Overview of the South African Poultry Industry from 2000 to 2010

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For the past sixty years, the poultry industry has grown continuously, maintaining this trend over the last decade. The estimated average number of poultry livestock on hand in 2000 was 109 650 000 birds per day, which in 2010 had grown by 40.6 percent to 154 136 000 birds. This increase in bird numbers was achieved despite the fact that stock numbers actually decreased during 2001 and 2003.

The poultry industry consists of two separate sectors: egg production and broiler production, both of which are regarded as distinct farming operations. Although both these sectors expanded over time, the broiler industry grew at a faster rate than the egg industry. This was achieved despite the fact that the broiler industry is exposed to the global poultry meat industry and has to compete with frozen products imported from countries with relatively low production costs. The fresh egg market, on the other hand, has very little exposure to imported products due to the perishable nature of the product.

The number of pullets reared per annum and the average number of hens in lay in the commercial egg industry and the broiler hatching egg sector is presented in Graph 1 below.

Graph 1

The poultry industry, like all farming operations, is exposed to external factors, such as global grain supply and exchange rates that impacts on production costs and the demand for their products. Efforts by egg and broiler producers to reduce the impact of factors such as variable input costs, fluctuation in the disposable income of consumers and oversupply of products on their profit margins, invariably led to volatility in both industries. Due to the long time required to effectively implement changes in the supply of poultry products, both industry sectors are inclined to be cyclical in nature. This is evident in Graph 1 where the number of pullets reared to replace old laying hens in the laying flock has decreased since 2007, while the number of laying hens was maintained at a high level by increasing the length of the laying cycle. Over the ten years since 2000, the number of point of lay pullets produced has increased by 18,4% while the laying flock has increased by 33,1%.

The total number of broilers produced per annum is indicated in Graph 2.

Graph 2

Over the decade, the number of day old broiler chicks placed has increased by 44% while the number of broilers slaughtered has increased by 45,3% due to improved productivity. The average compound growth in broiler production over the ten years was 3,9% per annum.

The period of continued growth in broiler production from 2004 to 2007 was supported by increased demand, relatively low input costs and a favorable Rand/Dollar exchange rate. The downswing in the economy and the associated reduction in disposable income resulted in a decrease in demand for products and lower profit margins. Steps by the broiler industry to adjust to the economic situation took more than a year to be fully effective, resulting in an oversupply of broiler product. Together with a strong Rand that favoured the importation of cheap poultry products, depressed market conditions resulted in depressed profit margins in the broiler industry during 2009.

The annual feed usage by the egg industry and the broiler industry is presented in Graph 3 and Graph 4, respectively.

Graph 3

Approximately 4,0 million tons of feed is required per annum by the broiler industry.
In Graph 5 the total tons of meat produced by the different industry sectors per annum is presented. The meat production indicated was calculated as 72% of live body weight and does not include any offal or by-products.

Graph 5

The estimated broiler meat production in 2010 totalled approximately 1 225 560 tons. In addition, the broiler breeder sector and the egg industry rendered approximately 24 500 tons and 28 670 tons of meat respectively. The total estimated South African poultry meat production in 2010 amounted to     1 308 730 tons.

The South African egg industry expanded by 34,6% between 2000 and 2010. The compounded growth over the period was 3,16% per annum. The estimated number of 30 dozen cases and tons of eggs produced per annum is indicated in Graph 6.

Most of the expansion in the egg industry occurred after 2004 when egg production increased by 31,3% over three years. This excessive expansion resulted in an oversupply of eggs coinciding with the economic downswing and increasing input costs and severe pressure on profit margins forced the egg industry to reduce hen numbers. Due to the long turnaround period inherent to the poultry industry, the layer flock only decreased in 2008.

Graph 6

The current per capita consumption of poultry meat and eggs in South Africa is relatively low compared to other developed countries, with the poultry industry potentially set to grow by approximately four percent per annum in the long term. Whether this growth will materialise depends on South Africa’s economic growth and the poultry industry’s ability to remain competitive in the global market. More than fifty percent of poultry rations consist of grain and grain by-products, and without reliable and affordable sources of these products, future expansion of the poultry industry will be stifled.

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