South African poultry producer Astral has to cut jobs, it said on Wednesday, under pressure from high feed prices due to drought and from an over-supplied domestic market.
Maize prices in South Africa have hit record highs as an El Nino triggers the largest rainfall shortages in over a century, while cheap chicken imports flood in with the ending of punitive duties on U.S. chicken imports in 2015.
The company employs about 13,000 people across operations in South Africa, Zambia, Mozambique and Swaziland, with a combined processing capacity of nearly 5 million broiler chickens a week.
Astral said it had implemented an import strategy to hedge against maize shortages and high prices, but if conditions did not improve it would have to consider further cuts to production and jobs.
Analysts said production cuts were likely to be accompanied by mergers and acquisitions as companies across the food sector scramble to offset falling revenues.
“A lot of producers are suffering under current conditions and a lot them will be forced to become very, very competitive,” said Global Trader equities analyst Paul Chakaduka.
Shares in Astral slipped more than 4 percent on Wednesday after the firm delivered its operational update.
It said the impact of rising feed costs, record poultry imports and a weak consumer market was more severe than it had originally anticipated.
“The impact of the planned production cutbacks will unfortunately negatively impact on the labour force due to the reduction in hours to be worked,” Astral said.
The South African Government expects the 2016 maize harvest to come in 28 percent lower at 7.16 million tonnes, with an improved harvest only in 2017 with a return of more rainfall.