Dennise Williams, Staff Reporter
LEVY
THE PRICE of chicken is proving tough for some consumers to chew on, so why then is the share price of Jamaica Broilers Group (JBG) floundering? From a 52 week high of $6.50, the share was trading at $2.93 yesterday.
Head of stockbroking at Dehring, Bunting and Golding, Vernon James, explained that the drop in share price could be attributed to investor paranoia. "People have fears about bird flu and the impact on JBG."
Another analyst who requested anonymity agreed. "The fear of avian flu is the only reasonable explanation for the rapid price drop."
Christopher Levy, vice-president of poultry operations, said there is really nothing to fear. "First, you cannot get bird flu from cooked poultry. Let me say that avian flu has been around for decades. What is new is the potential threat to humans. However, avian flu has not been discovered in Jamaica or even in this hemisphere. And where it has been found in Asia, it has not destroyed the poultry industry. So, there is a lot of paranoia in Jamaica about something that may not even happen."
However, his company is preparing for any eventuality.
"We are taking steps to deal with this issue. We will be embarking on an education programme for farmers. And we are working with the veterinary division of the Ministry of Agriculture and other interest groups in Jamaica to deal with this issue."
But that is not the only potential JBG difficulty. The poultry industry benefits from a 40 to 280 per cent duty on imported chicken.
According to Mr. James, "There is the fear that Government might remove the protection from the local poultry industry in an attempt to reduce inflation. Since food is very heavily weighted in the calculation of inflation, if the duty on chicken imports is removed, then imported chicken would force down the price of chicken in general."
Mr. Levy agrees that would be a problem for his company, but believes the Government "is taking a long term view." He says, "Inflation is across the board. So why not allow imported bread? Why not just wipe out every local industry? That doesn't make sense. We meet with the Government and the poultry importers every week to discuss issues; and it has not been communicated to me that the Government intends to lower the duty."
That said, Mr. Levy sees the current price movement of JBG as a "great buying opportunity."
The analysts have a more cautious outlook.
Mr. James says, "The fears of bird flu are premature. The removal of duty is a remote possibility. But given the fact that Hurricane Ivan disrupted business in 2004, it is anticipated that the next results should show improvement this year. So I would say to investors to take a careful approach."
The other analyst said, "JBG didn't lose any birds during this rainy season. Everything is in shape over there. They have three different types of insurance including business interruption. They are not only dependent on poultry; they also have a growing fish division plus the Content Beef line.
Additionally, they have state-of-the-art 'funnel houses' for the birds. And that is what minimises their risks. The worst case scenario is that the small farmers who don't have funnel houses could be exposed to risks. But that is easily quarantined."
