The industry carried through tight margins into the New Year as production costs remain elevated which was exacerbated by the ongoing power cuts.

An agricultural economist at FNB, Paul Makube, said although South Africa is well supplied with chicken, load-shedding had already disrupted operations in December 2022. This resulted in the irregular availability of some product lines for some fast-food outlets.

ALSO READ: The price of chicken scrutinised

Makube explained that the situation worsened early in 2023 which affected the whole chicken value chain and the broader agriculture sector, especially the electricity-intensive production systems such as poultry, pork, dairy, and irrigated crops, while up the value chain, it impacted negatively on abattoirs, feed milling, and other produce processing operations.

He added that chicken prices might have to increase in order to recover costs and improve margins enough to stimulate further expansion and investment. But it will make the cheapest source of animal protein unaffordable for millions of South Africans.

ALSO READ: Suspension of anti-dumping duties on chicken welcomed

However, Makube reassured that there is some positive news for consumers as the overall inflation rate has shown signs of slowing down. This is as the December 2022 Consumer Price Inflation (CPI) eased to 7.2% year-on-year (y/y) with the food CPI off the 2022 peak at 12.7% y/y.

“We saw a similar trend in global food prices with the Food and Agriculture Organization’s (FAO) monthly food price index in January 2023 declining for the tenth consecutive month by 0.8% m/m and 3.3% y/y, and of the past eleven high by almost 18%.

“On the production side, maize futures showed some moderation with white maize for May-23 and July-23 delivery already down by 10% and 11% relative to the 2022 highs during November at R4348/t and R4311/t respectively in this week’s opening trade.

“Though still at a premium over its counterpart, yellow maize showed a similar trend and declined by just over 7% during the same period at R4447/t and R4443/t for the May-23 and Jul-23 contracts respectively.

“This bodes well for a potential reduction in feed costs and expanding positive feeding margins as the year progresses,” Makube explained further.

He further stated that they expect a reprieve for consumers early in the New Year. Demand for meat is lower after the December festivities. Also, fuel and electricity costs remain high in a tight economic environment with costs of electricity and transport still elevated. Makube concluded that all these factors will likely place downward pressure on meat prices.

OFM News