Poultry industry curbed by soybean prices

The sustainability of South Africa’s poultry industry is under threat since soybean prices have increased. This is the view of Agbiz chief economist Wandile Sihlobo who says the industry’s quest to revive itself depends on soybean availability, a crucial ingredient in poultry feed manufacturing

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Mzansi’s poultry industry will be paying more for feed due to the soaring soybean prices that have been brought about by unfair trading.

This is the view of Agbiz chief economist Wandile Sihlobo. He says roughly 50% to 70% of broiler production costs are attributed to feed. This is up to 80% of maize and soybean costs.

Wandile Sihlobo, chief economist at Agbiz. Photo: Supplied.
Wandile Sihlobo, chief economist at Agbiz. Photo: Supplied/Food For Mzansi

For decades, yellow maize production has been a success story as the country is usually a net exporter.

However, the opposite is true for soybeans. Mzansi remains a significant net importer of soybean oilcake or meal. This is a major ingredient in poultry feed, costing the industry thousands of Rands.

In 2010 alone, South Africa imported close to a million tonnes of soybean oil cake.

This urged agribusinesses, supported by government, to make investments to increase domestic soybean processing capacity. This increased from roughly 860 000 tonnes in 2012 to current levels of over 2.2 million tonnes.

Soybean records

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As a result, soybean oilcake imports declined by 56% from the record levels of nearly a million tonnes in 2010 to about 420 000 tonnes in 2019.

Sihlobo indicates that farmers responded positively to these demand changes as is evident in the growth in plantings over the past decade.  

“The record 806 000 hectares of soybean plantings in 2020-2021, combined with the higher-than-usual rainfall since the start of the season, suggest that South Africa could have solid soybean output,” says Sihlobo.

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“So far, the largest soybean harvest on record was in the 2017-2018 production season, a crop of 1,54 million tonnes, with an average yield of 1,96 tonnes per hectare. There is still uncertainty about the potential size of the yield in the current season.”

However, if one applies a five-year average yield of 1,82 tonnes per hectare on an area of 806 000 hectares, South Africa’s soybean harvest could reach 1,47 million tonnes. This would be the second-largest harvest on record, according to Sihlobo.

Impact on poultry industry

The Agbiz economist states that the possible increase in soybean production would also mean that soybean oilcake imports would soften somewhat from the 2019 levels of 420 000 tonnes.

This would support South Africa’s quest to reposition and sustain its poultry industry.

POULTRY: Mzansi remains a significant net importer of soybean oilcake or meal, a major ingredient in poultry feed. Photo: Supplied/Food For Mzansi
Mzansi remains a significant net importer of soybean oilcake or meal, a major ingredient in poultry feed. Photo: Supplied/Food For Mzansi

South Africa is not planting nearly enough soybeans to alleviate the high price challenge threating the sustainability of the poultry industry, though, Sihlobo warns. This is the biggest agricultural contributor in the country.

“The implications of increased domestic soybeans production on prices will remain marginal. South Africa is a small player in the global soybean market, accounting for a mere 0,5% of global soybean production.

“Our soybean prices are primarily influenced by market developments in significant soybean producing and consuming countries.

The China effect

The key producing countries are Brazil, the US, Argentina, India and Paraguay. Meanwhile, China is a significant consumer, as the country imports over 60% of globally traded soybeans.”

Sihlobo says on 5 February, Mzansi’s soybean spot price closed at R9 990 per tonne, up 65% year-on-year. This price increase was underpinned by higher global soybean prices, which were supported by China’s growing demand.

It is also backed by a recovery in the country’s pig industry from the devastation caused by the African swine fever outbreak of 2019.

“the gains in domestic soybean production, at least in the near term, won’t translate into lower price changes for buyers.”

Sihlobo indicates that ultimately, the poultry producers’ input costs will remain elevated despite the increase in domestic soybean production.

“This is yet one of the critical issues that we should be deliberately focusing on and discussing, as we attempt to retool this important industry whenever the topic of unfair poultry trade grabs headlines,” he says.

ALSO READ: ‘Africa to rethink agri for post-Covid recovery’

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