The new strain of avian influenza (bird flu) spreading across South Africa is a double blow for poultry producers. Firstly they lose millions of chickens, which have to be culled to help curb the outbreak. And secondly, the South African government refuses to compensate farmers for the healthy birds it orders them to cull.
The new strain, H7N6, is more deadly and spreads more rapidly than the other major strain circulating in South Africa – H5N1, which has hit most countries affected by the current worldwide outbreak. Bird flu is spread by wild birds and crosses continents as they migrate.
This is the worst bird flu outbreak the country has experienced, and it has contributed to profit warnings from two of the three listed poultry companies – Astral Foods, the country’s largest broiler producer, and Quantum Foods, the largest egg producer.
Bird flu is adding to the huge cost burden of daily power cuts, and both companies said they were heading for losses in the current financial year.
The new strain is spreading at an alarming rate and chickens are “dying like flies”, Astral CEO Chris Schutte told an investor briefing, after the company announced it was headed for its first loss since listing on the stock exchange 22 years ago.
Bird flu has already resulted in egg shortages in parts of the country and Schutte said chicken meat shortages were likely in the next four to six months.
Schutte said Astral would have delivered a strong performance had it not been for the impact of bird flu, the power cuts known as load shedding, and failing municipal and national infrastructure. Load shedding had cost the company R1.9 billion this year. The company is also spending R100 million on a pipeline to bring water from the Vaal River to its plant in Standerton, Mpumalanga.
Astral had been subsidising consumers by selling chickens at a loss, Schutte said, and the company would have to pass on the R3/kg cost to consumers. He added pointedly that this would not be “profiteering” but trying to claw back some of the increased input costs mainly associated with load shedding.
