The cost of producing South Africa’s favourite meat, chicken in particular, has increased. Increased production costs have subsequently spilt over to retail shelve prices, forcing low-income earning consumers to buy cheaper, frozen chicken cuts.
While prices remain slightly suppressed, experts cautiously predict that the cost of chicken could increase in the months ahead. If so, this spells good news for farmers, but not so much for consumers.
The good and the bad
South Africa’s poultry industry finds itself in a two-pronged situation. According to Izaak Breitenbach, president of the South African Poultry Association (SAPA), in the long term, the gross value of the industry has increased and thus remains globally competitive.
However, in the short term, the industry is in distress and losing money. “[This is because] raw material prices are at an all-time high, mainly maize and soya,” Breitenbach explained.
The gross value of the industry increased from R47bn in 2019 to R59bn in 2022, indicating that Mzansi’s poultry industry is in fact growing, and not shrinking. This positively impacts not only the feed manufacturing industry, Breitenbach said, but also the maize and soya industries, who supply key ingredients for chicken feed.
A new study on the global competitiveness of the industry indicated that the industry is not only globally competitive, but improved its competitiveness against the USA, Brazil, and the EU since 2019 despite serious challenges.
Why farmers hike prices
According to Breitenbach, at the moment it is difficult to predict whether chicken prices will increase because pricing is driven by the cost of raw materials.
“Feed makes out 70% of the cost of producing a chicken and thus is a major determinant of price. If we know what material costs would be in the future, we would know what the poultry meat prices would do.”
South Africa has seen a 17% increase in poultry meat prices since 2021 with an increase of 21% in feed prices during the same period of time.
Poultry farmer, Katekani Mahasha, said it has been difficult for her to keep up with high input costs.
“The biggest causes of suffering in poultry farming are high costs of feeds, electricity, fuel, and the high costs of everything else in our country. It is becoming extremely difficult for most farmers, especially small-scale, to keep up.”
To keep their business afloat, farmers increase their prices which in turn affects the consumer.
“Decent groceries are a luxury for most South Africans lately because everything is so expensive. So many find the current prices of farm fresh poultry expensive for them. They then opt for store-bought frozen chicken,” Mahasha said.
Breitenbach said poultry prices have reduced marginally since January but that is off a high-price base. Prices remain high, and at the same time, there has been a slump in demand and total consumption.
“In the period January to April, prices have been suppressed due to lower disposable income from consumers. There will be a short improvement in prices during the Easter weekend and then prices are expected to be suppressed during winter up to the end of July,” he said.
Breitenbach said the industry normally sees improved prices from September to December. “At present, we are seeing marginally suppressed prices due to the annual business cycle but also a small pullback on raw material prices.”
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