The South African poultry industry is in a strange place at the moment. It is growing but suffering, expanding capacity but losing money, and successful but with an uncertain future. Its resilience is remarkable.
This is the picture painted by Izaak Breitenbach of the SA Poultry Association (SAPA) at an annual media presentation on the state of the industry.
The audience was reminded that the poultry business is now a R59 billion strategic national asset, the second largest component of the agricultural sector, a significant employer that feeds the nation and a central pillar of national food security.
Yet it is in distress because of rapid rises in input costs, failing municipal infrastructure and the impact of South Africa’s daily power cuts, known as load shedding.
Breitenbach said the 2019 poultry master plan had resulted in the industry investing R1.8 billion in expanded capacity – more than the R1.5 billion anticipated in the plan – and creating 1 900 new jobs directly and 2 000 more indirectly. As a result, production capacity had increased from 19 million birds per week to 22.5 million per week.
The master plan envisaged this increased capacity serving expanded local and export markets. However, the local market has been affected by the Covid-19 pandemic, rapidly rising costs, bird flu and power outages.
Producers need to raise prices to recover increased costs, but are meeting consumer resistance to more expensive chicken. However, they cannot keep on absorbing rising input costs. The export market holds much promise but the export drive has yet to take off.
“If we talk about the medium term and the short term, we see an industry in distress, an industry that’s losing money. We see these record-high raw material prices and chicken prices [as a result] are high,” Breitenbach said.
“Consumer demand at present is down due to the high prices of chicken and cold storage facilities are full of chicken.”
Daily power cuts disrupt 24-hour production schedules and necessitate expensive investment in diesel generators. SAPA estimates that load shedding adds 75c/kg to the cost of producing a chicken. In addition, production was reduced in January and February by 13 million birds.
Breitenbach is proud of the success the poultry industry has had, creating jobs, supporting emerging farmers and increasing its gross value from R47 billion to R59 billion in three years.
“That’s a 25% increase is gross value. This is a growing industry.”
“South Africa’s poultry sector is demonstrating remarkable resilience – it is choosing to invest in growth under very difficult circumstances, and it is working hard to ensure that there is food on every table,” says FairPlay founder Francois Baird.
While the industry faces significant headwinds at home, chicken exports are likely to increase as new markets open up. That, however, could take up to two years in some cases, Breitenbach said.
The future is there, but it’s on hold.
