Good news for consumers as chicken prices expected to ease

Chicken accounts for roughly two-thirds of the meat consumed in SA, and the steep price increases for poultry over the past two years contributed to high food price inflation.

The overall price of a basket of healthy food increased by about 4% over the previous year.

As global poultry supply recovers from disease outbreaks such as avian influenza, which saw chicken prices spike in 2023, prices for certain chicken pieces have already moderated after showing double-digit hikes over the past two years, said Marlene Louw, senior economist at Absa Agribusiness.

“In recent times, the outbreak of diseases like avian influenza has caused a global shortage of this protein source, which put upward pressure on prices,” said Louw. “While potential new disease outbreaks may change the price outlook going forward, all things being equal we expect that lower feed prices will improve margins for producers, which could stimulate supply. This could in turn assist in keeping price increases contained over the medium term, which is good news for consumers.” 

The average price for a whole frozen chicken increased by 19% since 2021 from R29.22/kg to R36.20/kg in 2024. Over the next two years, the price for whole frozen birds is expected to increase at a much slower rate at about 8% to R39/kg by 2026.

The price increases for individually quick-frozen (IQF) chicken pieces, a product that many lower-income households rely on as an affordable source of protein, were even more dramatic, rising almost 23% since 2021. This product, according to Absa, is expected to show modest increases over the next two years, rising by about 5% to R32.82/kg by 2026.

According to the Bureau for Food and Agricultural Policy (BFAP), IQF prices dropped 11.9% year on year in July, from R33.47/kg in July 2023 to R29.50/kg in July 2024.

“While production is recovering, the decline also reflects subdued consumer demand,” BFAP said in its latest food inflation brief.

The price of a healthy food basket for a family of four, as tracked by BFAP, increased by R366, or 4%, to R3,761 a month on a year-on-year basis in July. Overall inflation on food and nonalcoholic beverages as measured by Stats SA increased 4.5% in July.

Some of the drivers of food price increases in July were sugar, dairy, egg, bread and cereals. Egg prices increased by a cracking 35% and the price of a 1kg packet of rice by 34%.

About 20% of local consumption of chicken is serviced through imports — mostly frozen bone-in portions. Louw said that any supply interruption could have a meaningful impact on price movements.

In July, Brazil experienced a case of Newcastle disease and though it was an isolated incident, trade was suspended for 21 days.

The UN Food and Agriculture Organisation’s August food price index indicated that international price quotations for poultry meat fell in August, reflecting the lingering effects of the Newcastle disease-related voluntary export suspension on Brazilian price quotations.

Given the importance of chicken as a source of protein for low-income earners in SA, there have been repeated calls to the Treasury to include chicken pieces in the list of zero-rated food items.

Louw said that while the importance of food affordability is acknowledged, it is also vital to note that a change of this nature could have unintended consequences — for example, relative price changes of products in the meat complex are likely to alter consumption patterns, which could affect prices and margins of other products in the meat complex.

“Policies that support and enable efficient broiler production, such as effective and agile disease management and sound service delivery, would also limit price increases of chicken products. This would likely have a less distortive effect on relative prices and margins and contribute to providing consumers with price relief,” she said.

erasmusd@businesslive.co.za