Price increases for poultry products in South Africa are expected to ease following double-digit hikes over the past two years, bringing relief to financially-constrained consumers who have faced rising food inflation.
According to the Absa AgriTrends Report released yesterday, these good news to the consumer come as a result of a stronger rand and robust growth in production by key global suppliers such as Brazil, possibly seeing average price of chicken products increase by just over 1% this year in some instances.
Dr Marlene Louw, senior Economist at Absa AgriBusiness, said in recent times, the outbreak of diseases like Avian Influenza had caused a global shortage of this protein source, which put upward pressure on prices.
“While potential new disease outbreaks may change the price outlook going forward, all things being equal, we expect that lower feed prices will improve margins for producers, which could stimulate supply,” Louw said.
“This could in turn assist in keeping price increases contained over the medium term, which is good news for consumers.”
Now in its third year, the biannual Absa AgriTrends Report has become a key resource, providing stakeholders throughout the agricultural value chain with valuable insights into the changing landscape, empowering them to make informed decisions that promote sustainable growth.
Louw said while chicken accounts for roughly two-thirds of meat consumed in South Africa, about 20% of local consumption was serviced through imports, mostly frozen bone-in portions. Thus, she said any supply interruption could have a meaningful impact on price movements.
In July this year, Brazil experienced a case of Newcastle disease and although it was an isolated incident, trade was suspended for three weeks.
“With around 400 000 tons of chicken being exported out of Brazil each month, the event highlighted the importance of Brazil as a key exporter servicing the global market,” Louw said.
“South Africa is especially vulnerable to export disruptions out of Brazil-in 2023, more than three-quarters of chicken imports to South Africa, came from the South American agricultural giant.”
Amid growing calls for chicken pieces to be zero-rated, Louw said it was also vital to note that a change of this nature could have unintended consequences for example, relative price changes of products in the meat complex being likely to alter consumption patterns, which could impact prices and margins of other products in the meat complex.
Louw noted that policies that supported and enabled efficient broiler production would also limit price increases of chicken products. She said this would likely have a less distortive effect on relative prices and margins and contribute to providing consumers with price relief.
According to the National Agricultural Marketing Council’s (Namc) South African Poultry Products Price Monitor issued in June, during the first quarter on a year-to-year basis, data obtained from the South African Revenue Service (Sars) indicated that South Africa imported 98 139 tons of chicken meat in the first quarter, reflecting a decrease of 19.9% when compared to the 122 460 tons imported in the first quarter of last year.
The main products contributing to the observed decrease in chicken meat imports were boneless chicken, which decreased by 71%, followed by frozen chicken leg quarters, frozen chicken feet and frozen chicken thighs, which decreased by 62%, 26% and 22%, respectively.
Comparing the first quarter of this year to the last quarter of this year, domestic producer prices for whole fresh chicken, frozen chicken, and IQF chicken pieces increased by 9.40%, 7.54%, and 2.54%, respectively.
The trends in that period in producer prices could be attributed to several factors, notably the recent drought incidents that disrupted feed production in numerous places around the world which led to increased cost of certain inputs. For example, global maize export prices rose slightly in March due to logistical challenges in Ukraine, affecting feed prices in South Africa.
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