The South African Poultry Association (Sapa) has extolled growth in the local industry despite challenges, including load shedding, which has necessitated investments that adds amounts ranging from 75 cents R2.00 to the cost of production as well as higher grain and other input costs.
Sapa CEO Izaak Breitenbach has said the industry had been able to hold its own despite extensive culls in January and February as a result of power cuts. This put pressure on farmers to not pile the increases onto the consumer.
Daily power cuts disrupt 24-hour production schedules and necessitate expensive investment in diesel generators.
Sapa estimates that load shedding adds 75c/kg to the cost of producing a chicken. In addition, production was reduced in January and February by 13 million birds.
“The South African poultry industry is in a strange place at the moment. It is growing, but suffering. Expanding capacity, but losing money and successful, but with an uncertain future. Its resilience is remarkable. Yet it is in distress because of rapid rises in input costs, failing municipal infrastructure and the impact of South Africa’s daily power cuts, known as load shedding,“ Breytenbach said in the industry's advocacy publication Fairplay.
The confidence in the industry is also shared by the Bureau for Food and Agricultural Policy (Bfap), which said in a recent report the prime driver of prices in the industry was feed cost or raw material cost.
“At present, there doesn’t seem to be any relief in terms of raw material cost on the horizon and that will keep the pressure on price. This fundamental needs to change for prices to reduce. Local producers are subsidising the very high raw material cost on behalf of the consumer. Chicken and eggs will remain one of the most cost effective and versatile animal proteins South Africans can enjoy,“ it said.
Breitenbach said producers need to raise prices to recover increased costs, but are meeting consumer resistance to more expensive chicken.
“However, they cannot keep on absorbing rising input costs. The export market holds much promise, but the export drive has yet to take off. If we talk about the medium term and the short term, we see an industry in distress, an industry that’s losing money. We see these record-high raw material prices and chicken prices (as a result) are high,” Breitenbach said.
In a competitiveness study on the local broiler industry as part of research into cost drivers, the Bfap said in line with leading poultry producers globally, the poultry value chain in South Africa was highly integrated which means that competitiveness also depended on other sectors, such as feed.
“South African producers remain competitive and were shown to produce a kilogram of chicken meat at a lower cost relative to the European producers included in the sample, but also at a higher cost than leading exporters such as the US and Brazil. This difference to Brazil and the US declined in 2021 relative to 2017,” it said.
Of the target of 3600 new jobs from 2019 to 2022 set in the Poultry Sector Master Plan (PSMP) signed by industry stakeholders in 2019, 1900 new jobs have been created in the poultry sector this far, with the -reporting an additional 2000 jobs being created throughout the value-chain; this is forecast to increase to 2600 by the end of 2024. Production capacity had increased from 19 million birds per week to 22.5 million per week.
Fairplay Founder Francois Baird alluded to the resilience, pointing out the need to keep tabs on the dumping of poultry from cheaper, mass-producing countries.
“South Africa’s poultry sector is demonstrating remarkable resilience – it is choosing to invest in growth under very difficult circumstances, and it is working hard to ensure that there is food on every table,” Baird said.
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