AVI Africa - Presentations - Tuesday, 31 May 2011

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Management | Broiler Organisation | Chick Producers Organisation | DPFO | Egg Organisation | Technical Repor t

Management Report

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PRESENTED BY MARIUS GERICKE AT THE 105TH SAPA CONGRESS | HELD ON TUESDAY, 31 MAY 2011| HOSTED AT EMPERORS PALACE, GAUTENG

INTRODUCTION | INLEIDING

The poultry industry has experienced a challenging business environment. Over the past few years, some respite was shown in that companies showed an improvement in their financial results. Government has indicated that they want to create five million jobs over the next 10 years and as welcome as this announcement is, one hopes that it will be real job creation and not job creation through legislation. If this could be achieved on a sustainable basis, it bodes well for the industry, as poultry and eggs are still the most affordable protein source for the majority of the population. The year also saw very negative publicity relating to the poultry industry with regard to poultry reworking and brining, and one would have wished that the media reporting could have been based on facts rather than sensationalism to boost their sales.

STATE OF THE INDUSTRY | STAND VAN DIE BEDRYF

The gross farm income from poultry meat for the period 2010 (as recorded by the Department of Agriculture, Fisheries and Forestry [DAFF]) was R22,940 billion and from eggs R6,658 billion. Combined, the gross poultry farm income for 2010 was R29,598 billion. As producers, we are the largest segment of South African agriculture at 23% of all agricultural production, in comparison with the 24% in 2009 and 45% of all animal products in South Africa, in Rand terms, in comparison with the 48% in 2009. The cattle and calves industry was the second largest at 11,6% of agricultural production and 23% of animal protein.

The poultry industry can continue to claim to feed the nation. More poultry products are being consumed annually than all other animal-protein sources combined. The per-capita consumption of poultry meat in 2010 was 32,96 kg per annum and for eggs 8,48 kg, a combined per-capita consumption of 41,4 kg per annum. In comparison with poultry meat, the per-capita consumption of beef was 17,65 kg, of pork 4,58 kg and of mutton and goat 3,16 kg per annum.

During 2010, total poultry consumption was 2,109 million tons (poultry meat and eggs), 24,4% more than the combined beef, pork, mutton and goat consumption of 1,282 million tons during the same period.

The poultry industry provides 62,2% of locally produced animal protein consumed in SA.

Total consumption in SA of white and yellow maize is approximately 9,334 million tons, of which about 4,627 million tons were used for animal feed consumption. The poultry industry consumes in excess of approximately 2,75 million tons of maize (30% of total maize consumption in South Africa), which is used in our feeds. During the current season, most of the maize consumed in the animal feed industry was still yellow maize, although white maize made up approximately 7% of the total maize usage in the feed industry.

FEED SALES | VOERVERKOPE

Our industry continues to be the main customer of the Animal Feed Manufacturers Association (AFMA). According to their annual report for the period April 2009 to March 2010, the poultry industry consumed 72% of their production of approximately 5,488 million tons of feed amounting to 3,96 million tons of feed supplied by AFMA members, and this consisted of about 90% of total consumption by the poultry industry. Non-AFMA members supplied the balance of about 0,4 million ton. This accounts for approximately R12 billion of AFMA's turnover.

MEMBERSHIP | LIDMAATSKAP

The current membership of SAPA’s four industry organisations is as follows:

Broilers 37
Eggs 47 (106 if individual members of co-operations are included)
Chicks 32
DPFO 91

DISEASE REPORT | SIEKTEVERSLAG

Notifiable avian influenza (NAI) | Aanmeldbare voëlgriep (AAI)

SAPA, in conjunction with DAFF is participating in the national notifiable avian influenza (NAI) surveys and we can state that we are negative for the H5N1 strain. Through the participation of poultry producers we have covered the majority of the producers in this survey. These surveys are being done on a six-monthly basis and I would encourage all producers to participate in the surveys.

The most recent reported survey included a total of 859 farms:

256 layer farms, including layer breeders and layer-rearing farms
603 broiler farms, including broiler breeders.

This amounts to 27 less layer farms and 47 more broiler farms, a combined total of 20 more farms than previously reported on.

The survey represented 95% of poultry farms in South Africa. This is a major achievement, as we are now in a much better position to deal not only with NAI, but also with any disease outbreak by having a much better map of local production sites. As disease risk is linked to infection sites, the surveillance team is now focusing on smaller producers. Please participate in this programme for the benefit of all of us.

Newcastle disease | Newcastle-siekte

The technical committee has provided information to DAFF, who revised the Newcastle Protocol with regard to the outbreak of NCD, and this document is available on the SAPA website.

Salmonella-reduction protocol | Protokol vir Salmonellavermindering

The Technical Committee of SAPA is still waiting for feedback from the state regarding the finalisation of this protocol. Implementation of a Salmonella-reduction plan might have major implications for our businesses, so we will collectively engage the state on this plan.

IMPORTS | INVOERE

Brazilian imports of poultry products in various forms continued to be of major concern during the year, with imports in general up by 14,9% on the 2009 figures; 73% of total poultry imports originated from Brazil and 10,3% from Argentina.

SAPA STRATEGIC PLANNING | SAPV- STRATEGIESE BEPLANNING

Another strategic session has been held regarding the statutory levy to ensure that all role-players have an input into the application of the levy. The management committee has also approached the NAMC to reduce the percentage increase from 10% to 5% per annum, to which the levy will increase per year. During the first strategic session, certain strategic action themes were formulated under the six headings under which the levy application was made. During the second strategic session the action themes were re-affirmed. As Kevin Lovell will address the

Training | Opleiding

Successful training courses were held by SAPA/KZNPI (KwaZulu-Natal Poultry Institute). The SAPA/KZNPI courses allow for the receiving of credits towards obtaining a national qualification. We would like to invite poultry producers to make use of this excellent course through KZNPI, as it would be of benefit not only to the individual, but also to the sponsoring company, as the skills shortage in the poultry industry is a real threat to the competitiveness of the industry. A new training landscape has come to the fore, which would affect training for the foreseeable future. Whereas the previous act allowed for attainment of Unit Standards, the new act will change towards satisfying an occupational profile. SAPA is in the process of adjusting the training curriculum to the new standards, as well as engaging the relevant people, to ensure that credits obtained will not be lost to individuals who completed the previous courses. Training will once again be held in Gauteng during August, Western Cape during September and KZN during October. Training is also being presented on poultry farms.

Engagement with stakeholders | Skakeling met belangegroepe

SAPA , through the CEO , has been actively engaging government in an effort to ensure that the Meat Safety Scheme, which will include independent meat inspection, is viable, implementable and affordable to the broiler producers.

A letter of intent was signed with the University of Pretoria in December 2010 for renaming the Poultry Disease Management Unit (PDMU, previously the PDMA) as well as for the establishment of a Chair in Poultry Research.

The Department of Health as well as the DAFF were actively engaged in an effort to improve the regulations regarding flavour enhancement.

FINANCES | FINANSIËLE SAKE

The financial reports will be tabled separately at Congress, and will therefore not be handled in the chairperson’s report. I am happy to report that we have now had four unqualified reports by the auditors. SAPA is aware that we need to utilise the levy within a certain timeframe, but is also acutely aware that the monies should be spent as originally requested in the levy application by industry. The implementation of these projects took time, as new capacities needed to be created, and the relevant partners need to be co-opted to fulfil this mandate.

TECHNICAL COMMITTEE | TEGNIESE KOMITEE

The restructuring of the Technical Committee with supporting sub-committees have started functioning well.

In view of the Consumer Protection Act, the participation of an organisation such as the Consumer Goods Council would make sense. Positive discussions in this regard are taking place with the DAFF and the Department of Health, with considerable progress towards finding common ground.

The opportunity to research specific issues particular to production practices in the RSA can be a prospect. The establishment of a chair at the Faculty of Veterinary Science, Onderstepoort to manage such research projects is envisaged.

Through the Poultry Disease Management Unit, applicable training of poultry veterinarians and supporting technicians can realise shortly to supply the needs of the industry.

CODE OF PRACTICE | BEDRYFSKODE

The new and updated Code of Practice will be tabled at congress for acceptance. It is up to each and every producer to ensure that standards for the production of poultry and eggs are maintained, in order to make sure that the buyers of these products believe in the safety and value they obtain from the purchase.

GOING FORWARD | DIE PAD VORENTOE

The SAPA communication programme will (as a part of it) include a Consumer Engagement Forum, which would engage consumer organisations, journalists and other stakeholders. This forum would endeavour to communicate the poultry industry to the relevant parties and thus build on the value chicken and chicken products offer the consumer. The first meeting is planned for 2011.

The Poultry Bulletin came back into the folds of SAPA in June 2010, and the new format has been given a thumbs-up by the industry. SAPA is well aware that improvements can be made to the publication, and would like to invite the industry to give feedback on how to improve the Bulletin, in order to enable us through the Poultry Bulletin to better serve the needs of the industry.

SAPA is also pleased to welcome the following new employees and wish them all the best in their new positions:

Masanda Peter, brand manager |handelsmerkbestuurder
Moses Modise, DPFO coordinator | OPBO-koördineerder
Ronel du Plooy, office manager | kantoorbestuurder
David Hughes, project manager | projekbestuurder.

With the retirement of Maarten de Kock, SAPA is also losing one of the pillars of the association over the years. Maarten has agreed to help us during the transition period to ensure a smooth hand-over to the new employees of SAPA. We would like to thank Maarten sincerely for his contribution over the years and his willingness to postpone his retirement during this SAPA transition period.

The industry has over many years prospered in the good times and survived in the bad times. The changing environment the producers find themselves in today establishes a need to address these challenges collectively through an industry body. I wish to thank the members, who, in good and bad times, have supported the poultry industry through their participation in the different committees in SAPA. I would like to invite producers who are not currently members of SAPA to join hands with fellow producers by joining the association, so that the industry could address industry issues as representative body of all producers.

Thank you | Baie dankie.

The Broiler Organisation

BROILER ORGANISATION COMMITTEE CHAIRMAN’S REPORT 2010 - PRESENTED BY | VOORGELÊ DEUR MIKE DAVIS

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MEMBERSHIP

Membership of the Broiler Organisation currently stands at 37 producers. Based on our SAPA statistics this suggests that broiler producers representing 71% of broiler production are members of SAPA. A concerted effort needs to be made to encourage more members to join our organisation. The Broiler Organisation Committee has approved a category of membership for contract growers, and these growers are encouraged to become members of the organisation.

COMMITTEE

The term of office of the committee is three years and the committee members shall serve terms of three (3) years. The term of office of the current committee expires in 2011. This year members were again co-opted to make the committee as representative as possible.

The Broiler Organisation Committee therefore presently consists of the following members:

Theo Delport (deputy chair | ondervoorsitter)
Paul Apostolides
Steve Steenkamp
Bonga Mavume
Jacques van Niekerk
Dr Louis Theron (co-opted | gekoöpteer)
Deon Fourie (co-opted | gekoöpteer)
Mike Davis (co-opted | gekoöpteer).
Izaak Breitenbach resigned in February 2011.

INDUSTRY OVERVIEW | OORSIG VAN DIE BEDRYF

The exceptionally high and growing demand that categorised 2006 to 2008, did not continue through to 2009 and 2010, with SAPA estimating an increase of 4% in total broiler production from 2009 to 2010. The year has seen further expansion in the poultry market in South Africa, as producers gear themselves for future demand and to capitalise on economies of scale, and the advantage that volume brings to tight realisations.

Chicken remains an affordable protein source relative to other meat-protein sources.

The average producer price for beef abattoir selling prices for class A2/A3 was R24,02 per kg in 2010, while the beef abattoir selling prices for Class C2/C3 was R19,83 per kg. The average price for 2010 for pork, all classes, was R14,82 per kg. In comparison with the other types of meat, the total realisation (less all discounts, rebates and secondary distribution) broiler producer price was R12,28 per kg in 2010.

The poultry industry (including meat and eggs) continues to dominate the agricultural sector in South Africa, and is the main supplier in kilogram and protein terms, as more poultry products are consumed per annum than all other animal protein sources combined. In terms of consumption, beef is second. Poultry has shown an upward trend in consumption over the past five decades.

The per-capita consumption of poultry meat was 32,96 kg per annum in comparison with beef at 17,65 kg, pork at 4,58 kg and mutton and goat consumption combined at 3,16 kg per annum in 2010. Egg consumption was 8,48 kg per person per annum in 2010.

VOLUME AND GROWTH

BROILER BREEDER PLACEMENTS

Day-old parent pullets placed

Continuous growth in day-old broiler parent placements has been recorded over the past five years. The rate of increase in parent placements has, however, slowed down in 2010 and the recent trend indicates that it will level off in 2011.

The total day-old parent pullet placement for the year 2010 was 9,154 million pullets. On average, 176 000 pullets were placed per week during 2010. The 2010 average placement per week was 4 700 higher (+2,8%) than the corresponding placement in 2009.

Broiler breeder flock | Braaikuikenteeltrop

The projected broiler breeder flock of 6,488 million hens for December 2010 was 168 202 higher (+2,7%) than the December 2009 flock.

On average, 6,477 million broiler breeders were in production during 2010. This represents a year-on-year growth of 245 000 (+3,9%) in the breeder flock.

The projected April 2011 breeder flock is 6,578 million hens. This will be 8 114 higher (+0,12%) than the April 2010 breeder flock.

Broiler chick placements

A total of 1,032 billion day-old chicks were placed in 2010; 47 million more (+4,8%) chicks were produced in 2010 than in 2009.

It is forecast that on average 19,966 million broiler chicks will be placed per week during June 2011. This will be 89 533 chicks less (-0,45%) than the average weekly placement in June 2010.

BROILER PRODUCTION

Industry growth

The projected broiler production for the last quarter of 2010 is 18,903 million broilers per week. This number will be 1,297 million higher (+7,4%) than the production in the corresponding quarter of 2009.

Average weekly broiler production for 2010, at 18,579 million, was 716 000 higher (+4,0%) than the 2009 average. Broiler production amounted to 968,8 million slaughtered in 2010.

Over the first six months to June 2011 an average production of 18,630 million broilers per week is forecast. This will be 472 000 more (+2,0%) than the corresponding production in 2010.

A slight downswing in broiler production is forecast for the first quarter of 2011. An upswing in production can, however, be expected in the second quarter of 2011.

Forecasts indicate that broiler production in July 2011 will be 18,861 million per week. Compared to July 2010 this represents an increase of 27 164 (+0,14%) broilers per week.

PROSPECTS FOR 2011

Between 2005 and 2009, day-old parent placements increased at a rate in excess of 5 percent. During 2009 and 2010, the rate of increase in day-old parent placement decreased to approximately 2 percent per annum. Recent trends indicate that the parent pullet placements will level off in the first half of 2011.
A total placement of 9,244 million day-old parent pullets is projected for 2011. This will be a slight decrease of 17 000 pullets (-0,2%) compared to the total 2010 placement.
A potential number of 1,035 billion broiler chicks could be produced in 2011. This will be 3,896 million more (+0,4%) than the total number of broiler chicks produced in 2010.
An increase of 9,450 million (+1,0%) to a total number of 978,246 million broilers slaughtered is forecast for 2011. On average, 18,760 million broilers will be produced per week.

PER-CAPITA CONSUMPTION

The per-capita consumption of poultry meat was 32,96 kg per annum, with broiler meat the main contributor at 32,0 kg per person per annum in 2010 (including culls). The consumption of broiler meat has been met by increased imports (+15%) and industry growth of +4%. It is expected that producer expansion should meet increased demand.
Part of the rise in chicken-meat consumption the last few years resulted from the broiler industry's response to the demands by consumers and food service operators for value-added, brand-name and convenience products, and not only from the commoditised volume products. Chicken producers are in an industry that is in demand. People want chicken meat and continue to consume it, and the per-capita consumption shows that there is still opportunity for tremendous growth in demand for chicken products. As a comparative measure, the per-capita consumption in Brazil and the United States is in excess of 40 kg. As imports make up a sizeable percentage of consumption, this suggests that we can safely grow by 50% in volume terms.

INTERNATIONAL MARKET

BROILER MEAT: 2011 FORECAST OVERVIEW PRODUCTION

Production is forecast up 2 percent to a record 76.2 million tons and is supported by record levels from all top producing countries. Strong domestic demand and, to a lesser extent, rising exports, will fuel production growth in many countries, as [will] the absence of major disease outbreaks. However, as 2011 progresses, rising grain prices may adversely impact production. “Production by the world’s leading broiler producer, the United States, is forecast less than 2 percent higher at 16.6 million tons, although that rate of growth may be tempered by high feed grain prices. Stronger domestic demand and recovering foreign demand will support expansion. US per capita consumption continues to rebound, building on the recovery that began in 2010 with tight supplies of red meats, particularly beef; consumers are expected to shift to lower-priced meat products like versatile broiler meat.

China’s production is expected to increase almost 4 percent to 13 million tons as strong demand and high prices encourage expansion. However, that expansion may be constrained by high feed costs, particularly corn, which accounts for about 60 percent of broiler feed. Fewer outbreaks of highly pathogenic avian influenza, more standardized operations and changing structure will improve productivity.

Growth Continues at a Slower Rate

Brazilian production is forecast up on both strong domestic and foreign demand while Mexican production is up on strong domestic demand. Per capita consumption for both countries is expected to rise, accounting for a larger portion of total meat consumption. Price competitiveness and improved purchasing power will bolster domestic demand. Higher production levels in Mexico will also be fuelled by greater use in processed products, although rising grain prices may slow growth, as feed accounts for a major portion of costs.

Government Interventions Affect Industry

Russian production is forecast to continue expanding, although more slowly than in recent years. Rising feed costs are expected to squeeze returns, although the government’s commitment to support long-term production expansion will likely assure continued profits. Large enterprises dominate the industry and government loan subsidies will continue to favor them over small producers.

Production in Argentina is forecast to jump 9 percent, as a sharp decline in beef production, generating a shortfall in animal protein supplies, is expected to cause an increase in poultry demand.

“Thus, rising broiler meat consumption would capture a growing share of total meat consumption. As broiler meat is not subject to the same production and export regulations constraining the cattle sector, production can also expand to benefit investors seeking export-orientated revenue.

EU production is forecast slightly higher as elevated grain prices constrain growth.
Rising domestic, rather than foreign demand will support marginal production gains. The full impact on the industry’s competitiveness due to recently implemented animal welfare regulations, which limit stocking density, is yet to be assessed, but generally expected to adversely affect profits.

TRADE:

“Exports are forecast 3 percent higher to a record of nearly 9 million tons due to a reduction in SPS barriers, as well as economic growth and recovery. Expansion is fuelled by demand from virtually all major and emerging markets, and both the United States and Brazil will benefit as major suppliers.

“The United States and Brazil are forecast to account for over 70 percent of exports by major traders. The combined share of trade by these two exporters is expected to be slightly less than 5 years ago.”

United States and Brazil Grow at Same Pace (3 Percent)

US exports are forecast at 3.0 million tons, reversing the recent downward trend.

The strongest growth is expected in shipments to RUSSIA as the United States is expected to fill its tariff rate quota allocation set at 446,400 metric tons. Despite strong domestic production, its imports are expected to rise on resolution of SPS issues.
As its main supplier, the United States will also benefit from a forecasted rise in Mexican imports. Raw material demand from the food processing industry is growing as consumption patterns mature due to rising incomes and urbanization.

Brazil remains the leading exporter, with growth expected at 3 percent, relatively on par with the past three years.

Growth is primarily due to robust demand by Middle East markets as rising incomes and economic expansion stimulate imports by Saudi Arabia, the United Arab Emirates and Iraq.
Shipments to China are likely to increase, but are not expected to fully replace US product displaced by anti-dumping and countervailing duties.
Emphasis on emerging markets will continue to fuel expansion.

EU Exports Stagnate While Argentina, China, and Thailand Rise

EU exports are forecast to stagnate due to lack of competitiveness and relatively tight exportable supplies.

Robust Argentine growth continues unfettered as exports are not constrained by government restrictions. However, increased shipments are mostly to [Venezuela where a meat deficit exists].

China and Thailand are expected to expand exports, particularly to other Asian markets. Shipments are largely limited to prepared/preserved products because of SPS restrictions.

SOURCE: USDA, United States Department of Agriculture, Foreign Agricultural Service October 2010

LOCAL TRADE

The origin of imports into South Africa enforces this picture with 73% of the poultry imported into South Africa originating in Brazil. Brazil remains a threat to world poultry due to the exchange-rate dynamics, competitive advantages in terms of climate, feed costs, economies of scale and government support.

The annual poultry imports for 2010 into South Africa were 265 791 tons, which constituted a 15% increase or 34 488 tons more in comparison with the total poultry imports for 2009. Broiler meat accounts for 90,4% of all poultry imports, an increase of 1,4% in comparison with 2009, the balance largely being turkey products.

The value of annual poultry imports (FOB) for 2010 into South Africa amounted to R1,766 billion, which constituted a 13% increase or R200 million more in comparison with the value of total poultry imports for 2009.

COST OF PRODUCTION

Feed costs have always been a significant issue in the poultry industry and that has also been the case in 2010. Dramatic feed-price increases in 2008 have been the result of the rising prices of maize and soya, the main raw materials in broiler feed. During 2009 and 2010, yellow maize, soya and sunflower prices decreased in comparison, but not to previous low levels as before 2008.

Producers are now competing with ethanol producers for the available maize, and this, coupled with low stock-to-usage ratios, have driven prices upwards. Over the next decade, the renewable fuels mandate and drive for bio-fuels in the United States will impact the global poultry industry. It is estimated that by 2015 about 36% of US maize production could be earmarked for ethanol production. The USA now uses more maize for ethanol than the whole of Africa uses for food.

Profit margins are still under pressure, although feed costs decreased slightly over the past two years in comparison with the high increases of the previous years. The average reported broiler-feed price for 2010 was R3 000,73 per ton, a decrease of 10% in comparison with the average feed price for 2009.

There is great concern in the industry that these increases in input cost will not easily be recovered and price realisation will be under tremendous pressure.

When the variation on the same month of the previous year is considered, the change in broiler feed prices have been increasing since April 2006. The year 2009 has seen a downward trend in the variation of broiler feed price going into a negative growth from April 2009 onwards, and remaining negative through 2010. The change in broiler producer price has also been on a downward trend in 2009 and showing a negative growth trend from July 2009 onwards through 2010, with positive growth recorded for the first time in December 2010.

ANIMAL HEALTH AND DISEASE

The past few years have seen a large emphasis on precautionary measures, disease surveillance and control, all in order to reduce the incidence of animal disease and minimise the impact of outbreaks when they do occur. The spread of avian influenza elsewhere in the world remains of great concern, and South African producers remain on high alert, as the threat of Avian Influenza also has the potential to reduce consumer demand. The routine surveillance program has been in place for more than three years, and importantly, chickens have at all times remained negative for highly pathogenic notifiable avian influenza (HPNAI).

Sporadic outbreaks of newcastle disease continued throughout the year. The spread can be largely attributed to a lack of biosecurity, and is linked to the commercial egg-layer industry, where newcastle disease has been far more catastrophic. The broiler industry has become largely resilient in disease situations.

MEAT SAFETY SCHEME

The Department of Agriculture, Forestry and Fisheries (DAFF) has proposed delegating the authority for independent meat inspection in terms of the Meat Safety Act (Act 40, 2000) to a body controlled by SAPA. A “Meat Safety Scheme” as defined in the act is of more use to us. The DAFF agrees with this concept.

The Department of Health (DoH) is, in principle, interested in allowing the delegations of authority in terms of Act 54 required for this to work.

It involves:

Enhancing meat safety practices
Conducting surveys
Conducting training
Investigating food-borne diseases
Promoting good hygiene practices
Determining origin of meat and animal products
Monitoring residues in meat and animal products
Creating meat and hygiene services / hygiene assessment services
Creating standard microbiological testing protocols
All national production to a common minimum standard
All imported products can be tested to scheme standard (possible to create barriers)
All further processing by importers able to be tested to same standard as local industry
Opportunity for more pro-active consumer engagement
Fair tariffs for all on a cost-recovery basis.

EMPLOYMENT, SKILLS SHORTAGES AND TRAINING

Along with being the primary source of protein, the poultry industry remains an important contributor to job creation and employment opportunities. Approximately 10% of all agricultural sector workers are employed in the poultry sector. Considering the dominance of the poultry industry in South Africa, it also has the largest influence on the feed industry as its main customer.

The lack of skills in the industry remains a cause of concern. The need for adequate training and a skills pool resource remains high on the agenda of all producers. SAPA remains committed to assisting the industry in terms of training by staging top-up and other courses. During 2009, SAPA formed a working partnership with KZNPI, an accredited training service provider to present short courses to the industry. Training of the 300 learners who registered in 2009 was completed by the end of April 2010, and another 190 learners were trained in 2010. At this stage, the unit standards cover production and processing and there is a need to expand the available courses to enable learners to complete a full learnership by attending short courses on the core unit standards. This will enable learners to gather the necessary credits to qualify for the National Certificate: Poultry Production or Poultry Processing.

FINANCES

The financial statements of SAPA reflect a healthy financial position and for the fourth year in a row SAPA has received an unqualified audit report.

CHALLENGES:

The poultry industry faces enormous and complex challenges, including the rising cost of heat and power, environmental issues, sustainability and bird health and pandemic diseases. The following challenges remained critical through 2010 and will remain the greatest challenge for the year to come.

Higher input costs and combating these through efficiencies. There seems little relief from high feed prices, and producers will need to overcome this to remain profitable.
The never-ending stream of imports into South Africa, predominately from Brazil, has great competitive advantage in terms of economies of scale. If local demand is restricted, the imports will play an even more important role as they enjoy a favourable price differential.
The threat that avian influenza poses throughout the world – not only the possibility of an outbreak, but also the impact on consumer demand for poultry.
The ability of the industry to embrace food-safety practices rapidly enough to ensure consumer confidence in poultry products
The effect of the time needed for approval and the requirements of EIAs have and will continue to influence expansion of growth.
The threat posed by the possible removal of anti-dumping duties is immense and could bring this industry to its knees.
Negative media comments around the practice of brining are a potential crisis for the industry.

GENERAL

We need to thank the various role-players, who have ensured the successful functioning of the Broiler Organisation over the last year. I wish to express my thanks to committee members for their contributions to the organisation. To all SAPA staff members, my sincere thanks for your dedication to and support of the Broiler Organisation. To all our members, without which there would not be such a wonderful industry to work in, congratulations on the success of the industry during the past year.

The Chick Producer Organisation

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PRESENTED BY MARIUS GERICKE AT THE 105TH SAPA CONGRESS HELD ON TUESDAY, 31 MAY 2011 HOSTED AT EMPERORS PALACE, GAUTENG

WELCOME

I would like to welcome you to this AGM of the Chick Producers’ Organisation (CPO) and wish to present you, as members, with an overview of the activities of the CPO during the past year.

MEMBERSHIP

The current membership of the CPO stands at 32 members, with additional categories created to facilitate the fertile egg traders and day-old chick distributers. As in previous years, I wish to again invite the industry to join the CPO and help SAPA to ensure that your interests are attended to through SAPA as industry body representing the poultry industry.

COMMITTEE

The committee consists of the following members:

Marius Gericke (chair)
Pieter Oosthuysen (vice chair)
Robbie Kruger (executive member)
Arend Kuipers
Jim Gray
Koos Pretorius
Jan Serfontein Jnr (co-opted)
Keith Millard (co-opted)
Tommy Snyman (co-opted)
Sevias Chigombe (co-opted)

INDUSTRY OVERVIEW

State of the industry

During 2010, the industry saw a downward movement in raw material prices, which resulted in feed costs decreasing from a high of a 32% increase from 2007 to 2008 to a decrease of 5% from 2008 to 2009 and a decrease of 10% from 2009 to 2010 in broiler-feed prices, and a decrease of 11% in layer-feed prices. The industry could, however, not take full advantage of this reduction in input costs due to the slow recovery of the spending power of customers over the same period. The spending pattern of consumers also changed, with shorter holidays being taken, thus influencing the amount of spending during the festive season.
The rand held its own in the financial world, trading between R6,63 and R7,75 to the dollar. This following from a weak rand at R9,30 early in 2009. The strong rand also made the importing of chicken attractive, further putting the local market under pressure.

Cheapest source of protein

Poultry meat and eggs are still one of the cheapest sources of protein for the majority of South Africans. The relative price per protein source is evident from Graph 1.

Graph 1: Price comparison between protein sources

Industry turnover – based on chick supply

Turnover increases in chick supply to the egg and broiler industry are shown in Graphs 2 and 3. The egg industry turnover increased from R109 million in 2006 to R145 million in 2010. During the same period, chick supply to the broiler industry increased from a turnover of R1,975 billion to R3,355 billion.

Graph 2: Turnover of chicks – egg industry

Graph 3: Turnover of chicks – broiler industry

Per-capita consumptio

Egg consumption increased from 124 eggs per person per annum in 2006 to 132 eggs per person per annum in 2010. Egg consumption showed an increase from 130 eggs per annum in 2009 to 132 eggs in 2010.
Broiler meat consumption increased from 30,72 kg in 2006, to 32,96 kg in 2010.
For the egg and broiler-meat consumption the economical woes resulted in less disposable income for purchases of these products.
Graph 4 depicts the different per-capita consumptions for the meat-protein sources available in South Africa. This clearly indicates the preference for poultry products to those derived from other protein sources.

Graph 4: Per-capita meat consumption

Chick placement numbers

Broilers

Graph 5 illustrates the increase in broiler breeder placement numbers from 2000 to 2010.

Graph 5: Average broiler breeders placed per annum

The effect of a then growing economy is clear from the increase in placement numbers of broiler breeders. In the industry overview at Congress 2008, it was postulated that the continued growth would be affected by interest rates and the recovery of input costs by the producers. The worldwide economic fiasco has added another dimension to the consumption of chicken and chicken products. This increase in placement of broiler breeders has not in total materialised in broiler placements, and one can only assume that flocks are being culled at an earlier age.
Graphs 6 and 7 show the sideways trend in the potential broiler placements during 2010. These graphs are derived from parent-stock placements, which do not take into account the full effect of earlier depletion of breeder flocks.

Graph 6: Potential broiler placements per week

Graph 7: Potential broiler placements per year

Layer breeders

The impact that the worldwide economic downturn has had on the broiler industry as illustrated above in Graph 6, demonstrates a similar trend in impact on commercial egg producers, as illustrated in Graphs 8 and 9.

Graph 8: Average national laying flock

Graph 9: Average cases of eggs produced per week from 2004 to 2010 and part of 2011

Input costs

Layer feed prices decreased by 11% in 2010 in comparison with 2009 to R2 102,77, per ton after a decrease of 5% in 2009 following the upward momentum of 2008 on the back of rising maize and protein prices. The feed price did not decrease to the levels before 2008.

Graph 10: Layer feed price from 2007 to 2010

After the continued rise in feed cost, with producers experiencing feed input costs increasing by between 26% and 48% during 2008, there was a decrease of 5% in broiler feed price in 2009 and a further decrease of 10%, although not to the levels before the rise in 2008. The average feed price for broilers was R3 000,73 per ton in 2010.

Graph 11: Broiler feed price from 2007 to 2010

As feed costs continue increasing over time profit margins are diminishing. The average reported broiler feed price for 2008 was R3 502,65 per ton, an increase of 32% in comparison with the average feed price for 2007.
The average broiler feed price for 2009 was R3 326,27 per ton – a decrease of 5% in comparison with 2008.

Employment sector

Latest estimates suggest that up to 7 000 people are employed by chick producers around the country, making the chick industry an important rural employer.

Local trade conditions

Total imports of broiler products increased by 15% in 2010 in comparison with the previous year, as international poultry prices and exchange rates made the importing of poultry products attractive.

Graph 12: Retail and producer price of frozen whole chicken

As can be seen from Graph 12, the ever-widening gap between the producer price and the retail price of chicken is a concern, as producers are struggling to recover input costs and the retail chains are putting pressure on producers to cut prices.

Health issues

Notifiable avian influenza (NAI)

SAPA, in conjunction with the Department of Agriculture, Forestry and Fisheries (DAFF) is participating in the national NAI surveillance monitoring surveys and is happy to report that we have tested negative for the H5N1 strain. We can also say that we covered the majority of the producers in this survey. These surveys are done on a six-monthly basis according to a prescribed protocol, and SAPA encourages all producers to participate in the surveys.

The most recent reported survey included a total of 859 farms:

256 layer farms, including layer breeders and layer-rearing farms
603 broiler farms, including broiler breeders.

This amounts to 27 less layer farms and 47 more broiler farms, a combined total of 20 more farms than previously reported on.

This survey represented 95% of poultry farms in South Africa. This is a major achievement, as we are now in a much better position to deal not only with NAI, but also with any disease outbreak through having a much better map of local production sites. As disease risk is linked to infection sites the surveillance team is now focusing on smaller producers. Please participate in this programme for the benefit of all of us.

Newcastle disease

The Technical Committee provided information to the DAFF, who revised the Newcastle Protocol with regard to the outbreak of NCD, and this document is available on the SAPA website.

Salmonella-reduction protocol

The Technical Committee of SAPA is still waiting for feedback from the state regarding the finalisation of this protocol.

OBJECTIVES OF THE CPO

I have again included in this years’ report the objectives of the CPO and would like to give producers the opportunity to measure the CPO against the objectives and give feedback on how well the organisation addresses these issues. Also advise if there are objectives that should be of key importance but are not tabulated as such.
As an independent subsidiary of the Southern African Poultry Association the Chick Producers' Organisation maintains a national organisation in the Republic of South Africa for the promotion and development of the poultry-breeding and chicken-production section of the poultry industry. The purpose of the organisation is to foster, promote and improve the general welfare of those engaged in this section of the poultry industry, by providing a vehicle through which group action may be taken on matters of common concern.
To promote and advance all matters pertaining to the improvement of the poultry-breeding and chicken-producing industry in South Africa by:
•        securing profitable poultry breeding and providing adequate supplies of poultry products to the consuming public;
•        promoting the breeding of poultry and commercial chicken production;
•        encouraging and assisting in the production of chickens of high quality, bred from parents selected for type, stamina and health qualities and for high egg production and/or meat qualities;
•        protection of the poultry-breeding and chicken-producing industry from adverse legislation and any other aggression by initiating, fostering and assisting in obtaining legislation and regulations beneficial to the poultry breeding and allied industries;
•        encouragement of poultry education;
•        dealing with any matter that may be in the interest of the poultry-breeding and chicken-production industries, the organisation and its members;
•        submitting individual data to the SAPA office for establishing a suitable statistical system to further the aims of SAPA.

CONCLUSION

I wish to express my thanks to committee members for their contributions to the CPO during the past year. To all the SAPA staff members, my sincere thanks for your dedication to, and support of the CPO. To all our members, without which there would not be such a wonderful industry to work in, join us into A New Era.

The Developing Poultry Farmers Organisation

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PRESENTED BY LIZ LEDWABA AT THE 105TH SAPA CONGRESS HELD ON TUESDAY, 31 MAY 2011 HOSTED AT EMPERORS PALACE, GAUTENG

WELCOME

Honourable guests, ladies and gentlemen and my fellow farmers, I would like to welcome you to the 2011 annual general meeting (AGM) of the Developing Poultry Farmers Organisation (DPFO).
I would particularly like to thank God Almighty for guiding us on the mandate bestowed upon us. Although we have not yet done enough, we are encouraged by the progress so far.

INTRODUCTION

Already there is a sense of increased commitment within the DPFO committee, especially with our young and vibrant co-ordinator, as direction and focus are communicated and ideas and suggestions are galvanised into action.
The creation of the DPFO logo and the launch of it hopefully will further strengthen the visibility and presence of the organisation, encouraging membership and motivation amongst those who are already on board. No doubt this is the beginning of seeing the commercial potential and added value of belonging to the organisation. ‘’Eendrag maak mag’’, unity is strength. There is a saying, “A business without a sign is a sign of no business”, and hence there is a need for branding the DPFO.
Once more, I must point out the fact that the DPFO started a dynamic process of enabling emerging farmers to move into the mainstream of the economy and to intensify promotion of poultry products among the consumers. Going back to the Presidents’ 2011 State of the Nation Address and in his call for job creation, the poultry industry contributes significantly to job creation and employment opportunities, both in the formal and informal sector, with 80% of the industry participating consisting of SMMEs. The magnitude of the figures suggests that poultry in the informal sector is a major resource for creating wealth and addressing food security. Thus the emerging sector has also the potential at a local level to enhance employment and food security, thereby supporting the process of ‘vibrant’ rural development (as per the plan of Minister of Rural Development & Land Reform, Gugile Nkwinti).

MEMBERSHIP

Compared to the previous years, our membership number has decreased tremendously. Our records show that previously we had 467 members with 148 fully paid-up members. For 2010, the total number of members stands at 93. Initially, we went all out to get everyone on board; later, one realised that it was not sustainable and we decided to go slow and make big strides – “small footprint, big impact”. To address this dilemma the committee came up with the following suggestions:
To have local and provincial structures in place
Establish one structure in one district municipality in each of the nine provinces
Resource the provincial representatives in terms of organising the farmers.
However, the committee concluded that mobilisation of members through provincial conferences, the launch of the logo and branding of the DPFO, and engagement in media slots might be the key solution to this dilemma.

COMMITTEE

At the 2010 AGM, the following committee was elected:

Liz Ledwaba – chairperson
Monde Dukashe – deputy chairperson
Penny Daly
Thammy Dlamini
Jake Mokwena
James Julius
Bongiwe Kali
Ephraim Mokhethi
Thandi Masilela.

DPFO OVERVIEW

The DPFO as emerging poultry farmers participated in a new initiative of SAPA to, on a regular basis, collect information from emerging farmers. This is a case of knowledge giving you the edge to make informed decisions. This service aims to inform emerging farmers of the industry statistics and how they relate to their own situation. SAPA started collecting statistics from the DPFO members in an endeavour to create awareness of common industry concerns among developing farmers. During the last quarter, 150 farmers were interviewed. SAPA can now report on emerging farmers in the broiler industry including one hatchery and 121 broiler farmers, six contract growers and two abattoirs, and in the egg industry on 20 egg farmers.

Broilers

The potential number of broilers in rearing per cycle for the reporting period of the first quarter of 2011 from emerging broiler farmers respondents was 466 000, while the potential number of broilers for contract growers was 459 000, attributing the survey group with the potential to raise 925 000 broilers (chickens). This represented 0,9% of the total number of commercial broilers in rearing. Based on census figures for the reporting period, there was an estimated total of 97 500 000 commercial broilers in rearing in South Africa.

Egg farmers

Twenty egg farmers were interviewed, of whom six farmers temporarily stopped farming. Of the remaining 14 farmers, three emerging egg farmers buy day-old pullets and raise their own laying flock. In total they had the capacity to house 6 100 chicks at a time. The potential number of layers (egg-laying chickens) for the reporting period of the first quarter of 2011 from the egg-farmer respondents was 200 000 layers (on a census basis). This represents 0,7% of the total of 31,2 million layers (layer breeders and layers in rearing included) in the country on a census basis.

Conclusion of statistics

SAPA statistical reports for the DPFO can be downloaded from the SAPA website www.sapoultry.co.za under STATISTICS. We thank all the members who co-operated in this exercise and we extend an invitation to all DPFO members to participate in future. This will help us measure the performance of the industry as far as the DPFO is concerned.

FUNDING

In the past, SAPA funded the DPFO for all activities pertaining to the organisation. The committee regarded the annual subscription fee of R100 paid by members as a token of support and acceptance of responsibility for the funding of the organisational activities. Only a few members paid the subscription fees, and the committee decided not to follow it up, because according to the statistics some of the farmers are no longer in operation. It was resolved by the committee that the outstanding subscription fees owed by DPFO members up to 2010 be written off as irrecoverable against the reserve funds of the DPFO. You will all be aware that at the previous AGM it was reported that SAPA had applied for the implementation of a statutory levy, in which the DPFO was also included. It was therefore agreed that at least 20% of the levies collected be spent on transformation. A strategic planning session in this regard was suggested. This took place in November 2010.

The following strategic issues were raised at the session and the budget will be applied for the following:

Mobilisation of provinces – establish local and provincial structures of new members through meetings, study groups and workshops in each of the nine provinces
Training
Marketing
Branding and launching of a DPFO logo
Government involvement, lobbying
Identifying funders, raising funds
Research
Leadership training
Statistics
Provincial conferences.

MARKET

Markets are still a dilemma. The co-ordinator and chairperson visited the Rainbow offices to harness any market opportunity available to the DPFO members. In this regard, Rainbow indicated that it was likely to invest in contract growers among farmers residing in KwaZulu-Natal and the neighbouring provinces.

The committee feels that a dedicated marketer should be employed for the local and international market. A service provider needs to be identified to conduct market research for the DPFO. The co-ordinator, however, will continue to be responsible for involving members and soliciting their opinions and buy-in.

TRAINING

The second DPFO committee meeting for 2010 was held at the KwaZulu-Natal Poultry Institute (KZNPI). This was to expose the committee to the facilities of the institute and to the services provided. The facilities of the institute seem to be most appropriate for theoretical and practical training. It is still envisaged that 270 poultry farmers will be trained per year, with the inclusion of extension officers from each of the nine provinces.

DPFO PAGE IN THE POULTRY BULLETIN

The Southern African Poultry Bulletin is the mouthpiece of the committee. It is therefore imperative that every activity concerning poultry in our provinces be published. Each member and relevant extension officer is urged to report on any event, important news or worthy material in this regard. However, it was agreed that committee members take the bull by the horn and each month take turns to report on any activity pertaining to poultry in their relevant provinces.

POULTRY HEALTH

What with El Niño and the floods that befell our country, it is crucial that all producers be on the alert and try by all means to prevent diseases by practising proper bio-security and acquiring knowledge of relevant vaccines and proper vaccination programmes. Concerning notifiable diseases, such as Newcastle disease and avian influenza, the best scenario, though, is to be transparent and report any signs of it.

DAY-OLD CHICKS

The difficulty of availability of day-old chicks is still the order of the day. It is a problem that broiler producers in the breeding industry themselves should be fully informed on. This will help farmers in the breeding industry to be aware of placing their orders well in advance. However, the co-ordinator will contact and sensitise all hatcheries regarding problems experienced by our members.

APPRECIATION

My sincere gratitude to all the donors towards the development of the DPFO. My heart-felt felicitations to SAPA and the staff for their endless effort in making the DPFO what it is today. My thanks to the statistics team for all the information, and the CEO and the co-ordinator for their endeavour to make my job bearable. My sincere thanks to my predecessor, Mr Dukashe, for his contributions during his term of office as chair of the DPFO. He is not lost to the organisation, though, as he is still serving as the deputy chairperson. Thanks to all the committee members.

CONCLUSION

Do not throw out the baby with the bathwater as a result of the recession, just work harder and smarter, kuzolunga kan cane kancane. Ngiyabonga, thanks, dankie.

The Egg Organisation

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EGG ORGANISATION COMMITTEE CHAIRMAN’S REPORT 2010

PRESENTED BY JIMMY MURRAY AT THE 105TH SAPA CONGRESS HELD ON TUESDAY, 31 MAY 2011 HOSTED AT EMPERORS PALACE, GAUTENG

MEMBERSHIP

The membership of the Egg Organisation remained at 47 members. If you add the individual members belonging to the various cooperatives, a total of 106 producers are represented by the Egg Organisation. With the planned flat-rate membership fee of R400 including VAT, we will need to ensure all producers are motivated to join as members.

COMMITTEE

The committee presently consists of:

Jimmy Murray (chair)
Dr Dave Allwright
Marco Torsius
Murray Jackson
Nic Elliot
Freddie Kirsten Snr
André Wohlfahrt
Gawie Rossouw
Dr Naudé Rossouw
Pier Passerini
Colin Steenhuisen
Kevin Barnsley

INDUSTRY OVERVIEW

Continuous growth in egg production was maintained during 2010. During the year, the average number of cases produced increased by 8 750 cases (+2,5%) to a total of 361 300 per week in December. The average laying flock projected for December 2010 was 23,482 million hens, which amounted to an increase of 614 800 layers (+2,7%), compared to December 2009.

Day-old pullet placements remained at a high level during the second half of 2010 relative to the 2009 placements. Based on the pullet placements up to December 2010, it is projected that the national laying flock will increase to 23,83 million in April 2011.

If the day-old pullet placements over the first six months of 2011 remain at the same level as in the corresponding period of 2010, one can expect the laying flock to exceed 24 million layers in the second half of 2011.

In total, 2010 egg production amounted to 18,526 million cases. Forecasts indicate that the total egg production will increase by approximately 674 400 cases (+3,6%) to 19,2 million cases in 2011.

The industry is not at its previous peak of 18,663 million cases reached in 2008, but should reach that during 2011.

TURNOVER

At a gross turnover of R6,658 billion at producer level, eggs take their place as the fourth largest animal-product sector in agriculture in South Africa. About 556 million dozen eggs were sold in 2010 through various channels.

EGG PRODUCTION

Day-old pullet production
Day-old pullet placements for the year 2010 amounted to 24,517 million. Compared to 2009 this represents an increase of 4,1%. On average 471 500 day-old pullets were placed per week during 2010.

Laying flock and egg production
The laying cycle was extended by two weeks, which implies that during 2009 the depopulation age of laying hens increased from 69 weeks to 71 weeks of age and remained at 71 weeks for 2010.

The average number of 23,1 million layers projected for 2010 is 866 000 hens more (+3,9%) than the corresponding flock for 2009.

The total annual egg production increased from 17,86 million cases in 2009 to 18,526 million cases or 3,4% more in 2010, with a forecast of 19,07 million cases in 2011.

During the first ten months of 2010, production increased from 352 400 cases produced per week in January 2010 to 358 300 cases of eggs per week by July 2010, and decreased to 352 800 cases per week in October 2010. By December 2010, egg production had increased to 361 300 cases per week. The average cases of eggs produced in 2010 was 355 300 per week.

Prospects for 2011

Since the end of 2009, egg production has increased gradually and it is expected that this growth trend will continue well into 2011.

The total annual egg production is expected to increase from 18,53 million cases in 2010 to 19,2 million cases in 2011.

PER-CAPITA CONSUMPTION

The per-capita consumption for 2010 was 132 eggs per person per annum, an increase of 2% in comparison with the per-capita consumption for 2009 of 130 eggs per annum.

From the following graph, depicting egg consumption in 2009, it is clear that considerable scope exists for increase in per-capita consumption, particularly taking into account the price competitiveness of eggs as a protein source compared to other animal proteins.

Source: IEC

INPUT COSTS

In 2010, the layer feed prices maintained a downward momentum, which had started in 2009. The layer feed price decreased by 11% in 2010 in comparison with 2009, after a decrease of 5% in comparison with 2008. The feed price did not reach the levels that it had before 2008 when an upward momentum on the back of rising maize and protein prices reached an average increase of 30%. In 2010, the average layer feed price was R2 102,77 per ton.

EMPLOYMENT

With an estimated 10 000 workers employed all over the country, the egg industry remains an important player in rural employment.

MARKETING

Competition: Feedback
The results of the in-pack competition were unsatisfactory with only one third of the golden egg prizes having been claimed and responses on only 0,42% of the pamphlets being received.

There were huge failings in the process, with various logistical problems. Millions of pamphlets were not used at all. In hindsight, the involvement of the retail sector also appears to be a mistake.

The committee agreed that the retail market should be left to the producers, although it appeared a decent proposal at the time. Instead, a TV and radio campaign was suggested for future competitions.

Appointment of advertising agency
Members who attended the presentation by The Jupiter Drawing Room, were of the opinion that their presentation was outstanding, and that up to now they have shown appreciation for the “Eggs are Magic“-campaign. They also showed an excellent understanding of the brief given to them.

“Eggs are Magic” 2011
The “Eggs are Magic” campaign is well underway with plans for the year having been finalised. As you know, The Jupiter Drawing Room is the advertising agency we are working with in the implementation of the campaign programme under the guidance of Masanda Peter. There will be regular updates for members on this year’s programme, some of which will be on the SAPA website. We encourage you to please channel your ideas to the marketing department, as these initiatives are a collective effort, and feedback from members is welcomed in order for them to be a success.

I want to thank Marco Torsius, Masanda Peter, Kevin Lovell, Sabine Frielinghaus and all committee members for their valuable inputs to ensure the growing success of this campaign.

The Galliova Awards
The Galliova Awards ceremony was held in Johannesburg on the 8th October 2010. The response from both food and health writers towards this award was once more something that we as egg producers should appreciate. According to Peter Feldman this award, now in its 22nd year, is still regarded as the ultimate food and health writers' award, and exposure that we get from this could hardly be quantified. To Mathilda Pansegrouw and her team, a hearty thank you for your valued contribution.

The 2011 Young Food Writers’ Competition
2011 sees the second year of the egg industry running The Young Writers Awards in association with the Galliova Awards. The aim of the initiative is to find the country’s most promising student food writer from a previously disadvantaged background. The initiative is supported by leading magazines who have partnered with us by offering the selected students internships giving them an enormous career boost. This year’s winners will be announced at the Galliova Awards to be held in Cape Town during October 2011.

THE GLOBAL EGG INDUSTRY

USA Egg Industry

“Table-egg production is expected to increase only slightly in 2011, reaching 6,6 billion dozen, up from the 6,5 billion dozen produced in 2010. The increase in production is anticipated to be spread out fairly evenly throughout the year and is expected to come from small increases in the number of hens in the table-egg flock, combined with relatively little change in the rate of eggs produced per bird. The number of birds in the table-egg flock was higher in four of the six months in the second half of 2010, and the flock is expected to remain above year-earlier levels through the first several months of 2011. While the prices for almost all feed components have risen rapidly in the last several months, egg prices are expected to receive some buoyancy from higher prices for beef and pork.

“Hatching-egg production for 2011 is forecast at 1,07 billion dozen, basically unchanged from 2010, reflecting slowing growth in broiler production as large increases in grain prices pressure integrator margins. The reduction in production is expected to be in the second through the fourth quarters, with production in the first quarter of 2011 being slightly higher than the previous year.”

SOURCE: Economic Research Service, USDA, United States Department of Agriculture, Feb 15, 2011

THE LOCAL EGG INDUSTRY

On the local scene, egg exports continued to operate from a low base and could perhaps become a long-term business opportunity for South African producers. Imports of egg products were also pleasingly low. During 2010, egg exports totalled 3 762 tons. While still operating from a low base, this is 54% or 1 321 tons more than the previous year. In 2002, a record 11 000 tons were exported, and although on a declining trend from 2002 to 2005, export of shell eggs started increasing from 2007. Shell eggs contributed to 96% of egg exports.

Total imports of eggs, including shell eggs and egg product (liquid and dried), were 210 tons in 2010, 41 tons or 16% less than the previous year. The egg product component amounted to 209,8 tons.

Egg prices on a per-kilogram base were at an average of all sizes of R14,10 per kg in 2010. This compared to R12,28 per kg for broiler meat (at farm-gate level), R14,82 per kg for pork (at abattoir level) and around R19,83 to R24,02 per kg for red meat at abattoir level. Eggs thus remain one of the cheapest broad-based food proteins available to the South African consumer.

INTERNATIONAL COMPETITIVENESS

According to Urner Barry, the average egg price for the region Northeast in the USA for white medium was 1,03 US$ per dozen in December 2010. Depicted in Rand, using the average exchange rate for the month, it is R7,13 per dozen. This compares to the R9,51 per dozen, an average egg price for all sizes in South Africa.

The average egg price for the region Northeast in the USA in December 2010 for brown large was 1,84 US$ per dozen; depicted in Rand, using the average exchange rate for the month, it was R12,71 per dozen. The average SA egg producer price for December 2010 was R9,51 per dozen, an average for all sizes.

ANIMAL HEALTH AND DISEASES

The continued prevalence of a wide spectrum of diseases in the poultry industry is a matter of real concern. The industry has during the past year been in a better position with regard to disease in general, but live-bird movement, poor bio-security and vaccination programs not executed as per specification, will continue to be a hazard to the industry. The Poultry Disease Management Unit, once implemented, will contribute to improved liaison with the division of veterinary services in the national department as well as provincial departments.

ANIMAL WELFARE

With an increased awareness of the general public of animal welfare we as an industry will have to ensure that our practices meet with both international and local expectations. The real experience with one of the chick producers has continued to contribute to the negative image of the industry and the general public's view on this has been described as “disastrous”. We need to ensure that all producers do heed the Codes of Practice applicable to the culling of non-saleable chicks, as well as the transport of both point-of-lay and cull birds.

FINANCES

The financial statements of SAPA reflect a healthy financial position, and for the fourth year in a row SAPA has received an unqualified audit report.

FOOD SAFETY

The Consumer Goods Council of South Africa had taken up as a priority the international pressure to ensure that safe food is available at all levels. Council members applied various standards for food safety and as producers we welcome the initiative to standardise these tests, ensuring possible cost reduction in the production process. The proposed egg mark will help us to have a practical and unified standard for food safety in South Africa.

LEGISLATION

The new regulations on egg packaging and grading, as well as on free-range production, were agreed upon and the new draft was circulated for comment in January 2010.

THE FUTURE

The resignation of Nulaid from the Egg Organisation was a sad loss and I am concerned that such an important role-player and contributor to the funding of SAPA via the statutory levy is not involved in the day-to-day decision-making of the Egg Organisation. Every effort must be made to encourage them to rejoin the organisation

The cyclical changes in consumer demand and the forecasted hen placement for the second half of 2011, combined with the rising commodity prices are going to put egg producers under margin pressure, but in the end every producer will have to decide on future production levels.

Cost of production will remain an unremitting problem. The lack of reliable production-cost figures will hamper not only every member, but also the industry in enabling us to inform government on the implications of costs, especially electricity, fuel and results of poor road infrastructure, in ensuring food security.

POULTRY BULLETIN

During 2010, we saw the changing of the guard with Zach Coetzee retiring as the editor of the Poultry Bulletin. Thank you, Zach, for the 36 years of informative publishing. We wish you well in your retirement. To Kevin Lovell, who has taken over the publishing of Poultry Bulletin, congratulations on the new-look Bulletin.

CONCLUSION

To our previous chairman, Willie Maree, who retired last year - I wish you a happy and relaxing retirement on the South Coast.

I wish to express my thanks to committee members for their contributions to the Egg Organisation during the past year. To all the SAPA staff members, my sincere thanks for your dedication and support. I wish to express my thanks to all the members of the Egg Organisation for your co-operation and assistance in dealing with the collective issues of our industry.

The Technical Committee

PRESENTED BY DR LOUIS THERON AT THE 105TH SAPA CONGRESS HELD ON TUESDAY, 31 MAY 2011 HOSTED AT EMPERORS PALACE, GAUTENG

The restructuring of a new Technical Committee with the supporting subcommittees has come off the ground and the involvement and co-operation of the concerned authorities, professional services and the industry have started functioning well.
The following subcommittees have met regularly during the year, with representation by various groups of all role-players in the industry and related state and other institutions.

Animal diseases committee

With representation by the Department of Agriculture, Forestry and Fisheries, poultry veterinarians (consultants) and the industry, who will in future also include the manager of the Poultry Diseases Management Unit (PDMU), as well as ex officio the chair of the Technical Committee. Discussions with the University of Pretoria’s feed-animal production section of the Faculty of Veterinary Science, Onderstepoort were successful. The establishment of applicable training of poultry veterinarians and supporting technicians can realise shortly to supply the needs of the industry.

Animal Welfare Committee

With representation of members of the SAPA, the National Society for the Prevention of Cruelty to Animals (NSPCA), a consultant (i.e. of the SAVA) and ex officio the chair of the Technical Committee. The withdrawal of the NSPCA at a late stage is regrettable, but with better understanding of mutual needs and discipline it could be re-established through continuous liaison with them.

Food Safety Committee

Currently, representation of the Consumer Goods Council of SA is not satisfactory, and in the light of the Consumer Protection Act the participation of such an organisation would make sense. Representation of the Departments of Agriculture, Forestry and Fisheries and of Health is resulting in positive discussions. Matters of urgent concern, such as independent meat inspection and flavour enhancement / brine injection have been discussed in depth, with considerable progress towards finding common ground.
The Consumer Protection Act will bring about a fundamental change in the day-to-day management of product safety, which should not make a difference with regard to the normal responsibility of the industry concerning such safe quality products.
The involvement of product-control persons at larger chain-store groups is considered to be of the essence, and in future they will be invited to attend meetings.

Research Selection Committee

Representatives of SAPA members, external experts and ex officio the chair of the Technical Committee now have the money available for the opportunity to research specific issues particular to production practices in the RSA in order to find solutions.
The establishment of a chair at the Faculty Veterinary Science, Onderstepoort to manage such research projects is envisaged. Funds will be made available for this purpose.

Training

The KwaZulu-Natal Poultry Institute (SAPA/KZNPI) presented successful training courses. The SAPA/KZNPI courses allow for the receiving of credits towards obtaining a national qualification. We would like to invite poultry producers to make use of this excellent course through the KZNPI; it would not only be of benefit to the individual, but also to the sponsoring company, as the skill shortage in the poultry industry is a real threat to the competitiveness of the industry. A new training landscape has come to the fore, which would affect training for the foreseeable future. The previous act allowed for attainment of Unit Standards, whereas the new act will change towards satisfying an occupational profile. SAPA is in the process of adjusting the training curriculum to the new standards, as well as engaging the relevant people to ensure that credits obtained will not be lost to individuals who completed the previous courses. Training will once again be held in Gauteng during August, Western Cape during September and KZN during October. Training is also being presented on poultry farms.
The broad function of the Technical Committee with the supporting subcommittees is, together with the role-players, to create the necessary liaison forum, be involved in government-implemented regulations, and maintain the required good image and confidence in the product as presented to the consumer.
Available information and advice to the SAPA Management Committee should be provided on a continuous basis. Liaison with concerned authorities and bodies involved in the poultry industry should take place with the necessary mutual acknowledgement of each other’s knowledge and integrity. Where the motive of profit is followed in a healthy way, protection of the integrity of the most affordable product is so much more important.
The opportunity should exist for discussions on food safety and the integrity of the product offered to the consumer to take place with the necessary authority and expertise in the suitable forum and in a transparent manner in order to create and maintain consumer trust.
The unfortunate media circus regarding flavour enhancement and brine injection of poultry meat has been handled with great responsibility. The proposed codes of practice and clear presentations of various levels should have left the consumer well informed and reassured.
It is the responsibility of the poultry industry, which has developed largely independently of government involvement with regard to industry standards and resultant food safety and product quality, to now, when there is more pressure to comply with stricter legislation and associated regulations, maintain and strengthen the confidence of the consumer.
It is indeed necessary that such important qualities and factors not be watered down or slackened.
The industry is facing major challenges. These can only be successfully addressed and handled with the necessary inputs from all the role-payers, especially with regard to national disease-management systems and control programmes, product safety and quality, and the integrity of the product that is made available to the consumer.
Each one of us in the industry, through the funds made available by approved levies, contributes to the necessary funding for the establishment of the required structures and ensuring the necessary technical support.
Funding of the essential elements to keep the industry healthy as development and change occur will probably in future be known as the watershed period – when the element of uncertainty about the capacity of the authority to manage controlled poultry diseases changed into an opportunity for the industry and the role-players concerned to perform this with precision and professionalism.

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AVI Africa - Presentations - Tuesday, 31 May 2011

Management Report

INTRODUCTION | INLEIDING

STATE OF THE INDUSTRY | STAND VAN DIE BEDRYF

The Broiler Organisation

The Chick Producer Organisation

The Developing Poultry Farmers Organisation

The Egg Organisation

The Technical Committee

Small Footprint. Big Impact