---

1.INTRODUCTION

---

1.1       Historical Overview

---

1.1.1    Establishment

The Southern African Poultry Association (SAPA) was established in 1904 in Kimberley, mainly as a body of poultry “fanciers” to co-ordinate and promote show holding and later to stage egg laying tests, and to provide an instrument to voice the feelings of the industry.

Historically, poultry was very much part of the South African scene.  Thousands of people kept poultry, and it was seen as a backyard industry.  Only the largest units kept between two and four thousand birds under extensive conditions.  Therefore, poultry clubs consisted of people from all walks of life who considered poultry also to be a hobby.  A number of poultry clubs were in existence, arranging competitions and shows.  The main functions of the Southern African Poultry Association were therefore to compose and formulate show rules and regulate the appointment of judges.

1.1.2    Early Years

The early years were difficult and turbulent, and the main issues always emerged as area representation and decentralisation of management.  Despite clashes between exhibitors and “commercial producers” – a bad word at the time – the Association forged ahead.

A South African Poultry Breeders Register was established in 1926, and in 1936, assurance was given that Government would definitely recognise SAPA as the representative organisation of the industry.  At SAPA’s request, the Egg Control Board was established in 1951. The Poultry Bulletin has been published by SAPA as its mouthpiece since 1937. Prior to that, from at least 1906, SAPA had a poultry magazine under various names to air its views.

1.1.3    Milestones

Milestones in the history of SAPA have been developing the commercial poultry industry as well as the work of the Association in the establishment of a Record of Production Register, which was deemed to be of great value at the time.  SAPA was also instrumental in making available modern poultry equipment when hen batteries were still a new concept.
Other milestones included:

• Getting import tariffs approved
• The passing of the Livestock Improvement Act
• Bilateral Trade Agreements
• Having GST on Livestock removed and later VAT on eggs removed
• Training:
• SAPA / YTA / KZNPI courses
• Advanced veterinary training at UP Onderstepoort supported by SAPA
• Reduction of surcharge on imported breeding material and equipment
• Setting up a Central Reference Laboratory
• Establishing a statutory levy as the main funding vehicle of SAPA in 2009

1.1.4    Formation of the DPFO

A division of SAPA, called the DEVELOPING POULTRY FARMERS’ ORGANISATION (DPFO), was established in 2003 to cater for the specific needs and requirements of emerging and small-scale poultry producers. It was recognised by the Southern African Poultry Association (SAPA) that specific and significant resources would have to be put in place in addition to merely creating an organisation. Significant support will be required by both relevant government agencies and the private sector. The DPFO will have to fulfill a dynamic capacity building and advocacy role, and will have to exert pressure in order to mobilise resources from various quarters, including government and the donor community.
 
The formation of the DPFO started a dynamic process that will enable emerging poultry farmers from previously disadvantaged communities to finally move into the mainstream of the economy. This journey will gain great momentum now that some guaranteed funding through the levy is available.

1.2       Representing the industry

The Southern African Poultry Association (SAPA) represents poultry farmers, both on a commercial level as well as developing poultry farmers, within the following three branches (some of which are integrated in major operations):

• The day-old chick supply industry
• The egg industry
• The broiler industry
• Small scale and emerging farmers

Our Vision

To create a milieu with-in which members can become world-class competitors in the food market.

 Our Mission

To be an industry-driven organisation to address collective issues.

1.3       Advancing improvement of the poultry industry

SAPA is a fully-fledged commercial representative body that aims to advance all matters leading towards the improvement of the poultry and allied industries in South Africa by embracing and coordinating the objectives of its subsidiary organisations.
SAPA is controlled by a Management Committee, that:

• Coordinates its activities and objectives
• Oversees its administration
• Looks after the collective interests of its members

SAPA’s Management Committee has four affiliate committees - Broiler, Egg, Chick Producers and Developing Poultry Farmers, as well as a Technical Committee comprised of workgroups covering issues such as Animal welfare, Animal Health, Training, Research and Food Safety. These workgroups involve key stakeholders such as the NSPCA (until February 2011), Department of Health, Department of Agriculture, Forestry and Fisheries and the Consumer Goods Council of South Africa.

1.3.1    Egg Organisation

This Organisation and its Committee have as its main missions improving the egg industry and promoting it on a national level. This entails a critical evaluation of the methodology of regulatory structures; supporting an industry Code of Practice; liaising with Government on crucial matters; liaising with consumer bodies; collection, compilation and distribution of statistics; as well as striving to build a stronger image and market for the egg industry on an ongoing basis through our Eggs are Magic campaign and to support training.

1.3.2    Broiler Organisation

The main objective of the Broiler Organisation and its Committee is to serve the interest of the broiler industry on a national level, which entails tending to poultry production and processing matters and promoting the SAPA Code of Practice; collection, compilation and distribution of statistics; ensure that appropriate action is taken to promote positive aspects of the image of the broiler industry at large; institute and maintain an importation protective tariff; and to support industry training.

1.3.3    Chick Producers’ Organisation

This Organisation and its Committee give specialised attention to matters concerning the members of the Chick Producers’ Organisation in order to help enable them to supply quality breeding stock for South Africa. The main objective is therefore to improve and maintain the standard of the country’s breeding stock.  They monitor imports, act as a Breed Society, review regulations, stay abreast of developments in poultry breeding worldwide and provide members with technical and statistical information and support industry training.
1.3.4    DEVELOPING POULTRY FARMERS’ ORGANISATION
The DPFO and its Committee caters for the needs of - and matters concerning - small scale and emerging farmers.  The DPFO fulfill a dynamic capacity building and advocacy role with the aim of providing provincial structuring and partnerships with the state. Small, medium and micro enterprises represent an important vehicle to address the challenges of job creation, economic growth and equity in our country. The DPFO can only deliver within its capacity, and most of the time, within a long-term timeframe.

1.4       Information for the industry

One of the practical problems SAPA has is the effective, efficient and rapid communication with our members and interested parties on an on-going basis. To facilitate a free-flow of information between all parties, our website – www.sapoultry.co.za - was established to meet this need. 

In addition to the Poultry Bulletin that will continue to be an important way of sharing information with all members, the website, supplemented with other electronic communications, will greatly enhance the communication process, assist in the dissemination of information and improve the speed at which information is made available.

---

2.THE POULTRY INDUSTRY IN SOUTH AFRICA

---

2.1       Dominating the agricultural sector

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 graph below depicts the consumption of different meat categories of animal products in South Africa.

The graph below depicts the different protein sources in animal products, with Egg production added to Poultry production in comparison with other meat industries.

Production of poultry and egg industries together increased with 4% in 2010 in comparison with 2009, while the combined beef, pork, lamb and goat meat production increased by 13% over the same time period.

2.2       Feeding the Nation

The poultry industry can continue to claim to feed the nation. More poultry products in kilogram terms are being consumed annually than all other animal protein sources combined.  The per capita consumption of poultry meat in kg terms was 32,96 kg per person per annum and for eggs it was 8,48 kg in 2010, a combined per capita consumption of  41,44 kg per person per annum.  In comparison with poultry, the per capita consumption for beef was 17,77 kg, pork was 4,58 kg and mutton and goat was 3,16 kg per person per annum, a combined per capita consumption of 25,39 kg per person per annum.  This is 16,05 kg per person less than the combined poultry per capita.

A comparison of consumption of different animal products that are all sources of protein can be seen in the graph below:

The poultry industry provides 62,2% of locally produced animal protein consumed in SA (on a volume (kg) basis). 

In 2010, the poultry industry supplied, including imports: 

• 1 661 840  tonnes of poultry meat
• 446 720 tonnes of eggs and egg product

(Source: DAFF)

2.2.1    Employment and Job Creation

In addition to its importance as a source of food and its contribution to the nation’s Gross Domestic Product, the SA poultry industry remains an important contributor to job creation and employment opportunities, both in the formal and informal sector, with in excess of 80% of the number of producers consisting of SMMEs (Small, Medium and Micro Enterprises).  Approximately 10% of all agricultural sector workers are employed in the poultry sector.

Known poultry farmers/employment include:            

• Commercial Broilers (404):

• 199 producers
• 205 contract growers

• Commercial Eggs (267)

• 267 producers

• Small Farmers (PDIs) established by government  (1 554)
• Breeders

Poultry industry employment includes:

• Formal and upstream (estimated 48 000)

• Broiler                35 000
• Egg                      6 000
• Chick Producer     7 000

SMME Development

The poultry industry has gone a long way in organising Small, Medium and Micro Enterprises (SMMEs). The establishment of the Developing Poultry Farmers Organisation (DPFO) has given expression to the strategic objective of the Southern African Poultry Association to advance the objectives of the government strategies of broad-based economic empowerment, job creation and SMME development.

Development projects, under the auspices of SAPA and the DPFO, will be rolled out to:

• Prepare them to organise the SMME sector provincially and nationally;
• Facilitate access to services for developing poultry farmers in order to provide them with the necessary technical skills to ensure successful poultry and egg production;
• Ensure empowerment of SMME leaders with the understanding of the drivers in poultry production and its environment;
• Source funds for training and development of support structures and relevant research.

---

3. THE SA POULTRY INDUSTRY'S SUB-CONTINENTAL IMPACT

---

3.1       Southern African Development Community (SADC) overview

Headquartered in Gaborone, Botswana, SADC member states are Angola, Botswana, the Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe.

3.2       The SADC Vision and Mission

The SADC Vision is one of a common future, a future within a regional community that will ensure economic well-being, improvement of the standards of living and quality of life, freedom and social justice and peace and security for the peoples of Southern Africa. This shared vision is anchored in the common values and principles and the historical and cultural affinities that exist between the peoples of Southern Africa.

The SADC Mission is to promote sustainable and equitable economic growth and socio-economic development through efficient productive systems, deeper co-operation and integration, good governance, and durable peace and security, so that the region emerges as a competitive and effective player in international relations and the world economy.

3.3       The SA poultry industry’s impact on SADC countries

COMMODITY: CHICKEN MEAT

YEAR: 2009 in comparison with 1999

 

COMMODITY: HEN EGGS IN SHELL

YEAR: 2009 in comparison with 1999

---

4. INTERNATIONAL COMPETITIVENESS

---

4.1       International exposure

Poultry imports into SA are largely exchange rate driven, thus negatively affecting expansion possibilities for the last eight out of ten years. During 2010, the annual imports under tariff headings 0207 (raw poultry) and 1602 (processed poultry) were in the order of 16% of domestic consumption.

Exports promise a window of opportunity for the industry, with an almost constant decline in our currency value. However, this has to be offset against the costs of production in competitor countries such as Brazil, where the input costs are substantially lower than in SA. To be truly competitive, a level playing field is required. A limitation for export however is the lack of access to large markets such as the EU and USA, where sanitary measures forbid exports to these lucrative markets.

Illegal cross border trade poses substantial risks to the poultry industry, not just economic but from a disease perspective. This has taken on an increasingly critical dimension, given the spread of Notifiable Avian Influenza. In its drive to combat smuggling, SAPA uses various agencies to assist the state in their efforts.

4.2       Broiler Meat Production

Of the 203 countries listed as producing 79,4 million tonnes of world broiler meat in 2008, the Republic of South Africa occupies 17th position with a market share of 1,23%.  The first three countries total 48% of world broiler production. These are the USA with 21%, China with 14% and Brazil with 13%.3    

4.3       Hen Shell Egg Production

Of the 204 countries listed for hen shell egg production, South Africa is ranked 25th with a market share of 0,8%. World egg production is dominated by China with 37,5% (23 million tons) of the global total of 60,7 million tonnes.  Other major producers include the USA with 8,8%, India 4,5% and Japan 4,2%.4  

---

5. IMPACT OF SA’S POULTRY INDUSTRY ON RELATED INDUSTRIES IN THE COUNTRY

---

Given the agricultural dominance of the poultry industry in South Africa, our influence on the closely-related feed industry is considerable.

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.

5.1       Feed Sales

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.

---

6.       MAJOR DRIVERS IN THE POULTRY INDUSTRY

---

Supply side issues

• The maize price - influenced by:
• Exchange rates
• CBOT
• Local crop size
• SAFEX speculation
• Diseases (Newcastle Disease, potential Avian Influenza, etc)
• Imports

Demand side issues

• Consumer preferences
• Imports (exchange rate driven)
• Diseases (Avian Influenza, etc.)

---

7.       NATIONAL AGRICULTURAL STRATEGY

---

SAPA has agreed with the Department of Agriculture, Forestry and Fisheries on a series of strategic programs and projects to support and give effect to the National Agricultural Strategy.

---

8.       ANIMAL HEALTH / DISEASE

---

A routine surveillance program for Notifiable Avian Influenza (bird flu) using a protocol in line with OIE guidelines has been in place since September 2005.  According to the protocol, all commercial ostriches and chickens as well as non-commercial chickens are sampled and tested on a six-monthly basis for both the H5 and H7 Avian Influenza subtypes. The outbreak of H5N2 in ostriches in the Southern Cape was successfully eradicated.  No further isolations or identification of the highly pathogenic virus could be made. The EU informed South Africa that it accepts the country’s status as free from Highly Pathogenic Notifiable Avian Influenza (HPNAI).

Chickens have, at all times, remained negative for the H5N2 virus.

We are now almost resilient to the effects of diseases on our poultry sector as a whole due to the continuous waves of various diseases moving over us on a constant basis. Catastrophic diseases such as Newcastle Disease remain virulent for the fourth year of constant occurrences, not to mention coryza, pox, low-pathogenic AI, typhoid and others.

Also on the Mycoplasma spp. incidence we have moved backwards as very few flocks, if any, are still Mycoplasma spp. negative.  This, together with live-bird movement, highly variable bio-security and poor vaccination programs, makes it impossible to effectively manage diseases in the industry. It will take a structured and supported long-term disease-reduction program to at least reduce the negative impact of diseases on egg and broiler economics.  

8.1       PDMU

Under the working title of 'The Poultry Disease Management Unit', a structured and supported long-term disease-reduction program which is to be funded by SAPA is in the final planning and approval stages and should be rolled out during the next three years.

Further meetings with the University of Pretoria have been held and the plan for the PDMU has been approved by the Management Committee. As this will be our single biggest expense it is worth explaining the plan in some detail. Up until the end of September 2010, SAPA had been subventing the salary of the Director of the Poultry Reference Centre. This was a long standing arrangement that helped improve the salaries of the last few Directors of the Centre. With the resignation of the last Director (Shahn Bisschop) we had decided to stop this practice and, together with the University agree on a new form of cooperation. This has the objective of ensuring that the industry has sufficient research and academic support commensurate with our industry size.

A new structure with three separate entities is to be created which has
            - A section of Poultry Health (the straight academic part of the faculty)
            - A new position of Chair in Poultry Health and Production
A Poultry Disease Management Unit (university rules do not allow the term ‘agency’) with the acronym PDMU

A Poultry Management and Advisory Committee with equal representation from the Faculty of Veterinary Science and SAPA will be set up to manage this partnership. We still have to jointly finalise the terms of reference of the Committee with the Faculty. The Chair in Poultry Health and Production will provide the secretariat but will not have any voting rights and each party will contribute four members to the Committee.

The University of Pretoria will provide:

• Infrastructure for the Chair in Poultry Health and Production;
• Salary, infrastructure and operational budget for the Section of Poultry Health (two lecturers/senior lecturers);
• The poultry research facilities under the management of the Department of Production Animal Studies; and
• Accommodation for the PDMU.

SAPA will provide:

• Salary for the Chair in Poultry Health and Production;
• Once-off funding for the recapitalisation of the research infrastructure of the Faculty in the area of poultry diseases;
• Funding for the PDMU

Over and above this SAPA will also support individual research projects on a per case basis and the Faculty will always apply for THRIP funding from the State which increases the research budget by 50% if the application is successful. This increases the scope of research work we can fund.  THRIP stands for “Technology and Human Resources for Industry Programme”, a programme of the Department of Trade and Industry through the National Research Foundation.

What will the industry get for this investment? Firstly you will get a system to ensure that poultry studies are given the status they deserve. Secondly you will get the development of a research capacity that will help give us the information we need. If necessary we will head hunt the Chair position from elsewhere in the world so that the University of Pretoria becomes an attractive place for students to do post graduate studies. Thirdly you will get a productive home for the PDMU in an environment which will allow collegial relations with a range of other scientifically minded people and so help as a sounding board for the PDMU staff. For data confidentiality reasons the actual surveillance work will be done off-site in the same way we have successfully done the NAI work to assist DAFF. Fourthly South Africa will get a top quality physical research facility which will also attract student interest.

The initial partnership will be for a period of three years and will be renewable depending on the renewal of the statutory levy.

8.2       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 partly 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.

---

9.       FOOD SAFETY ISSUES

---

There are many concerns facing the industry, not least of these centred on food safety. Some important matters that need input from various sectors of the poultry industry and other role-players like the national Departments of Agriculture, Forestry and Fisheries and Health, are:

• The possible implications of Avian Influenza (bird flu) on poultry production and consumption in the RSA if or when it occurs in the country,
• The new broiler-processing regulations, Notice No. 153 of 24/02/2006, under the Meat Safety Act, (Act 40 of 2000) and the possible effect it will have on the availability of safer chicken-meat products for the consumer,
• The new Regulation R146 under the Foodstuffs, Cosmetics and Disinfectants Act (Act 54 of 1972) which deals with regulations relating to the labelling and advertising of foodstuffs and will affect a number of our marketing and production practices
• The Consumer Protection Act whose regulations are scheduled to come into effect in April 2011 but are still not properly known to the industry.
• Pathogen-reduction plans and the responsible use of antibiotics in the production processes of broiler growing and egg production. The ethical responsibility of poultry farmers and their veterinary poultry consultants is a major factor in the responsible application of such antimicrobial remedies, which could have far-reaching effects if abused,
• Water pick-up and flavour enhancement: to do or not to do, is the question!  The debate on the subject remains unresolved. Flavour enhancement definitely improves the consumer taste experience and regulation of the practice is still apparently in the planning phase at the Department of Agriculture, Forestry and Fisheries.
• Food safety and quality audit - the need to standardise various audit requirements as demanded by different buyers or retail groups should be addressed to prevent unfair practices. The announcement of the initiation of a standard audit by the CGCSA, initially planned for the last quarter of 2010, but now delayed, may be of practical benefit to all producers.

• Currently, representation of the Consumer Goods Council of SA in our Food Safety workgroup 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.

---

10.     DAY-OLD CHICK SUPPLY INDUSTRY

---

10.1   Industry Overview

The day-old chick supply industry supplies inputs to both the egg and the broiler industries. Pure lines are imported at either great-grandparent or grandparent level. Most imports are at the grandparent level with some parent level imports. No commercial level day old chicks or fertile eggs may be imported.

The following factors influence this industry:

• It is a time consuming process, due to the lag time in expansion of commercial chick numbers: at least 18 months are required from pure lines and six months from parent stock.
• The Livestock Improvement Act stipulates pure line imports.
• A quarantine period of 8 weeks from day-old applies to all imported live chicks.
• During the whole rearing period it is critical to control the mass of parent females and especially so between the 18 to 24 week period.  If not according to standard, dramatic losses at the level of fertile egg numbers and overall profitability will be experienced.

The following diagram illustrates the poultry meat process:

The following diagram illustrates the egg production process:

• Commercial broiler chick placements were as much as 1,032 billion during 2010.  The potential number that can be hatched is 20,109 million per week
• 6,23 million female parents produced a commercial progeny of 1,032 billion chicks for the broiler industry from an estimated 400 000 grandparents and great-grandparents. 
• Layer Breeder parents were estimated at 300 000 per annum (2010).
• Chick producers employ around 7 000 people.
• Genetic progress:

Layers:

TRAIT	2010
EGGS PER HEN PER ANNUM	280
KG FEED PER KG EGGS	2,49
% MORTALITY PER ANNUM	7,45
% HENDAY PRODUCTION	79,7%

Broilers:

TRAIT	1968	1998	2004	2010
SLAUGHTER AGE	62 days	42 days	38 days	35 days
LIVE MASS	1,18 kg	1,79kg	1,82 kg	1,85 kg

 

 

Note:

• Availability of broiler chicks to the industry at large is such that figures based on parents placed indicate that substantial oversupply is possible.  Statistics show a steady increase in potential availability of commercial chicks, to the level of well on 20,1 million and more per week.
•   The inflow of broiler imports is still substantial and harming the potential expansion of chick producers as 16% of the end product market has been replaced with imports in 2010. 

10.2     Turnover

With the continued growth in both egg and broiler producers, the size of the chick industry continues to grow.  The chick producers' share of the total poultry industry is now approaching 12%.  The chick industry turnover in the layer market increased from R91 million in 2004 to R145 million in 2010.  During the same period, chick supply to the broiler industry increased from R1,608 billion to R3 400 billion.

10.3     Production

Broiler Chick Placements

The following graph illustrates the increase in broiler breeder placement numbers from 2000 to 2010:

Average broiler breeders placed per annum

The effect of a then growing economy is clear from the increase in placement numbers of broiler breeders. This continued growth is 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.

The graph depicted below shows the sideways trend in the potential broiler placements from 2008 onwards. These graphs are derived from parent-stock placements, which do not take into account the full effect of earlier depletion of breeder flocks.

Layer breeders

The impact that the worldwide economic downturn has had on the broiler industry as illustrated above, demonstrates a similar trend in impact on commercial egg producers, as illustrated below.

---

11. EGG INDUSTRY IN SOUTH AFRICA

---

11.1     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 24 million in 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 yet at its previous peak of 18,663 million cases reached in 2008, but should reach that during 2011.

11.2     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 554,3 million dozen eggs were sold in 2010 through various channels.

11.3     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.

• Laying flock
• 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.

• Egg production
• The total annual egg production increased from 17 862 000 cases in 2009 to 18 526 000 cases or 3,4% more in 2010, with a forecast of 19 073 000 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 18,526 million cases in 2010 to 19,2 million cases in 2011.

11.4     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 an 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

11.5     Trade

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 was 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.

11.6     Cost of Production

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 2009 when in 2008 an upward momentum on the back of rising maize and protein prices reached an average increase of 32%. In 2010, the average layer feed price was R2 102,77 per ton.

11.7   Provincial Distribution of Layers on layer and layer breeder farms in SA

In the table below, the provincial distribution of layer farms is depicted. This is not necessarily the province where the product is sold.

For the purposes of this report, in order to keep participants’ information confidential, the Northern Cape and Western Province will be considered as one province and also Mpumalanga and Limpopo provinces

EGG INDUSTRY
PROVINCE	TOTAL LAYER BIRDS	% OF LAYERS
EASTERN CAPE	910 178	3.4%
FREE STATE	4 672 075	17.7%
GAUTENG	6 595 820	24.9%
KWAZULU-NATAL	3 670 367	13.9%
LIMPOPO & MPUMALANGA	2 830 158	10.7%
NORTH WEST	2 583 665	9.8%
WESTERN AND NORTHERN CAPE	5 191 957	19.6%
TOTAL	26 454 220	100%

The total number of layer farms, incl. layer breeders, layer rearing farms that took part in the NAI surveillance survey was 256 farms.

11.8. Structure and Contribution 

An average laying flock of 23,1 million layers in 2010 produced 18,5 million cases or 555,8 million dozen eggs. The egg industry is a major supplier of food to the nation with 450 thousand tonnes consumed in 2010. The egg industry employs approximately 6 400 staff in the formal sector.  Layers of all stages consumed 0,83 million tonnes of feed in 2010. (Source: AFMA)

Human egg consumption increased by 17%  over 11 years from 113 eggs in 1999 to 132 eggs in 2010.  The per capita poultry consumption is set to increase commensurate with the escalation of the standard of living and economic growth.  Redistribution of wealth and opportunities will lead the way in achieving the material advancement of our population at large. Our fortunes are closely linked to the level of disposable income.  48 egg producers (SAPA members and non-members) produce in excess of 60% of total egg production while hundreds of smaller producers supply the balance.  New entrants into the egg industry are free to enter, the only limitation being the availability of day-old chicks, point of lays, capital and expertise.  Producers in the formal and informal industry sell layers as live birds at depletion age.

Normally the egg industry follows the cycles which are linked to the economic cycle and climatic factors.  Annual cycles reflect the normal highs in Easter and December.  The present financial position of both big and small producers are seriously marred by cost pressure, the state of the economy and imports.  The egg industry is totally dependent on maize and greatly affected by maize prices as maize is the source of feed energy to the industry.  Dependence on other feed ingredients as well as packing facilities are crucial determinants in the industry.

---

12.     BROILER INDUSTRY 

---

 12.1     Industry Overview

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 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.

12.2     TURNOVER

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.. As producers, the broiler industry is the largest segment of South African agriculture at 17,5% of all agricultural production and 35% of all animal products in South Africa (in Rand terms).

12.3     BROILER PRODUCTION

• 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

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.

12.4     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 the United States was 43 kg per year in 2010. As imports make up a sizeable percentage of consumption, this suggests that we can safely grow by 50% in volume terms.

12.5     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.

12.6     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 were 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.

 

The projected potential increase in the maize price from February 2011 to July 2011 are 3,68% inland and 3,56% at the coast.  Soya meal is projected to move sideways over the same period.

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.

12.7     Summary of current issues

• PERFORMANCE EFFICIENCY

Over a number of years, efficiencies in the industry have been improving. Efficiency improvements in broilers have led to a 3% reduction in mortalities between 1995 and 1997. Since then, an even better improvement of this parameter of efficiency has been recorded, which is now in the order of 4% to 6% - on par with USA at 4%. The Production Efficiency Factor improved from 150 to 263 while international PEFs are constantly represented between 270 and 300. The difference can be explained by the disease pressure we suffer, as well as our high altitude production systems, our market mix in terms of products and weights and a range of other reasons.

• 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.

• 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, predominantly from Brazil which 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.

• In evaluating the SA broiler industry, it is useful to keep in mind the following facts:

• High transport cost of raw materials via Spoornet’s rail service adds substantially to import parity, the domestic parameter affecting maize - and therefore feed - price.

• There are intrinsic disadvantages in SA for poultry production that inhibit us from becoming one of the best producers in the world. These aspects include:

• low yield (and relatively high prices) of grains, aggravated by the buffer effect of domestic and international freight and duty
• poultry production at high altitudes
• free movement of (even diseased) culled birds
• many informal flocks
• relatively unhindered (at zoo sanitary level) imports of poultry meat from many countries

12.8   Provincial distribution of broiler farms

In the table below, the provincial distribution of broiler farms (breeder and rearing) is depicted. This is not necessarily the province where the product is sold.

For the purposes of this report, in order to keep participants’ information confidential, the Northern Cape and Western Province will be considered as one province and also Mpumalanga and Limpopo provinces are combined.

BROILER INDUSTRY
PROVINCE	TOTAL BROILER BIRDS	% OF BROILERS
EASTERN CAPE	6 849 857	6.5%
FREE STATE	5 657 563	5.3%
GAUTENG	5 658 147	5.3%
KWAZULU-NATAL	16 308 753	15.4%
LIMPOPO & MPUMALANGA	23 880 194	22.6%
NORTH WEST	25 712 717	24.3%
WESTERN AND NORTHERN CAPE	21 793 000	20.6%
TOTAL	105 860 231	100%

The total number of farms that reported NAI surveillance was: NUMBER OF FARMS
Total number of broiler farms, incl. broiler breeders : 603

12.9   Structure and contribution

The weekly production of broilers in 2010 was 18,6 million broilers slaughtered per week at 1,35 kg dressed mass, of which an estimated 1 million per week is in the informal sector. The broiler industry has thepresent role as major supplier of food to the nation at 1,7 million tonnes consumed in 2010.  This figure includes imports.  The industry employs approximately 60 000 staff in formal sector and main input supply industries.  According to the AFMA chairman’s report, 3,09 million tonnes of their feed, representing 96,8% of the national feed production, were consumed by the broiler industry in 2010.  From 1997 to 2010, there was a 52% per capita consumption increase over 13 years from 21,7 kg in 1997 to 32,96 kg in 2010.  Per capita poultry consumption is set to increase commensurate with the escalation of the standard of living and economic growth.  Redistribution of wealth and opportunities will lead the way in achieving the material advancement of our population at large. Our fortunes are closely linked to the level of disposable income.

70% of total broiler production is supplied by 44 producers (SAPA members and non-members) and hundreds of smaller producers supply the balance.  New entrants are free to enter, the only limitation being the availability of day-old chicks, capital and expertise. There are a total of 265 abattoirs.  Many producers sell live birds at slaughter age in the formal and informal sector.

Normally the poultry industry follows the cycles which are linked to the economic cycle and climatic factors. Annual cycles reflect the normal highs in Easter and December. The present financial position of both big and small producers are seriously marred by cost pressure, the state of the economy and imports.

The following factors has an impact on the broiler industry:

• Feed costs.
• Import tariffs, which in effect determine maximum prices, not necessarily in line with domestic factors:
• Maintenance and increase of R2,20 tariff
• Anti-dumping duty (USA) of an average of R2,35 added to above
• The threat of USA leg quarters has been contained by the institution of the anti-dumping duty in 2000.
• Maize prices crucial as result of total dependency on it as source of feed energy.
• Dependence on feed ingredients and slaughter facilities are crucial determinants in the industry.

In a Free trade Agreement, the loss of protection will render us completely vulnerable to developed world traders.

---

13. CORPORATE SOCIAL RESPONSIBILITY 

---

13.1     Developing Poultry Farmers

Established in 2003, the Developing Poultry Farmers Organisation (DPFO) is a division of SAPA that caters for the specific needs and requirements of emerging and small-scale poultry producers.

The formation of the DPFO has started a dynamic process that will enable emerging poultry farmers from previously disadvantaged communities to finally move into the mainstream of the economy.

Strategically, the objectives of the DPFO are to:

• Maintain the DPFO as a fourth leg of SAPA as an independent body with the same rights as the other legs of SAPA;
• Promote and advance the SMME sector of the poultry industry in the RSA;
• Promote and advance all matters required to ensure a healthy poultry developing sector in South Africa relating to the improvement of the total broiler, egg and allied SMME industries as a financially feasible industry. This includes:

• Production,
• Grading,
• Packing,
• Transportation,
• Storage
• Marketing

Some activities to support the strategy include:

• Securing profitable production and supporting the sustainability of projects to provide adequate supplies of broiler products to consumers in areas where developing poultry farmers are active;
• Protecting the developing poultry and egg producer and/or industry from adverse legislation and any other negative actions;
• Promoting access to finance for members to develop their businesses;
• Collating information and market intelligence and making it available to members to assist them in successfully marketing their products through an understanding of the overall market phases

Another focus area of the DPFO is building capacity - be it intellectual, organisational, social, political, material, practical or financial - to assist the organisation and its members to achieve their objectives. Efforts to strengthen organisational capacities must not be separated from external change - or more specifically - from improvements in living standards and equity.

In order for the DPFO to fulfil a dynamic capacity building and advocacy role, support in terms of specific and significant resources – in addition to that provided by SAPA - is required from both relevant government agencies and the private sector. The DPFO will have to exert pressure in order to mobilise resources from various quarters, including government and the donor community.

13.2     Training and skills development

With training for our industry an area of major concern, SAPA has drawn up a training strategy for the industry encompassing all levels and acknowledging the current players in this market, including:

• AgriSETA (Agricultural Sector Education and Training Authority
• SAPA courses – SAPA/KZNPI
• Tertiary institutions
• National Skills Fund (NSF) training programmes, encompassing:

• SMME training
• Management.

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.

---

14. CONCLUSION 

---

The poultry industry at large has experienced one of its most challenging years in the last decade. We have had to endure increases in feed prices, which were mostly brought about by international developments and with local producers in an environment where no forms of state support, such as subsidies, were available. The influence of higher inflation and relatively high interest rates also contributed to aggravate cash-flow problems. Many members operating in the industry experienced a year of marginal profits, if any at all, and this has unfortunately taken its toll on the industry.

---

Southern African Poultry Association | Suider Afrikaanse Pluimveevereniging | Terms & Conditions