Egg and chicken prices on the rise: Factors behind the increase

Eggs and chicken are still way more expensive than only a few months ago, as anyone pushing a shopping trolley through the aisles of their local supermarket will know.

Not long ago, the cheapest eggs were in the region of R14 for a pack of six. The cheapest price now is in the mid R20s. Chicken used to be the cheapest protein; a shopper with a keen eye could get fresh chicken for less than R60 per kilogram two years ago. It is now difficult to find it for less than R85 per kilogram.

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Indeed, Statistics SA wrote in an analysis of the latest inflation figures that poultry and egg prices “continue to heat up”.

“Food and non-alcoholic beverages sub-categories that registered a rise in inflation in December include meat, milk, eggs and cheese, fish, fruit and the miscellaneous sub-category referred to as ‘other’ food.

“Annual meat inflation ticked up to 3.9% in December from 3.5% in November. Sharp annual price increases continue to haunt poultry products, such as chicken giblets (up 18.5%), fresh chicken portions (up 14.6%), non-individually quick frozen portions (up 8.8%), whole chickens (up 8.4%) and individually quick frozen chicken portions (up 6.4%).

“The milk, eggs and cheese price index increased by 14,5% in the 12 months to December, higher than November’s rate of 13.9%,” according to Stats SA.

The statisticians specifically mentioned that the increase in the price of eggs was to blame, with Stats SA’s average price for different sizes of eggs increasing by around 40% compared to a year ago.

“The 12-month increase in egg prices was 38%, slightly lower than November’s print of 39.9%,” it says.

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A look at the list of prices as surveyed monthly by Stats SA and available for download on its website shows that the price of eggs has increased a bit year after year.

At the beginning of 2017, six eggs were priced below R15; at the end of 2017, the price rose to just above R16. It ran up to more than R17 for a few months but still ended 2019 at R16 for a carton.

Price of six eggs

Bird flu

The first bout of a new strain of avian influenza during the first few months of 2020 and the culling of millions of chickens to stop its spread resulted in the first shortage of eggs.

The Stats SA data shows that the price of eggs increased from below R16 per carton of six in March 2020 to above R26 in April 2020.

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The price of chicken increased from around R50 per kilogram (fresh whole chicken) in December of that year to R65 per kilogram within six months.

That highly pathogenic avian influenza (HPAI) outbreak was contained, and prices declined somewhat, but the respite was only temporary.

Another outbreak of a more contagious strain of bird flu hit SA during the first months of 2023. It spread quickly because the disease is transmitted by wild birds and carried by bird droppings.

It is estimated that more than 10 million chickens became infected.

Quantum Foods

Quantum Foods, one of SA’s largest egg producers, said in its latest annual report that one of its big farms, Lemoenkloof, noticed the disease in the second half of April 2023. It was the third time this farm had been affected.

Lemoenkloof supplies about 13% of Quantum Foods’s eggs and was repopulated in July 2022 after culling 400 000 hens during the previous outbreak. Towards the end of the financial year, further outbreaks at Quantum Foods farms in Gauteng and the North West were detected, according to the company.

“The value of biological assets (layer hens and breeding stock) written off during financial 2023 amounted to R155 million. This excludes the further cost of feed and eggs that had to be destroyed as well as the direct cost of destroying birds and disinfecting facilities.

“Additional costs to move eggs to areas impacted by HPAI had to be incurred, and we lost the potential income from selling birds and eggs,” says Quantum.

“HPAI outbreaks have become endemic in SA. It can result in operations shutting down between six and nine months and impacts the entire value chain. Layer farms and breeders are more at risk than commercial broilers, as layer and breeder flocks remain on farms much longer.”

The company noted the devastating impact of bird flu on the economy and employees as it causes a sudden drop in demand for animal feed – an important source of revenue for most chicken producers.

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It necessitated layoff agreements with employees. “Although this will enable employees to return to work once the farms are operational again, it has a negative financial impact on them and their families,” it says.

There is no vaccine available at present. The government has, in principle, approved the use of vaccination to mitigate the risk of HPAI infection, but it still needs to approve a feasible protocol for vaccination.

Under control

Izaak Breitenbach, CEO of the SA Poultry Association (Sapa), says the disease is under control and the SA poultry industry is on the road to recovery. The last new infections were recorded in November 2023.

“With strong biosecurity protocols and monitoring programmes in place, evidence suggests that the infection rate has peaked, and after very serious initial concerns, the recovery process is currently underway,” he says.

“To date, we culled 9.5 million chickens, which included 3.5 million broiler breeders and 6 million commercial layer birds,” says Breitenbach.

Sapa notes that 9.5 million chickens represent a significant portion of the national flock. “Many poultry farmers have been badly affected by the outbreak and aren’t compensated for these losses in line with the Animal Diseases Act.”

Breitenbach says there is still a shortage of eggs but more than enough meat. “The average slaughter numbers are at 21.5 million birds per week. That is back to normal.

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“Chicken prices have reduced in January 2024, actually indicating an oversupply of meat, because of imports.

“Total production imports plus local production has increased from 175 000 tons per month in September 2023 to 195 000 tons in November 2023,” says Breitenbach.

Sapa indicates that the industry’s main challenge now is the replacement of chickens that had to be killed during the avian flu outbreak. That will take another six to 12 months, it says.

“The next big challenge is to compete with the rebate on import tariffs announced by Department of Trade and Industry Minister Ebrahim Patel. We are disappointed in this since there is no shortage of meat that [is] necessitating more imports through a tariff rebate,” says Breitenbach.

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While egg prices are still close to double the levels of a year ago, Sapa expects them to decline again.

“Prices will come down, but the shortage will probably last for another six months,” says Breitenbach, meaning that Sapa’s eggs-every-day mantra will cost consumers more for a few months longer.

This article was republished from Moneyweb. Read the original here