Poultry Price Relief Expected for Consumers

After significant price hikes in 2022 and 2023, poultry prices are expected to stabilise over the medium term, providing much-needed relief to consumers.

This anticipated relief is largely due to a stronger Rand and increased production from major suppliers like Brazil.

However, ongoing disease issues, such as the 2023 Highly Pathogenic Avian Influenza (HPAI) outbreak, could still disrupt poultry supply and push prices up.

Chicken makes up about two-thirds of the meat consumed in South Africa, with around 20% of local consumption met through imports, mostly frozen bone-in portions. South Africa is particularly vulnerable to export disruptions from Brazil, as over three-quarters of its chicken imports came from Brazil in 2023. As such, any supply interruption from Brazil could significantly impact price movements and the cost of affordable protein to end-consumers.

On the local front, lower feed prices are expected to improve margins, potentially boosting supply and helping to keep price increases in check over the medium term.

 

Average Poultry Prices (2021-2023) and Price Forecasts (2024-2027)

 

Outlook: Poultry Market 2024-2030

An annual growth rate of 5.8% is expected for South Africa’s poultry market from 2024 to 2030, driven by rising demand in both food services and households. Poultry is a key source of affordable protein, and its consumption is increasing due to health trends and dietary changes.

However, the market faces challenges such as strict regulations, high feed costs, disease outbreaks, and uncertain national power supply. Despite these hurdles, opportunities exist through value-added products and innovative farming practices, catering to the growing demand for poultry as the most affordable protein source for South African consumers.

 

VAT-Free Chicken

While there are increasing calls to make chicken pieces zero-rated to improve food affordability, it’s important to consider potential unintended consequences.

If chicken is made VAT-free, it could lead to several potential impacts on the demand and price for offal of red meat:

 

Increased Demand for Chicken

With chicken becoming more affordable, consumers might shift their preferences towards chicken over other meats. This could reduce the demand for red meat, including offal, as people opt for the cheaper alternative.

Decreased Demand for Red Meat Offal

As the demand for chicken increases, the demand for red meat offal see a decline in consumption if fewer people are buying red meat.

Price Adjustments

The reduced demand for red meat offal could lead to a decrease in its price. Producers might lower prices to stimulate demand or to clear excess stock. Conversely, if the supply of offal remains constant while demand drops, prices could fall significantly.

Market Dynamics

The overall meat market could experience shifts in pricing dynamics. If chicken becomes significantly cheaper, it might pressure red meat producers to lower their prices to remain competitive. This could affect the entire meat complex.

 

These potential impacts highlight the interconnected nature of the meat market and the importance of considering broader economic and consumer behaviour changes when implementing such policies.

Implementing policies that support efficient broiler production—such as effective disease management and reliable service delivery—could help limit chicken price increases. This approach would likely have a less disruptive impact on relative prices and provide consumers with price relief.

ChickenFacts is closely monitoring the debate around VAT-free chicken, examining the potential consumer benefits while also weighing the economic and industry impacts within the poultry value-chain. Ultimately, we support an outcome that benefits both the industry and consumers. Our aim is to continue presenting the facts objectively.

 

Government Initiatives: Poultry Master Plan

In November 2019, the Department of Trade, Industry and Competition (DTIC), the Department of Agriculture, Land Reform and Rural Development (DALRRD), and the poultry industry signed a Poultry Sector Master Plan (PMP).

This plan aims to bolster production and investments in the poultry sector through a variety of actions whilst promoting exports as a catalyst for growth. The South African Poultry Association (SAPA) has invested 1.8 billion rand (£99 million) to expand production facilities.

In 2023, the Association of Meat Importers & Exporters (AMIE) established the AMIE Academy. A transformation initiative for the meat and poultry import and export industry focused on training previously disadvantaged SMEs and individuals to become active in the industry’s value chain. Currently, in its pilot phase (2023/24), the Academy is scaling up in 2024/25 with more than a 100% growth in candidates. This industry-first initiative fully supports the goals of the PMP, while linking beneficiaries in the bigger value chain.

At the last Executive Oversight Committee (EOC) Meeting led by Minister Patel, he applauded the overall progress made, yet expressed concern over the slow to non-existent progress in exporting chicken. He emphasised that the next phase of the Master Plan should focus mainly on transformation, exports, and the funding support required to mainstream SMEs in the sector. The next phase of the Master Plan is under consultation by affected stakeholders.

AMIE fully supports the proposed Master Plan pillars outlined above and commits to playing a strategic role in ensuring that the right quality products reach the intended export markets, thereby contributing to the economic growth of both the poultry sector and the country.

AMIE recommends a smaller, focused, and more agile working group involving government and key value chain stakeholders, reporting to the Directors General or relevant Ministers. Support to DALRRD is key in addressing capacity constraints that may exist in implementing the SPS regulations necessary for international trade. The key target markets for exports will remain the UK, EU, and the Middle East, whilst exploring the opportunities presented by the African Continental Free Trade Agreement. Saudi Arabia remains the biggest market opportunity in the Middle East for South African poultry – thus it is urgent to finalise access to this market.

It is envisaged that the gap in the local chicken supply created by the increase in exports will be filled by imports, creating a win-win situation for the chicken meat value chain. AMIE therefore emphasises the need for agility in reopening closed markets (once declared disease-free) to foster availability, variety, and therefore lower meat prices.