Picture: REUTERS
Picture: REUTERS

SA’s poultry industry is reeling due to the sharp increase in feed prices, dashing hopes for a strong recovery in a sector that has suffered a jobs bloodbath in recent years.  

GM of the SA Poultry Association (Sapa), Izaak Breitenbach said on Tuesday the industry is struggling to stay afloat due to “abnormally” high grain prices as a result of the drought in the US combined with China buying up global grain stocks.

The industry has also been hard hit due to reduced demand and pricing mainly as a result of the Covid-19 lockdowns, Breitenbach said.

Feed, which includes yellow maize and soybean as the key ingredients, accounts for about 65% of production costs. Globally, maize and soybean prices are up about 25% and 22% respectively. This has put local producers, already facing low profit margins, under pressure and could push up chicken prices despite muted demand. In SA, yellow maize is up about 19% to just over R3,000 a tonne.

“There is nothing that can be done [about high feed costs] as prices are determined by the international markets,” Breitenbach said.

He said it is difficult for producers to increase their prices to make up for high production costs as consumers are cash-strapped and demand is low.

Demand for chicken has dropped as the income of consumers has declined due to the Covid-19 induced economic crisis, and the importation of poultry meat products at low prices has eroded demand for locally produced products.

The poultry industry is the largest segment of the agricultural sector, contributing about 16% to SA’s GDP and responsible for at least 110,000 jobs. It is one of the largest consumers of maize and supports many peripheral businesses, including the feed industry and those downstream in the value chain.

However, the industry has recorded colossal job losses in recent years and has ascribed its demise to cheap chicken imports from Brazil, the US and Europe. This has brought it into conflict with SA meat importers who blame the lack of competitiveness of the local poultry industry for its woes. Sapa suggests that for every 10,000 tonnes of chicken meat imported, 1,000 direct and indirect jobs are lost in SA.

More jobs could be under threat due to increasing production costs.

In a market update on Monday, Wandile Sihlobo, head of agribusiness research at the Agricultural Business Chamber, said the record 806,000ha of soybean plantings in 2020/2021, combined with the higher-than-usual rainfall since the start of the season, suggest that SA could have solid soybean output.

He added, however, that strong local soybean production will offer no immediate input-cost respite for poultry farmers as SA remains a net importer of soybean oilcake or meal, a major ingredient in poultry feed.

At the end of last week, SA’s soybeans spot price closed at almost R10,000 a tonne, which is 65% higher than the corresponding period in 2020. This price increase was primarily underpinned by higher global soybean prices, which are supported by China’s growing demand, Sihlobo said.

The state has moved to protect the poultry industry from unfair competition. In 2020, the government gazetted tariff increases to 62% on bone-in chicken portions while tariffs on boneless portions were raised to 42%. The South African poultry industry was pushing for an 82% tariff on both categories, up from 37% and 12% respectively.

In 2019, the government announced a new master plan for the industry that includes measures to boost domestic demand, the affordability of local broiler products, and access to new markets.

Breitenbach said the core objective of the master plan has always been to stop unfair trade practices such as dumping and to gain back the market share lost to unfair imports. Its secondary objective is to grow the local market and export.

He said the industry will apply to the International Trade Administration Commission — the organisation tasked with customs tariff investigations, trade remedies, and import and export control — “to address the issue of unfair trade”.


Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.