By Gert Strydom, Brolier and Egg Industries Production Consultant Overview of the south african poultry industry: 2001

to 2011 Over the past ten years the estimated number of birds in the South African poultry industry increased from 107.065 million in 2001 by 49.190 million birds (+45.9%) to 156.255 million in 2011. As indicated in Graph 1 almost 80% of the birds were used for meat production and 20% for egg production. Graph 1
AVERAGE NUMBER OF BIRDS IN THE SOUTH AFRICAN POULTRY INDUSTRY
Million 170 160 150 140 130 120 110 100
BIRDS

Total Poultry Industry

Broiler Industry

90 80 70 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 YEAR 2007 2008 2009 2010 2011 Egg Industry

Compounded growth in the broiler production sector amounted to 38.8% over the ten years while the egg production sector increased at a much slower rate of 33.7%. The compounded growth in the total poultry industry over the past ten years amounted to 36.9% but the annual growth fluctuated considerably from -4.3% in 2003 to +9.5% 2005 as indicated in Graph 2. Graph 2

SOUTH AFRICAN POULTRY INDUSTRY % Change 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 2002 2003 2004 2005 Broiler Industry 2006 2007 2008 2009 2010 2011 % GROWTH PER ANNUM

Egg Industry

Total Poultry Industry

The marked downswing in the growth rate of the poultry industry in 2003 and 2009 coincided with factors such as outbreaks of poultry diseases, increased input costs and depressed demand for poultry products caused by a downswing in the economy during the previous year. Even though the broiler industry was exposed to higher volumes of importation of poultry meat and increased production costs during the period under review, it was able to maintain positive annual growth from 2005 but at a declining growth rate The egg production sector, on the other hand, proved to have a more erratic growth pattern than the broiler sector and showed negative growth at times. This is caused by the long turn-around time required to change the number of hens in the laying flock up- or downwards. To reduce or increase the laying flock size effectively takes from 18 months to two years. In addition, eggs have a short shelf life and an over supply of the product invariably results in drastic price reductions over the short term while in an under supply situation the price of eggs normally increases excessively. These periods of egg price fluctuations do not necessarily coincide with up- or downswings in the economy. This leads to extreme volatility in profit margins, typically associated with the egg industry. The number of pullets reared per annum and the average number of hens in lay in the commercial egg industry and the broiler hatching egg sector is presented in Graph 3. Graph 3

Millions
26.000 24.000 22.000 20.000

Poultry Industry : Layer and Breeder flocks

B I R D S

18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0.000 2001 2002 2003 2004 2005 2006 YEAR 2007 2008 2009 2010 2011

Broiler breeders reared

Avg. Broilers breeders in lay

Layer pullets reared

Avg. Laying flock

Evident in Graph 3 is that the broiler parent flock grows fairly consistently over time. In contrast, the actual hen numbers in the egg production flock increased excessively by 5.49 million hens (+32.1%) between 2004 and 2008, only to decrease by 580 000 hens (-3.1%) in 2009. The total number of broiler chicks placed and broilers produced per annum is shown in Graph 4. Graph 4

Million
1,050 1,000 950

BROILER PRODUCTION PER ANNUM

B R O I L E R S

900 850 800 750 700 650 600 2001 2002 2003 2004 2005 2006 YEAR 2007 2008 2009 2010 2011

Broilers produced

Broiler chicks placed

347.9 Million (+50.6%) more broiler chicks were placed in 2011 than in 2001. The number of broilers slaughtered increased by 330.5 million (+50.1%) over the same period and the average compounded growth in broiler production over the ten years was 4.3% per annum. A growing demand for broilers, relatively low input costs and a favourable Rand/Dollar exchange rate supported growth in broiler production from 2004 to 2008. Rising input costs, the strong Rand and increased importation of poultry meat caused the broiler industry growth to slow down in 2009. Despite the fact that negative growth in broiler production was projected for the second half of 2009, the price of broiler meat decreased by between 15 and 20 percent in 2010 which put profit margins under pressure up to the end of 2011. In Graph 5 the total tons of meat produced, per annum, by the different industry sectors is presented. The meat production indicated was calculated as 72% of live body weight and does not include any offal or byproducts. Graph 5

TONS of MEAT

SOUTH AFRICAN POULTRY INDUSTRY : ANNUAL MEAT PRODUCTION

(EXCLUDING OFFAL)

1,400,000 1,300,000 1,200,000 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

YEAR

Broiler Breeders

Layers

Broilers

Total poultry meat production amounted to approximately 1 324 900 tons in 2011. Broiler production contributed 1 268 600 tons (95.8%) of the total poultry meat production while the remaining 56 300 tons (4.2%) were produced by the broiler parent and egg production sectors of the poultry industry. The estimated number of 30 dozen cases and tons of eggs produced per annum is indicated in Graph 6. Graph 6

SOUTH AFRICAN EGG INDUSTRY : EGG PRODUCTION

Million
20.0 19.5 19.0 18.5 18.0 17.5 C 17.0 A 16.5 S E 16.0 S 15.5 15.0 14.5 14.0 13.5 13.0 2001 2002 2003 2004 2005 2006 YEAR 30 Dozen cases / tons of eggs 2007 2008 2009 2010

(Cases of 30 Dozen and Tons of eggs)

Thousand
410 400 390 380 370 360 350 340 330 320 310 300 290 280 270 2011 T O N S

Between 2001 and 2011 egg production increased by 37.6% or 5 296 900 cases of 30 dozen eggs per case. The average compounded growth in egg production over the ten year period was 3.37% per annum. Most of the expansion in the egg industry occurred after 2004 when egg production increased by 28.6% over the period of three years to 2007. The excessive growth over this short period was activated by a persistent increase in demand for eggs and good profit margins. After 2007 the economic downswing resulted in a decreased demand for eggs and severe pressure was put on egg prices. As a result egg production was decreased in 2008 and 2009 and egg prices subsequently increased by up to 20%, year on year, leading to high profit margins. In response egg production was increased in 2010 and 2011 which resulted in an oversupply of eggs and severe pressure on egg prices. . The annual feed usage by the egg industry and the broiler industry is presented in Graph 7 and Graph 8, respectively. Graph 7

Million 1.2 1.1 1.0 0.9 0.8 T 0.7 O N 0.6

EGG INDUSTRY : ANNUAL FEED USAGE

S 0.5 0.4 0.3 0.2 0.1 0.0 2001 2002 2003 2004 2005 2006 YEAR Pullet rearing feed Layer feed 2007 2008 2009 2010 2011

Approximately 1.172 million tons of feed were used by the egg industry in 2011. Of this amount 1.004 million tons (85.7%) of feed were used for laying hens while the remaining 168 000 tons (14.3%) were used to rear pullets for egg production. Graph 8
Million
4.5 4.0 3.5 3.0 T O N S 2.5 2.0 1.5 1.0 0.5 0.0 2001 2002 2003 2004 2005 2006 YEAR Broiler Breeder feed Broiler feed 2007 2008 2009 2010 2011 BROILER INDUSTRY : ANNUAL FEED USAGE

In 2011 approximately 4.021 million tons of feed were used by the broiler industry. 3.506 Million tons (87.2) of the feed were utilised to produce broilers while the remaining 515 000 tons were used to produce broiler parents and hatching eggs.