Research and Strategy Analyst at Sagicor Investment, Jodian Aris, is warning that Jamaicans may see several increases in the price of chicken in 2022. 

Jamaica Broilers Group recently announced a 10 percent price increase in its chicken prices, which is expected to come into effect by the end of January. 

Speaking on Taking Stock with Kalilah Reynolds, Aris said the price increase was unavoidable as the company contends with rising inflation.

“One of the things that [Jamaica] Broilers has been doing, even though they raised prices in 2021 and they’re going again in 2022, is that they have been trying as much as possible not to pass on all these input costs to consumers,” she said. 

However, she noted that those measures would have affected the company’s profitability.

“So when it is that we look at margins, we note that those would have been falling just on the mere fact that they have not been passing on these costs to consumers,” she added. 

In its second-quarter results up to October 2021, Jamaica Broilers reported that its gross margins had fallen from 24 percent to 20 percent as a result of increased input costs. 

The company said this was only partially mitigated by the growth in its USA operations. 

The company added that despite revenues for Jamaica moving up by 31 percent to $20.44 billion for the first six months of 2021, its segment result fell by 13 percent to $1.53 billion.

Aris noted that the company would have been impacted by increasing oil prices as well as higher costs for grains, such as corn and soy.

Oil prices have hit a seven-year high as West Texas Intermediate (WTI) topped US$84 a barrel in January, with analysts expecting prices to hit US$100 later this year.  

Corn and wheat prices have gone up by 62 percent and 44 percent, respectively, since the start of the pandemic to US$6.10 a bushel and US$273.50 a ton.

“We know chicken would need feed and so that would have had an impact on the company,” Aris said.

“One of the other things to note is that when you consider inflation. The International Monetary Fund recently came out with their World Economic Outlook for January, and they’re saying that back in 2021 we were talking about transitory inflation, they’re now saying that inflation might be with us for a while,” she added. 

According to the Statistical Institute of Jamaica, point-to-point inflation for 2021 was 7.3 per cent, a five-year high and well above the Bank of Jamaica’s upper inflation band of 6 per cent.

“So, this may be just one of the increases Jamaica Broilers has to effect,” Aris said. 

Banking fees “understandable”

Meanwhile, the analysts also noted that raising inflation could be behind the recently announced increased banking fees from both of Jamaica’s largest commercial banks.

National Commercial Bank and Scotiabank announced a slew of new and increased fees, including charges to withdraw money from bank-owned ATMs. 

Both banks came under heavy fire from consumers and politicians. 

However, Assistant Manager of Private Equity at PROVEN Wealth, Julian Morrison, said the new charges are understandable. 

“It is understandable given the inflationary pressures across the board. The fact is, utility expenses will hit institutions because banks consume a lot of energy,” he said.

“They have to run their operations, they rely heavily on technology and higher energy costs, which have risen significantly in the past year, definitely could impact the bottom line,” he noted. 

“And as a part of mitigating against that, the institutions would pass on some of those expenses to consumers in the form of fees,” he added. 

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