? (John)
Northern and Central Mozambique: Profiles and analysis (Rakesh)
Maputo and Southern Mozambique: Profiles and analysis (Neville)
Some key issues and recommendation one: the Development Group (Rakesh)
Recommendation two: Soya beans and USDA (Neville and Mariam)
Closing recommendations and discussion (John)
The chicken meat market (‘broiler’)
Key products: Whole chicken, chicken parts, cooked chicken products
What do we mean by the ‘poultry industry’, anyway?The poultry industry is actually two different markets
The egg market (‘layer’)
Key products: Table egg
The broiler market tends to ‘lead the way’ in terms of growth, allowing the egg market to grow in response. It forms the focus of this presentation
Both broilers and table egg layers need the same four ingredients in order to produce end product
Day old chick
Feed
Growing
Processing
The whole process from day old chick to processing takes 42 days (6 weeks)
+
+
+
Source: expert interviews, photos from Malawi chicken industry
Day old chick
Feed
Growing
Processing
+
+
+
The whole process from day old chick to processing takes 42 days (6 weeks)
Source: expert interviews, photos from Malawi chicken industry
Both broilers and table egg layers need the same four ingredients in order to produce end product
Day old chick
Feed
Growing
Processing
+
+
+
The whole process from day old chick to processing takes 42 days (6 weeks)
Source: expert interviews, photos from Malawi chicken industry
Both broilers and table egg layers need the same four ingredients in order to produce end product
Day old chick
Feed
Growing
Processing
+
+
+
The whole process from day old chick to processing takes 42 days (6 weeks)
Source: expert interviews, photos from Malawi chicken industry
Both broilers and table egg layers need the same four ingredients in order to produce end product
Day old chicks require large scale and capital cost to produce …
Great Grandparents“Pure lines”
Day old chicks(sold for 13,000 mzm)
In USA or Europe
Grandparents(for $4 a chick)
Imported as day old chicks
Parents150 eggs
150 eggs
+
+
+
Source: expert interviews
And for feed, two main components are required Typical feed mix – note that we recommend the usage of a nutritional consultant to determine the optimal mix based on market price and breed
Feed 40% non-maize
5% groundnut cake
20% soya cake
5% fishmeal
5% sunflower cake
5% vitamins and others
60% maize
10% full fat
10% low fat
+
Most of the bulk components are available in Mozambique
+
+
Source: average of various costs, Malawi/Mozambique feed compositions
54% Feed
7% Growing costs9% Processing costs
Surprisingly, the biggest cost is feed ...Breakdown of actual costs for chicken producers in Mozambique (average), present
• Feed is the major cost in producing a chicken
30% Day Old Chick
Source: average of various costs at early 2005 market prices, Malawi/Mozambique feed compositions
30% Day Old Chick
• Feed is the major cost in producing a chicken
30% Day Old Chick
7% Growing costs9% Processing costs
Surprisingly, the biggest cost is feed ...Breakdown of actual costs for chicken producers in Mozambique (average), present
Source: average of various costs at early 2005 market prices, Malawi/Mozambique feed compositions
7% Growing costs9% Processing costs
11%: Feed: Maize component
43% Feed: Non-maize component
• Feed is the major cost in producing a chicken
• Most of the feed cost is not the maize component
30% Day Old Chick
Surprisingly, the biggest cost is feed ...Breakdown of actual costs for chicken producers in Mozambique (average), present
Source: average of various costs at early 2005 market prices, Malawi/Mozambique feed compositions
7% Growing costs9% Processing costs
11%: Feed: Maize component
43% Feed: Non-maize component
• Feed is the major cost in producing a chicken
• Most of the feed cost is not the maize component
Surprisingly, the biggest cost is feed ...Breakdown of actual costs for chicken producers in Mozambique (average), present
Source: average of various costs at early 2005 market prices, Malawi/Mozambique feed compositions
7% Growing costs9% Processing costs
11%: Feed: Maize component
43% Feed: Non-maize component
• Feed is the major cost in producing a chicken
• Most of the feed cost is not the maize component
• Most of the day old chick cost is feeding the parents
21% Chick: Feed component
9% Chick:other costs
Surprisingly, the biggest cost is feed ...Breakdown of actual costs for chicken producers in Mozambique (average), present
Source: average of various costs at early 2005 market prices, Malawi/Mozambique feed compositions
7% Growing costs9% Processing costs
11%: Feed: Maize component
43% Feed: Non-maize component
• Feed is the major cost in producing a chicken
• Most of the feed cost is not the maize component
• Most of the day old chick cost is feeding the parents
21% Chick: Feed component
9% Chick:other costs
The actual cost of a broiler is 74%
feed
Surprisingly, the biggest cost is feed ...Breakdown of actual costs for chicken producers in Mozambique (average), present
Source: average of various costs at early 2005 market prices, Malawi/Mozambique feed compositions
7% Growing costs9% Processing costs
11%: Feed: Maize component
43% Feed: Non-maize component
21% Chick: Feed component
9% Chick:other costs
Hence, in absolute terms, maize
represents 20% of total broiler cost and soya
cake 37%
Surprisingly, the biggest cost is feed ... and soy!Breakdown of actual costs for chicken producers in Mozambique (average), present
20%
37%
18%
25%
Maize
Soya cake
Other feed
All other processing
Total broiler cost
Source: average of various costs at early 2005 market prices, Malawi/Mozambique feed compositions
But how many chickens are in Mozambique, anyway?
How many chickens are consumed in Mozambique?
38 million
Source: This number was obtain using a judged average of numerous sources, including data on chicken consumption from the Ministry of Agriculture, interviews with importers and local producers, and triangulated with consumption per person data
And, considering most commercial activity comes from overseas, there is not as much local production as there should beChicken consumption, 2004
For every chicken grown commercially in Mozambique, two are imported
Composition of chickens consumed, by source
17 millionProduced in
village
21 millionProduced
commercially
Imported commercial
Local commercial
7 million
14 million
Composition of commercial chickensconsumed, by country of origin
Source: This number was obtain using a judged average of numerous sources, including data on chicken consumption from the Ministry of Agriculture, interviews with importers and local producers, and triangulated with consumption per person data
If we can increase the amount of local production, it will have a flow-on effect across five industries …
Feed
Hatchery
EGGSHatchery
CHICKEN EGGS
Feed
Fish meal & Vitamins
Oil MillCakeSoyaGroundnutSunflower
Maize
MORE CHICKENS
FROM LOCAL
SOURCES
Chicken industry
Hatcheries industry
Farming industry
Oilseed processing industry
Feed mills
Source: value chain analysis
… generating an integrated, self-sustaining and profitable industryIncreased raw materials, throughput and employment resulting from 1,000,000 broilers
• Feed: 4,200 T
• Cake 1,400 T
• Incubators: 4
• Sheds: 30
$2.2m investment**
1,500 ha* 9,000 People*
*Assumes commercial farming production with average commercial yields per crop. If small scale farming was stimulated, approximately twice the land and employment would result. **Assumes that all feed mills, soya extractors, sheds and oil presses would need to be built (ie no spare capacity at present)Source: capacity/throughput financial model
• Maize: 2500 T
• Soya: 1000 T
• Sunflower: 500 T
• Groundnut: 300 T
• Fish Meal: 200 T
Raw materials Land Factory throughput Employment
Even if commercial chicken consumption did NOT grow, replacing imports with local chickens would result in the creation of approximately 9,000 (jobs per million broilers
created) x 14 (million imports that could be replaced) = 126,000 permanent jobs that would be created – and we haven’t even considered the egg industry yet!
The cost of an (undiscounted) day old chick in Maputo is the equivalent of a frozen chicken in Brazil!
Source: team analysis with numerous operators, interviews and field experts
On cost prices – even with shipping included – no one in Mozambique even comes close with Brazil Cost price comparison of 1.0 kg dressed chicken, average inferred costs excluding tax, various cities
Chimoio(estimate)
Day old chick
Cost of feed,production
Shipping
5,00011,000
10,000
27,000
5,000
Sao Paulo, Brazil to Maputo
20,000
38,000
15,000
30,000
Maputo(average)
Nampula(estimate)
45,000+
12,000
30,000
42,000
We have calculated that, even at current crop prices for all inputs, a fully integrated efficient producer could produce at 27,407 mzm per broiler
Day old chick
Cost of feed,production
Shipping
5,00011,000
10,000
27,000
5,000
Sao Paulo, Brazil to Maputo
20,000
38,000
15,000
30,000
45,000+
12,000
30,000
42,000
8,197
19,210
Modeled cost price
27,407
… But the team have analysed that the cost price of a frozen chicken produced in Mozambique could approach, but not beat Brazil’s price …Cost price comparison of 1.0 kg dressed chicken, average inferred costs excluding tax and team financial model’s cost price using existing crop prices
Chimoio(estimate)
Maputo(actual)
Nampula(estimate)
Source: team analysis with numerous operators, interviews and field experts
… On wholesale prices, however, reducing costs to below 38,000 mzm allows local chickens to be sold over imports and profit to be madePrices offered to and accepted by wholesalers by producers, importers and traders, by major city
Brazilianin Maputo
38,000 39,50045,000
[Modeled cost price]
27,407
*Not many imported chickens are brought into Chimoio anymoreSource: team analysis with numerous operators, interviews and field experts; this evidence is heavily interview-based and so whilst great effort has been taken to cross-check data, accuracy is not guaranteed
Chimoio(estimate*)
Maputo(estimate)
Nampula(estimate)
40,000
2. Therefore, if a local chicken’s costs fall below 38,000 mzm, profit is possible3. Our model suggests that producing as low as 30,000 mzm per broiler is possible
1. Importers are not
willing to sell
imported Brazilian
chickens for less than
38,000 wholesale
Contents of this presentation
Introduction to the team (Jake)
An introduction to poultry and initial insights (Mariam)
What are we trying to achieve here? (John)
The global chicken market and a vision for Mozambique (John)
So, how exactly do you sell more chickens? (John)
Northern and Central Mozambique: Profiles and analysis (Rakesh)
Maputo and Southern Mozambique: Profiles and analysis (Neville)
Some key issues and recommendation one: the Development Group (Rakesh)
Recommendation two: Soya beans and USDA (Neville and Mariam)
Closing recommendations and discussion (John)
Stage One: In the beginning, each country made its own chickens
Source: interviews with poultry experts within Mozambique, Malawi, Brazil. Arrows are indicative only
Flows from poor nations
Flows from rich nations
Even today, the live market (particularly within poorer countries) endures
Stage Two: As shipping and transport became more and more sophisticated, chickens began to be exported: Generally originating from richer countries
Flows from poor nations
Flows from rich nations
Source: interviews with poultry experts within Mozambique, Malawi, Brazil. Arrows are indicative only
Stage Three: We have now reached the age of global exports and low cost production - the poor exporting to the rich Though the rich - the EU and USA - still are substantial exporters
Source: http://www.foodmarketexchange.com
Flows from poor nations
Flows from rich nations
Brazil (1st), Thailand (3rd) and China (5th) have joined the USA (2nd) and EU (4th) as major exporters – Brazil has grown 2-3x since 1999
Transitioning from the present to the future …Some of the major factors affecting the world market
1. Activism in the first world –particularly Europe – has increased
their costs of production
Source: interviews with poultry experts within Mozambique, Malawi, Brazil. Arrows are indicative only
2. Asian bird flu has caused the Asian market (particularly Thailand) to
materially decline …
Transitioning from the present to the future …Some of the major factors affecting the world market
Source: interviews with poultry experts within Mozambique, Malawi, Brazil. Arrows are indicative only
Transitioning from the present to the future … Some of the major factors affecting the world market
3. … along with causing difficulty across northern hemisphere markets – with migrating birds from Asian causing
trouble in Europe and beyond…
Source: interviews with poultry experts within Mozambique, Malawi, Brazil. Arrows are indicative only
4. … opening the gateway for the world’s newest low cost producer –
Brazil – to enter in, along with Argentina and others
Transitioning from the present to the future … Some of the major factors affecting the world market
Source: interviews with poultry experts within Mozambique, Malawi, Brazil. Arrows are indicative only
5. Tariff barriers – ranging from 0% to 249% - as well as non-tariff barriers(such as health regulations) still keep many low cost producers out of some
markets
Transitioning from the present to the future …Some of the major factors affecting the world market
Source: interviews with poultry experts within Mozambique, Malawi, Brazil. Arrows are indicative only, WTO tariff listings, by commodity
Finally, the endless trek towards “more revenue per chicken” continues to fuel the chicken parts marketComparison of consumption trends: whole vs. sum of parts
As chickens become more of commodity, and margins are squeezed, chicken producers will look to maximise revenue per kilo (or dollar of
input) – matched by increases in global incomes
… note a similar difference between South African and rest-of-southern-Africa markets!
Whole broiler
Wings, breast and whole leg
(aggregate)$1.10
$0.62
29%
22%
Percentage growth in exports, 2004 Available price per chicken, USD
Source: prices from US spot prices, 2004; growth in exports from overall Brazilian export data (ABEF annual report 2004)
Transitioning from the present to the future … Some of the major factors affecting the world market
All these pressures – along with a continued demand for chickens – has led to wild fluctuations in chicken prices over
the past few years
“the price for some chicken parts has jumped by 50-100% in this year alone … we
can’t keep up with demand … I have no idea what will happen next!”
- Brazilian exporter (who would only offer me a spot price!)
Source: interviews with poultry experts within Mozambique, Malawi, Brazil. Arrows are indicative only
Great, but what about Mozambique?How 14 million imported chickens arrive in Mozambique each year …
Source: This information has been deduced from speaking to exporters in Brazil and some importers from Mozambique. However, accurate percentages of imports that follow this route to Mozambique are not available –hence these inferences should be treated with caution
1. Brazil produces containers of 900g -1.4kg whole broilers for the Middle
Eastern marketNote: very little - if any - will come
direct to sub-Saharan Africa
Great, but what about Mozambique?How 14 million imported chickens arrive in Mozambique each year …
2. They are purchased by traders in the Middle East (who export 750 million
tons from Brazil each year alone!) who sort them into large freezer containers of
900g, 1.0kg, 1.1kg. 1.2kg, 1.3kg and 1.4kg and distribute them across this
lucrative market
Source: This information has been deduced from speaking to exporters in Brazil and some importers from Mozambique. However, accurate percentages of imports that follow this route to Mozambique are not available –hence these inferences should be treated with caution
Great, but what about Mozambique?How 14 million imported chickens arrive in Mozambique each year …
3. If these are not purchased within an acceptable timeframe (between 3
months and 1 year*), the traders will look to ship (‘dump’) the 1.0 and 1.1 kg
broilers to sub-Saharan Africa via Durban port - the only other major
market for such broilers, and one which lacks rigorous quality standards
• Durban
*anecdotal evidence onlySource: This information has been deduced from speaking to exporters in Brazil and some importers from Mozambique. However, accurate percentages of imports that follow this route to Mozambique are not available –hence these inferences should be treated with caution
Great, but what about Mozambique?How 14 million imported chickens arrive in Mozambique each year …
4. From Durban, traders will identify suitable ports that will purchase
containers of frozen 1.0 and 1.1kg broilers – and, due to our price
sensitivity – Mozambique’s Nacala and Maputo ports are 2 of the
destinations
• Maputo• Nacala
Source: This information has been deduced from speaking to exporters in Brazil and some importers from Mozambique. However, accurate percentages of imports that follow this route to Mozambique are not available –hence these inferences should be treated with caution
Will it always be this way?What stage four might - will! - look like
Source: expert interviews and team analysis, overall
• Maputo• Nacala
1. Richer countries will
continue to struggle against the cheap
imports …
2. Asia’s growth will continue to be
hampered by Asian bird flu, causing
reliability and price problems
3. Brazil will continue to dominate but, as it attempts to earn more per broiler,
will target richer markets - with Argentina, Ukraine and other emerging
markets taking its place …
4. And non-South African sub-Saharan Africa will continue to get the
leftovers!
We are in a unique window of opportunity: where being unattractive is our best advantage! Key conclusions from preceding analysis
1. There will always be a live market. Lack of electricity, poor roads, and the desire for fresh chickens will maintain this in Africa and its developing countries for some time.
2. As prices and quantities remain unpredictable, the local market will always have some window to succeed, but …
3. As none of the world’s exporters are focused on sub-Saharan Africa – not even South Africa (they have their own undersupplied lucrative parts market!) – there is an opportunity for an African country to become the low cost high quality leader in chickens.
Australia
China
Mozambique 46%
0%
58%
Whilst other sub-Saharan African countries (such as Malawi!) may have a headstart, the current times of wealth and great fluctuations mean that
Mozambique has an opportunity to win in this market!Source: team analysis, live market data from interviews with expert, various internet sources
We have a three stage plan to be the best …Timeline for the Development Group’s implementation
The mediocre presentImport beaters: taking back our own market
Africa-beaters: exporting to other SADC countries
Local share 33% 50%+ 75-80%
Exports None A small amount, testing the waters
The chickens of choice in sub-Saharan Africa – a one billion broiler per year market*
Phase
Being the best means selling more Mozambican chickens both in the country and in export markets – and more jobs and higher standards of living for
Mozambicans!
Focus Survival. Trying to not be killed off by Brazilian import pressure
Cost and quality. Trying to differentiate local product from overseas imports.
New markets. Taking the best quality over the border within SADC.
*Note: approximately half of these are “village chickens” and hence will not affect commercial market; population information from UN
Contents of this presentation
Introduction to the team (Jake)
An introduction to poultry and initial insights (Mariam)
What are we trying to achieve here? (John)
The global chicken market and a vision for Mozambique (John)
So, how exactly do you sell more chickens? (John)
Northern and Central Mozambique: Profiles and analysis (Rakesh)
Maputo and Southern Mozambique: Profiles and analysis (Neville)
Some key issues and recommendation one: the Development Group (Rakesh)
Recommendation two: Soya beans and USDA (Neville and Mariam)
Closing recommendations and discussion (John)
There are four basic ways to increase the number of local chickens that are sold
Selling morelocally
produced chickens
Increased marketsreached
Increased market share
relative to imports
More chickens consumed per
existing customer
Greater number of customers
reached
Higher perceived
quality relative to imports
Lower price/costrelative to imports
x
or
or
8. Promotions of chickens relative to other sources of protein – eg beef
7. Access to new markets – both export and domestic
4. Animal health regulations resulting in greater confidence and no health disasters
5. Common domestic branding6. Positive public relations about
domestic chicken, negative publicity about imports
1. Government legislation requiring higher quality from imports (and locals)
2. Promoting competition by removing barriers to entry/exit
3. Facilitating learning from “World’s best” producers
Key levers to increase local production Particular actions that can be taken
ling morelocally produced chickens
Increased marketsreached
d market sharerelative to imports
More chickens consumedper existing customer
Greater number of customers reached
perceived qualityrelative to imports
ice/cost relative to imports
x
or
or
Source: Interviews with Brazilian experts, particularly EMBRAPA, team analysis
The most powerful lever is reducing costs: Broilers have 5 areas where cost can be reduced
7% Growing costs9% Processing costs
11%: Feed: Maize component
43% Feed: Non-maize component
21% Chick: Feed component
9% Chick:other costs
Composition: broiler cost (from previous)
20%
37%
18%
25%
1. Maize
2. Soya cake
3. Other feed elements
4. All other processing (both broiler and chick)
Total broiler cost
?5. Advantage from charging tariffs, transport of imports
Opportunities to improve cost of local broilers relative to imports. • Maize. Sourcing maize next to feed mill. Large scale Maize production.• Soya cake. Developing appropriate soya bean seed. Proximity of production next to mill.• Other feed elements. Buying these (vitamins, etc) in bulk improves margins.• All other processing. Appropriate scale and expertise reduces processing costs per unit.• Making imports costlier. Apart from the transport cost, quality standards raise their price.
ing morel
ocall
y produced chi
ckens
Increased marketsreached
arket sharerelative to imports
More chickens consumedper existing customer
Greater number of customers reached
rceived qualityrelative to imports
e/costrelative to imports
x
or
or
Much of Brazil’s cost advantage has come through appropriateness of sizeWould this be possible in Mozambique?
Brazil has a “super hub” – with 80% of chicken operations with 1000km of the hatcheries
Hubs have evolved because each part ofthe value chain has an optimal size:•Hatcheries are very large (1 per state)•Abattoirs/feed mills are large (1 per town)•Commercial farms are big (few in town)•Surrounded by small chicken growers (one family looks after one shed)
The lesson from Brazil is that some agricultural functions are best done by small scale, and some by commercial scale – but rarely both!
ing morel
ocall
y produced chi
ckens
Increased marketsreached
arket sharerelative to imports
More chickens consumedper existing customer
Greater number of customers reached
rceived qualityrelative to imports
e/costrelative to imports
x
or
or
Hatchery (20m + chicks pa)Hub (feed mill, abattoir)Super-hubSuper-hub 2 (under construction)
Source: interviews with experts, Brazil
Perceived quality relative to imports is a small-but-important lever
Acceptable trader’s price for local chicken
38,000
40,000
How much would a trader be willing to pay for a frozen chicken, mzm, wholesale prices
Quotes from Mozambicans about broilers …“Local chicken tastes so much better. You can really tell the difference!”
“Imported chickens are terrible! Yuk!”
Actual trader’s price for imported chicken
‘Quality advantage’
Despite all Mozambicans we spoke to clearly preferring local chicken, they were not willing to pay more than 1,500-3,000 mzm for it – and neither were the traders we spoke to!
However, there are some pivotal steps an industry can take increase this value:• Creating a common “Mozambican made” brand• Animal health and quality standards
• Positive publicity about local chickens• Negative publicity on imports
li
ng morel
ocall
y produced chi
ckens
Increased marketsreached
d market sharerelative to imports
More chickens consumedper existing customer
Greater number of customers reached
perceived qualityrelative to imports
ice/costrelative to imports
x
or
or
Source: interviews with various Mozambican consumers, importers/traders
In Mozambique, apart from farmers, there are quite a few integrated players in a crowded marketplace
Day old chick Feed Growing Processing+ ++
CIM
HIGEST
UGC
Abilio Antunes
Public abattoir2,000 small scale
Xavier da Barca
Mobeira, Beira Some small scale
Sout
hC
entr
al
Andrew Cunningham Some small scale
Alex Stewart (Charles Stewart/Hyline) Gary SteinNor
th
Source: interviews with each of these companies/individuals listed on this page
Increasing the number of chickens consumed per person is mostly a function of incomeChickens consumed relative to income
lling morelocally produced chickens
Increased marketsreached
d market sharerelative to imports
More chickens consumedper existing customer
Greater number of customers reached
perceived qualityrelative to imports
ice/costrelative to imports
x
or
or
Number of chickens eaten
Income USD per year
0
5
10
15
20
25
Poorest 2ndpoorest
Median 2nd richest
Richest
Income bracket (quintile of 1.2 billion)
Chickens consumed per year (1 kg)
0
5,000
10,000
15,000
20,000
25,000
30,000
Income (USD) per year • As people get richer,
they consume more and more chickens
• In chicken producers like Brazil (and one day, Mozambique) there is a multiplier effect – if incomes rise because of chicken-related industry, more chickens are eaten per person
• Brazil’s population consume over 30 kg of chickens per person per year!
Source: various internet sources – www.fte.org, www.aviagen.com, triangulated with Mozambican information
Contents of this presentation
Introduction to the team (Jake)
An introduction to poultry and initial insights (Mariam)
What are we trying to achieve here? (John)
The global chicken market and a vision for Mozambique (John)
So, how exactly do you sell more chickens? (John)
Northern and Central Mozambique: Profiles and analysis (Rakesh)
Maputo and Southern Mozambique: Profiles and analysis (Neville)
Some key issues and recommendation one: the Development Group (Rakesh)
Recommendation two: Soya beans and USDA (Neville and Mariam)
Closing recommendations and discussion (John)
… and he has beaten the imports!
Abilio’s best price
Imported broiler
39,500
Wholesale prices in Chimoio, 2004, mzm:
Due to the quality advantage, traders have stopped buying from imports and
(reportedly) solely from Abilio
38,000
Abilio Antunes is the best example in Mozambique of how a vertically integrated producer can beat the importsOutside-in analysis of Abilio Antunes’ cost competitiveness
Farmers located in
Manica province
Hatcheries (100,000 chicks
per week capacity)
Chicken growing (2.5m
per year broilers
capacity) and egg laying
Chicken processing and sales
Abilio is fully vertically integrated
Feed mill (under
construction)
Sources: interviews with experts in Chimoio region, Abilio Antunes
Nampula, however, is a good example of how vertical integration and the creation of a hub has led to greater competitivenessCase study of Alex and Gary from Nampula - estimated prices only
1. Gary produced chickens and cooked them
Chicken growing and processing
Inputs (from Maputo and South Africa)
Cooked chicken retailing
2. Alex started a hatchery and feed mill nearby
3. They have continued to work together since
Cost of day old
chick
Cost of 50kg feed
360,000
15,000
400,000
12,000
Pre vs. post-AlexBefore
After
Non-integrated
Integrated
Gary’s original structure
Net savings per broiler:
• 3,000 mzm on chick (cost)
• 7,000 mzm on feed (cost)
• Able to drop wholesale and retail price by 5,000 mzm and increase profits
• Greater reliability of supply
Note: this analysis is with publicly available information
Source: team analysis, speaking to chicken industry experts in Nampula
Yet there is no inherent economic reason for Maputo chicken producers to be losing money
Whilst Maputo does pay more for crops …
Recorded Maize prices, white, at various cities (spot price 2005); ton/mzm
… It is located closer to South Africa – meaning that non-maize components of feed –as well as vitamins, minerals – and processing costs – should be cheaper in Maputo
than the other centres.
2,500
4,000
2,600
Maputo
Nampula
Chimoio
So why are all the Maputo producers – large scale and small – losing money?
Source: publicly available spot prices, early 2005
We have concluded that the problem in Maputo has been the price and quantity shocks from the influx of imports
1. Before Brazilian imports just a few years ago, Maputo chicken producers were doing okay - running at a smooth cycle at the rate of customer demand
2. When the imports came in, the chicken producers (both small and large) suffered shocks“They were selling for less than my costs of inputs alone!” – Small scale producer
“A new shipment would come, and then for weeks … where we would not sell many chickens at all!” – Large processor
3. But the flow-on effects were lethal – affecting all the parts of the chain – and reversing any profitability that any of the parts had …
Hatchery Feed mill Chicken producers Customers
Owned by large company (eg UGC, CIM)Both large and small scale productionCustomers
Hatchery Feed mill Chicken producers
“I have 1000s of chicks no one buys”
“My storage is full and rotting”
“I can’t afford to pay for those inputs”
Customers
“Sorry, I won’t buy from you today”
Is it any wonder that they are struggling?
Source: adapted/shortened quotes from Maputo interviews
The problems with Maputo thus reveal three interesting things about the poultry industry
1. In these cases, the scale, market size and proximity to ports of Maputo has actually worked against the local producer.
• Therefore, it is sad but quite possible that at least one of the Maputo producers – and a number of small scalers – will leave the industry over the next 24 months due to ongoing losses in an already tight market
2. For chickens, vertical integration is a must– you are dependent on your customers and suppliers whether you realise it or not! Therefore it is wise to develop close relationships with your chain
3. However, there is no reason why a flexible, vertically integrated competitor cannot compete on price
Therefore, we need to work out ways for industry players to become more price and cost competitive, as well as flexible and able-to-respond to
changes in the environment
Contents of this presentation
Introduction to the team (Jake)
An introduction to poultry and initial insights (Mariam)
What are we trying to achieve here? (John)
The global chicken market and a vision for Mozambique (John)
So, how exactly do you sell more chickens? (John)
Northern and Central Mozambique: Profiles and analysis (Rakesh)
Maputo and Southern Mozambique: Profiles and analysis (Neville)
Some key issues and recommendation one: the Development Group (Rakesh/John)
Recommendation two: Soya beans and USDA (Neville and Mariam)
Closing recommendations and discussion (John)
Now that we know how important the poultry industry is– and we understand some of the problems – we would like to test three recommendations with youThe situation:
Poultry production could be a major source of employment for Mozambicans across a number of different industries – and a unique window of opportunity exists to help enable this
market to grow that we should take advantage of
The challenge:
It is hard for Mozambican chickens to compete on price with Brazilian imports – and the industry lacks meaningful competition across the country. Furthermore, Maputo’s chicken
industry is not progressing well
Our recommendations: Stimulate the enabling environment for poultry in Mozambique by …
1. Initiate the formation of an Development Group of companies across the value chain
2. Pursue subsidized soya beans as part of a USDA proposal
3. Pursue small scale-commercial outgrower partnerships as part of the work of Emprenda
Situation: A few actions – most of which required co-operation from all chicken producers – prepared Brazil for its growth
Selling morelocally
produced chickens
Increased marketsreached
Increased market share
relative to imports
More chickens consumed per
existing customer
Greater number of customers
reached
Higher perceived
quality relative to imports
Lower price/costrelative to imports
x
or
or
5. Penetration through increased competition
3. Animal health regulations
4. Branding, marketing and public relations
1. Government legislation requiring higher quality
2. Promoting competition
Key levers to increase local production Based on regions – change required
Source: ideas adapted from Brazil
Complication: The changes required never happen because it takes everybody – competitors! – to co-operate
Why doesn’t anything happen?1. No one company has even a large
minority share of total consumption
2. It is very difficult to compete and co-operate at the same time
What needs to happen is …From single broken stick …
… To a strong pile of sticks!
In the areas where co-operation will result in industry growth, a
mechanism for all players to work together must be found
Source: team analysis, interviews with all commercial producers, previous data
CIM Gary SteinUGC
HIGEST
Other small
Abilio Antunes
commercial imports
Village/microproducers
Recommendation: To get all producers to work together in areas of common interest yet remain competitive, start an industry development group of all large players in the value chain
Overview of the industry development group
• Initially funded by donors (Industry Development Group to pay for itself after 12 months)
• Acting in the interests of all producers – both present and future
• Not interfering in any intra-industry competitive issues – for example, discovering or disclosing market secrets, prices and quantities of competitors
Major benefits:
• Lower costs and prices through increased competition, import legislation (via communication with government) and knowledge
• Higher quality through better animal health standards
• Higher perceived qualitythrough branding, positive local publicity and negative publicity about imports
• Greater penetration of marketsthrough identification of new consumers of Mozambican chicken
The Industry Development Group will require a charismatic leader -and be significantly different from other client-serving agencies
Structure of the industry development group: Emprenda staff
Source: team analysis
Wall –
no formal reporting
Executive secretary(full time or part time)
• Understands (and meets with) industry players and
their issues
• Networks with key enablers, donors and government
Needs: Charismatic, good networked, industry visionary
Co-ordinator(full time)
• Understands industry developments and supports players
• Supports president and makes communications
• Needs: Analytical and expression skills, well-
organised
eg TNS Consultant(may be more than one)
• Helps specific poultry clients achieve financial
or operational gains
• Agrees to not disclosing any sensitive data
• Needs: Strong analytical and presentation skills,
subject expertise
Contents of this presentation
Introduction to the team (Jake)
An introduction to poultry and initial insights (Mariam)
What are we trying to achieve here? (John)
The global chicken market and a vision for Mozambique (John)
So, how exactly do you sell more chickens? (John)
Northern and Central Mozambique: Profiles and analysis (Rakesh)
Maputo and Southern Mozambique: Profiles and analysis (Neville)
Some key issues and recommendation one: the Development Group (Rakesh)
Recommendation two: Soya beans and USDA (Neville and Mariam)
Recommendation three and discussion (John)
Many believe that Brazil – the world’s low cost producer of chicken –does everything big. Almost …
Most effective size/scale Why
HatcheriesEnormous. One hatchery would serve up to 1000 km away.
Maintain high quality and automated process; economies of scale.
Pack houses(abattoirs)
Very large. Only 1 in every large town.
Economies of scale are greatest – particularly for flow operations and refrigeration
Feed millsLarge. Only 1-2 in each livestock producing town.
Good size to have relationships with a few commercial farmers to supply maize and soya
Chicken raising
Small. Sufficient for one family to look after with minimal financing
Small enough that a single family can look after 10,000 broilers in one shed; avoids taxation and risk issues
Commercial farms
Sizeable. Only 5-10 in each farming suburb. Average size 2500 hectares. Very few small.
Large enough to profitably use commercial machinery.
decreasing size
Not everything is big in Brazil – in fact, the broiler explosion was “on the back of” small scale chicken raisers
Source: team analysis, interviews with over 10 Brazilian experts on “the reason for your success”, quote from Brazil export group leader
“But small scale chicken contract growing couldn’t work in Africa?”… Really?
Andrew Cunningham, of New Horizons Mozambique LDA, has implemented such a programme in two other sub-Saharan African countries, and has just started here
Houses made of local mud and
equipment at 10-20% of normal
shed cost
Instead of feeding buckets imported from South Africa,
local recycled materials are used
Source: Andrew Cunningham
“But small scale chicken contract growing couldn’t work in Africa?”… Really?
Leftover packaging and bagging used for brooding and rearing seasons
Only the tin roof needs to be
imported – and that can be recycled
Basic lighting used through a
suspended piece of wire
Source: Andrew Cunningham
Andrew Cunningham, of New Horizons Mozambique LDA, has implemented such a programme in two other sub-Saharan African countries, and has just started here
“But small scale chicken contract growing couldn’t work in Africa?”… Really?
Extension agent coming to support growers and check qualifying weight
Most members of the family involved in the creation of
profit …
… the layer modeling I was
shown $1000+ profit per year to the family sector
Source: Andrew Cunningham, approximate and conservative numbers only
Andrew Cunningham, of New Horizons Mozambique LDA, has implemented such a programme in two other sub-Saharan African countries, and has just started here
“But small scale chicken contract growing couldn’t work in Africa?”… Really?
Heating facilities are built in – as a chimney – to the inexpensive mud brick premises
Source: Andrew Cunningham
Andrew Cunningham, of New Horizons Mozambique LDA, has implemented such a programme in two other sub-Saharan African countries, and has just started here
“But small scale chicken contract growing couldn’t work in Africa?”… Really?
The construction was basic but still yielded results – mortality
rates were only 2-3% higher than their professional, expensive
counterparts …
Profit to family over 72 weeks equals
five times the starting cost of
housing
Source: Andrew Cunningham, numbers approximate only – and will need to be confirmed for Mozambican market
Andrew Cunningham, of New Horizons Mozambique LDA, has implemented such a programme in two other sub-Saharan African countries, and has just started here
“But I’ve tried and seen thousands of small scale farming schemes fail … isn’t this the same?”
What is different about chickens
Evaluation is fair - chicken growth from day one is predictable and can be checked
One family will require one shed, rather than one hectare - saving visit time
Cash received within 42 days - and the cash flow to producer soon after on sale
Fairer payment mechanisms that reward compliance (eg feed conversion, feathers)
Small scaler doesn’t technically own the chickens, so such activities fall to producer
As long as weather conditions are suitable in the area, chickens are fairly safe
Why small scale schemes struggle
Difficulty in monitoring progress (hence detecting error or stealing).
Distances between farms making extension visits difficult.
4-7 month lag between cash loan and revenue received for farming (cash flow).
Reward (payment) mechanism is very late and blunt - judging on weight/quality of crops.
Difficulty in small scaler organising/paying for any value added activities eg cleaning
Heavily dependent on rainfall/irrigation.
Of course, this cannot be done without a client. So, what this recommendation is about Emprenda and other integrators actively seeking out profit-seeking companies
and financiers to assist in the micro-loans.Source: team analysis and numerous interviews with NGOs conducting small scale farming schemes
Presentation to poultry supporters and enablers
Tuesday, 24 May 2005
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