Economist Dawie Maree says consumers in the Western Cape can expect to feel some price pressure on eggs in at least the next four weeks.. Picture - iStock
The latest outbreak of the highly pathogenic avian influenza (HPAI/bird flu) in the Western Cape, has resulted in at least 550 000 chickens being slaughtered and many more eggs being destroyed in attempts to contain the disease.
This is according to general manager of the South African Poultry Association (Sapa), Izaak Breitenbach, who spoke to Moneyweb on Thursday.
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This is the second bird flu outbreak to hit the region this year. The first one occurred in April, concerning the JSE-listed producer of Nulaid Eggs, Quantum Foods, which had to slaughter at least 420 000 birds to curb the disease’s spread.
At the end of May, the Department of Agriculture, Land reform and Rural Development issued a notice alerting the public that five HPAI outbreaks have been confirmed at commercial chicken farms in the province to date. It added that the affected farms are under quarantine to contain the disease.
“We’ve got two farms and five sites on the two farms that are positive for highly pathogenic Avian Influenza. It was an infection from wild birds to chicken, so we haven’t seen a spread from farm-to-farm in this particular case,” Breitenbach says.
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To contain the outbreak and prevent exposure to consumers, farmers on the affected farms – as well as those in a three-kilometre radius of the site of infection – are required to slaughter all chickens and to destroy all eggs produced.
“None of the meat or the eggs will enter the retail or wholesale chains, so there’s no direct product from a highly pathogenic avian influenza flock – (nor) indirect like eggs, so there’s no chance of it (having) an impact on a consumer,” he added.
Although Sapa cannot put an exact figure on the value lost as a result of the mass slaughtering and crushing of eggs in efforts to control the outbreak, Breitenbach has described it as a massive financial loss for farmers.
To put the impact into context, in its April run-in with the bird flu Quantum Foods informed investors that its books would lose R34 million as a result of the contamination of its Lemoenkloof layer farm.
Breitenbach further adds that an event like this creates a double whammy for poultry producers, who are already under immense pressure due to persistent power cuts, as well as higher feed- and input costs.
“Remember these are egg-producing birds and they should have produced eggs in the future, and they are not producing those eggs. So, the farmer has got two losses: the loss of the birds that were culled and secondly the lack of income from these birds.”
“And in all these cases, because we’ve got a farm with sites all those birds are culled, so if it’s an independent farmer, basically they go from a normal income to no income at all,” he adds.
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As the outbreak is currently localised to the Western Cape, Sapa forecasts that the area will experience a reduction in supply and consumers there should expect to feel some upward price pressure, while consumers in other parts of the country will stay largely unaffected.
“We have between 28 and 29 million commercial egg-layer birds in production at any point in time – and I did mention that we culled 550 000 – so proportionally it’s not that big.”
Head of information and marketing at FNB Agribusiness Dawie Maree concedes with the Sapa forecast, adding that pricing pressure will be felt most on eggs and not necessarily on poultry meat and that consumers in the province should prepare to start feeling the pinch in the next four to six weeks.
According to the latest Statistics South Africa (Stats SA) CPI data, the milk, eggs and cheese product group registered a 14.5% annual price increase in April, the largest annual price rise since January 2009, with a half-a-dozen tray of eggs being R1.21 cents more expensive at R21.59 than a year prior.
Recent data contained in the Pietermaritzburg Economic Justice & Dignity Group’s (PMBEJD) Household Affordability Index showed 60 eggs were 9% more expensive in May 2023, at R129.79, than they were during the same period in 2022.
“The impact will be felt for eggs and it will be the same scenario that we had about four years ago when they also had an avian influenza outbreak in the Western Cape and there was a shortage of eggs. So, we can definitely expect some pricing pressure,” Maree says.
The economist says shortages aren’t likely, as producers and retailers will look to other provinces to plug supply gaps. However, he adds that what the consumer does not feel in supply shortages will be felt in egg prices, as they will most likely be absorbing the cost of transporting eggs from other parts of the country.
“I would say we can probably see a 10% to 15% increase in egg prices in the Western Cape.”
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The poultry industry has battled massive outbreaks before. During a 12-month period between 2021 and 2022, the sector was forced to cull over three million birds after 145 bird flu outbreaks were recorded.
Such experiences of drawn-out fights with the disease make it difficult for the industry to forecast an end to the latest outbreak.
In fact, for Sapa primary infections – which happen between wild birds and chickens – remain a key threat for the overburdened sector and will remain so for the rest of the winter season.
“We are under threat from the wild birds that are positive for highly pathogenic avian influenza, so we can get other infections,” Breitenbach said.
“We don’t foresee further spread of secondary infection – chicken to chicken – but there’s always a risk, specifically now in winter that we will get other incidents of the disease going from (wild) birds to chickens.”
For Quantum Foods, the possibility of a further spread of the bird flu poses a considerable threat to job security for the sector.
“As a company we are always concerned about Avian Flu outbreaks and the spreading thereof. If the Avian Flu outbreaks are not managed and contained correctly, it could lead to significant losses for the poultry industry,” Astral said in an emailed response to Moneyweb’s queries.
“All poultry infected with HPAI must be culled so there is an immediate loss of stock and products, but it could possibly also lead to job losses, as the recovery time from an outbreak could be many months and it would depend on the circumstances of the producer involved.”
This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.
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