Publication: Sunday Sun
Paper Page: 22A
Paper Date: Sun, Nov 22, 1998
Byline: Terry Ally and Jennifer Blackman
BY THE time the imported whole chicken lands in Barbados having paid
freighting and insurance charges along with all the taxes and duties, it is
still one-third cheaper than locally produced birds.
The CIF (cost, insurance, and freight) is US$0.84 per pound for whole
chicken, boneless breast is $2.20 per pound, whole wings $0.89 per pound, bulk
leg quarters $0.37 per pound. Local charges are a one-per cent environmental
levy, a three-per cent cess payable to the Barbados Agricultural Society on all
chicken imports, and a 15 per cent import duty.
It raises the question of whether local farmers were not taking consumers for
a ride.
While it is appreciated that local cost would be higher than imported cost
because of economies of scale, how does the consumer know that the local price
is not excessively high considering that all aspects of the industry is
controlled by a few companies?
The man who is considered to be the mastermind of the present structure of
the chicken industry, Peter Defreitas, declined an interview with this
newspaper. He is the chairman of Chickmont Foods and he referred us to either
his general manager, Edward Albecker, or president of the Barbados Egg and
Poultry Producers' Association, Carlyle Brathwaite.
Albecker declined a formal interview and Brathwaite has not returned our
numerous telephone calls. The issues which these officials would have been asked
to address are as follows:
Overheads
Farmers say that feed is about 70 per cent the total input to produce a chicken.
That chicken takes about 49 days to grow, and eats during that period between
2.0 to 2.2 kilogrammes of feed which the contract grower buys from the processor
at $0.8667 per kilogramme for starter and $0.8279 per kilogramme for finisher.
The price of feed on the world market has been steadily declining, yet the
association says chicken prices will be increased come next year. In 1996, it
was 89 cents per kilogramme, in 1997 it was 86 cents per kilogramme, up to June
this year it was 77 cents per kilogramme and it continued to fall in the last
half of this year.
Control
Given that the two feed manufacturers own the two major processors which control
more than 60 per cent of the market, what mechanisms are in place to ensure that
the consumer is getting the best price possible and not being overcharged?
Knowledgeable industry sources said that when Defreitas entered into an
agreement with Roberts Manufacturing to purchase into the financially ailing
Montrose Poultry Farms, there was a provision that Chickmont (which was formed
out of Montrose and National Foods Limited, another of Defreitas' companies),
would receive a percentage commission on all the feed sold to Montrose's
contract farmers. Just how much is that commission, who gets it and to what
extent does it contribute to the final cost that consumers pay for chicken?
Large farmers
Chickmont, the largest processor in Barbados, also employs the largest number of
contract growers. They do not grow chicken themselves, as in the case of Super
Poultry, but contract this aspect of the business to individuals. The company
supplies the farmer with the chicks, the feed, and the medicine. This is
advanced to the farmer and deducted at the end of the growing period from the
cost of the birds sold to the processor. Growing chicken is a volatile business
and depends on climatic conditions. In a good year the farmers make a net profit
of more than 88 cents per bird which is the break-even price, but in 1997 the
farmers incurred significant losses because of a high death rate from the El Niņo-induced
heat wave. The largest contract farmer in Barbados is said to be Defreitas
himself who grows approximately 40 000 birds. The next largest contract farmer
is Albecker, his general manager, who has pens with between 24 000 to 26 000
birds.
"Between 1991 and 1994 when there was the economic problems and a
reduction in chicken output, Defreitas cut back our (contract growers) to 50 per
cent capacity but filled his own pens to 110 per cent and that caused a big row
(within the industry)," said one high-level industry source.
He explained that the industry standard was one bird per one square foot of
pen space but Defreitas exceeded that. Is this a conflict of interest for
Defreitas and Albecker to be buying from themselves? How do we know that the
rate is the same as for other contract farmers and to what extent is this
transaction contributing to the final price which consumers pay for chicken?
Exports
The price of locally produced chicken comes into sharp focus and question in
light of extraordinary cheap exports to neighbouring islands. For example,
export figures show that in 1996 the local industry exported fresh chilled parts
to Caribbean for $10.32 per kilogramme (this includes the cost of insurance and
shipping charges) and frozen parts for $9.98. In 1997, frozen wings were
exported at 64 cents per kilogramme, frozen parts for $1.42 per kilogramme and
fresh chilled parts for $9.59 per kilogramme. Up to June this year, fresh
chilled parts were exported at $11.85 per kilogramme and frozen cuts at $11.16
per kilogramme. Why are exports so cheap when Barbadians have to pay $13.99 per
kilogramme for breast and $5.36 per kilogramme for local wings? These are the
only parts available locally.
Is it time that the industry players explain to Barbadians why the cost of
locally produced chicken is so high and why Government should not open the
market?
An industry official did reveal to the Sunday Sun that out of the processors'
wholesale price, the processor, the feed mill, the farmer and the hatcher all
have to make their profit. The official argued that with so many sharing a small
profit margin, consumers should be questioning the prices of the retailers,
especially the fast food restaurateurs, because their prices are high and the
profits only go to one person.
While Government continues to protect producers through a licensing system,
is Government turning a blind eye to the rights of consumers?
The power of consumerism lies in buying from an alternative seller but in
Barbados there is no alternative. According to Brathwaite in a CBC Radio
interview yesterday, the producers sell their chicken for $6.59 wholesale and
consumers can shop around to get the best retail price.