South Africa’s poultry industry is grappling with a series of structural and economic challenges that threaten the sustainability of small-scale farmers. These farmers are often the hardest hit by fluctuations in inflation and rising production costs.
Over the past few months, South Africa has seen fluctuations in inflation rates. As of October 2024, the country’s annual inflation rate was 5.4%. While inflation rates have shown signs of decreasing in recent months, these changes often do not benefit small-scale poultry farmers, who bear the brunt of fluctuating costs.
In an interview with ChickenFacts, industry expert Flo Masoane, CEO of Easy Chicken Club, explained that inflation directly affects the poultry sector, especially input costs like feed, which account for the bulk of production expenses.
Feed Costs
Masoane explained that feed has experienced significant price increases, forcing small-scale farmers to absorb these extra costs despite consumers enjoying the benefits of low inflation rates.
“The small-scale farmer is often the most vulnerable in this economic landscape. They face cascading layers of costs as feed prices pass through manufacturers, distributors, and retailers before reaching them,” she said, adding that they end up not seeing the benefit of low inflation.
“At the end of the day, small farmers end up paying the highest price for their feed, and that pushes them out of the market,” Masoane said, pointing out that larger, industrial poultry producers with economies of scale can better absorb these fluctuations.
The disparity between small-scale farmers and larger poultry producers is stark. While large players in the poultry industry benefit from bulk purchasing and established distribution networks, small-scale farmers are left to cope with the increasing difficulty of accessing affordable inputs and markets. Masoane said small-scale producers are often forced to pay much higher prices for their feed because of the multiple layers of the supply chain, including manufacturers, wholesalers, and retailers.
“The small-scale farmer ends up paying the most, which erodes their margins, and that has a direct impact on the price at which they can sell their produce,” she said.
This pressure is compounded by small farmers’ limited financial resources to buffer against these price differences.
In comparison, large producers can distribute the cost burden more evenly due to their scale and financial flexibility.
Poultry Exports
While South Africa can potentially be a major player in the global poultry export market, it struggles to expand its presence in global markets, largely due to structural issues within the industry.
“We are not producing enough poultry for our own consumption, let alone for export,” Masoane said, referencing the substantial imports that continue to flood the local market despite the country’s domestic production capacity.
She added that the mismatch between South Africa’s production methods and global standards for poultry export—such as a preference for larger chicken breasts in international markets—creates additional barriers.
“The local industry is not structured to meet global export demands, as much of the world’s poultry production focuses on chicken breasts, while South Africa’s market favours dark meat cuts like thighs and drumsticks,” she said.
As a result, Masoane stressed the need for a different value chain for export opportunities that address these international preferences while maintaining a focus on meeting local demand.
“Our focus should always be on strengthening local production first, and only then should we consider expanding into export markets,” she said.
Policy Reform
Inflation also profoundly affects domestic demand for poultry. As inflation rates rise, consumers’ purchasing power declines, especially in rural and peri-urban areas, where many small-scale poultry farmers operate.
While government interventions, such as tariffs and anti-dumping duties, have been implemented to support the local poultry industry, Masoane argued that these policies are more reactive than strategic. She criticised these interventions for not addressing the underlying structural issues within the industry that stifle competition and sustainability.
“The policies are more of a band-aid solution than a long-term fix,” Masoane said, adding that there has been insufficient focus on rethinking the industry’s structure.
“There is an urgent need for a comprehensive review of the poultry sector’s policies, starting with local strategies and extending regionally under initiatives like the African Continental Free Trade Agreement (AfCFTA),” she said.
She added that there was a need for policy reform to create a level playing field for small-scale farmers. “The industry is not open or fair enough for small-scale farmers to thrive. They are often forced to depend on their competitors, which creates a highly uneven market.”
Driving Innovation
Despite the challenges posed by inflation, Masoane said smaller producers are driving innovation by reinvesting in efficient practices, which could reduce costs and improve product quality.
“There is also potential for growth in export markets if the industry adapts to global standards, especially with regional initiatives like the African Continental Free Trade Agreement,” she said.
Masoane added that policy reforms could create a fairer playing field for small-scale farmers, fostering competition and sustainability. With strong local demand and the right support, South Africa’s poultry industry can overcome its hurdles and thrive.
“Smaller producers are advancing the industry with new competition, and there is a true commitment to transforming the sector. With the right support, farmers can drive development and meet nutritional needs,” she said.
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