Covid-19 Watch

Overcoming the fear of the COVID-19 as a threat to smallholder business sales

The recent outbreak of the epidemic Corona virus disease ‘COVID-19” brought fear, not only to the sector of agriculture, but to the entire economy not only of South Africa but the whole world. After the announcement of the first lockdown by President Ramaphosa on the 23rd March 2020, it became a thought of dead end to many smallholder farmers who were in production and were ready to supply the market. However, MC Chicken Poultry Pty Ltd proved to survive the threat of business shutdown as a result of Covid-19 outbreak in South Africa.  MC Chicken Poultry business is a newly established business within the poultry industry with less than two years of operation. This means that Charles Darwin got it write in his theory of evolution is arguing that “species that survive are not the strongest nor the weakest but the most adaptable ones”. This piece is put together to show that it is not doom and gloom. A poultry farm with limited to resources such as land, biosecurity and farming infrastructure can still survive this pandemic.   

Current status of MC Chicken Poultry Pty Ltd 
MC Chicken Poultry farm is a land resource limited, operating at a hectare of communal land in Hammanskraal area. With two poultry houses, the farm has a caring capacity of approximately 3 000 birds/house. Noteworthy, is that only one of the two houses is presently used due to limited capital. This business is 75% women owned from its four Directors. As if that is not enough, 75% Directors fall under the youth category – providing employment to two (2) permanent workers and six (6) temporary workers. One of the Directors is a graduate of Buhle Academy and has experience in domestic chicken production.  

On March 2020, the farm had approximately 2670 broiler chickens ready for sales. One Director explained their fears after the President announced the 1st lockdown. She highlighted that they never thought they will be able to trade their stocks at the current situation. However, the pricing model has assisted them to sell all the stock within two weeks. The interesting question is “did MC Chicken make profit setting the price below the market price?” A follow up question could be “did they manage to cover their production cost? The Director indicated that it was important for them to make sure that the chickens were sold, otherwise they ran the risk of incurring more costs feeding the chickens or experiencing higher mortality as the chickens grow beyond the intended catching time. She emphasised the fact that they had to significantly reduce their prices in order to sell the chickens. She highlighted that at a stock price of R40/chicken, 45% of their chicken were bought by a local butchery (26%) and broiler broker company (19%); 42% of the chickens were sold to local re-sellers such as hawkers who sell back to consumers and the 13% of chickens were sold to local consumers for direct consumption. 

Economic bulleting 
From my view point perspective, the following could be lessons to other smallholder farmers  

  • The MC Chicken has spent about R35 (usually R33 if there is no delay on sales of chickens) cost of production per chicken, which gives the total cost of production of approximately R106 000 for 3 000 chickens.  At the end of the cycle, 89% of the production was sold and 11% mortality (2.7% production mortality and 8.3% mortality as a result of employees’ absence to provide water to the chickens).
  • MC Chicken total revenue was R116 750 (19% from the brokers; 26% from the local butcher, 42% from the local re-sellers and 13% from the local consumers. 
  • Mc Chicken managed to cover their cost of production but they were far from meeting their profit target.

Bottleneck holding the company back

  • Electricity – they currently do not have on-farm electricity and it requires approximately R20 000;  
  • Land size is very limiting – if they can be granted with another space of land for expansion and will require capital investment power; 
  • Access to formal markets (i.e. Off take agreements); and 
  • Inconsistent of demand in informal markets.  

Concluding remarks
There is no doubt that smallholder projects like of MC Chicken would have done better in the absence of the COVID-19 outbreak. It can be concluded that, MC Chicken has done better in their price marketing strategy and they can generate more income in the near future, if they are to sell their stocks at normal average prices at minimum of R55 at stock price and maximum price of R75 to individual consumers. If more funds available, MC Chicken will be able to utilise both houses for production. 

Article by: By Elekanyani Nekhavhambe, Agricultural Economist.

Disclaimer: The views and opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of Mzansi Agriculture Talk or its members.

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