(By Dawie Maree, Head of Marketing and Information for Agriculture at FNB Business)
In recent months, South Africa has been impacted by a strain of Avian influenza HPAI H5N8 outbreak that has not only negatively impacted the already hard hit poultry and ostrich producers, but the reach of the flu has now begun to pull a strain on the pocket of the consumer…
Although the reach of the Avian influenza is countrywide, the Western Cape, which is going through a drought, accounts for about 22% of the poultry numbers in South Africa, it is most likely to feel the pinch the hardest as it comes in the midst of water restraints.
The Avian influenza is impacting all poultry producers around the country. Some of them are obviously directly impacted, where there is an outbreak, the rest is indirectly impacted.
The ostrich industry will also be affected. The areas mostly affected are Mpumalanga, Gauteng and the Western Cape. The last one, most probably the most affected, while still battling with the drought as well. Up to September approximately 2 million layers where culled.
This meant that it will have a negative effect on the replacement layers for the future. Industry experts indicated that there will at least be a 55 day lag in producing new layers, which mean that the replacement layers will only be available by Christmas.
Impact on business :
The confectionary (baking) industry will feel it as this impacts the price of eggs. The saving grace for the major bakeries is that they will most probably have contracts that will be fulfilled before supermarkets, but for the small bakery (home industries, SMMEs) the rise in prices due to the flu has the potential of being detrimental.
The feed industry is also impacted as a decrease in bird numbers means less demand for feed. The cumulative year-to-June broiler and layer feed consumption for 2017/18 has fallen by 4% relative to the same period during the 2016/17 season. This accounts for 55% of the total animal feed consumption as recorded by the Animal Feed Association.
Other related industries include people that clean the chicken houses. If there is no throughput from the chicken factories, it means nothing to clean, and therefore less work.
The impact at retail level:
Consumers might struggle to get products that are impacted e.g. eggs and fresh chicken. In the Western Cape for instance, there are supermarkets that literally have empty shelves due to the strain.
Effectively, the price of eggs is increasing, which is not good news for cash strapped consumers as eggs are an important protein source for SA consumers.
Eggs needed to be brought in from Bloemfontein into Western Cape, obviously at a huge cost, and that cost will most likely downstream to the consumer. Effectively, the price of eggs is increasing, which is not good news for cash strapped consumers as eggs are an important protein source for SA consumers.
The good news is that it can just get better from here on. The industry has gone through a couple of challenges recently:
In the latest SARS import data update, the total poultry imports jumped to 51,889 tons in September 2017, which is up 13% m/m and were 6% higher relative to the same month last year. The cumulative poultry imports for the nine months of 2017 reached 415,921tons, which is however still 2% lower relative to the same period last year.
Producers, who’ve managed to stay in business through all of these challenges, may have a better future ahead. Feed costs have come down, with the exception of imports related to the Avian Influenza, as soon as the AI issue has been sorted, they will be able to produce again.