It’s not the chicken price, it’s the egg

The drought and its devastating impact have been top of mind for producers, retailers, government and consumers, with the National Agricultural Marketing Council and StatsSA mistakenly reporting that meat prices have increased considerably. This is however not the case; rather, this impression is the result of a problem with the data collection system.  The real increase lies in the price of eggs.

Although South African consumers know a lot about the poultry meat industry, very little is known about the egg industry, even though it is also prone to similar challenges, including price squeezes by retailers, increasing input costs and labour issues, which all have a significant impact on the profitability of egg producers.

In the last two months, the egg industry situation has experienced a sudden shift from an oversupply of eggs to a shortage of eggs, with some producers reporting a balanced environment, while most are reporting a shortage of eggs.

Unlike the broiler industry that is, in most cases, an integrated large-scale production system, the egg industry is made up of medium scale producers, mainly family owned businesses. In today’s difficult times, most producers have great difficulty absorbing high input costs, resulting in more farmers exiting the industry, scaling down operations by emptying their farms earlier than usual, and not restocking. Reports are surfacing of farmers cancelling large orders of point of lay pullets usually bought to restock, which results in a surplus of point of lay hens in the market.

The decline in the national layer flock means that egg prices to consumers are likely to increase. This will follow the predicted trends as seen in other industries feeling the brunt of exorbitant grain price increases – and subsequent animal feed price increases.

The market for hens that have finished their productive lives will see an increase in supply in the short-term. However, this will be followed by a period of shortage as farmers start keeping their flocks for longer to compensate for the shortage of eggs, further exacerbating the shortage of low-cost chicken and pushing up the price for those who can least afford it.