More than a hundred farms, the majority of which have commercial facilities, have reported to be infected by avian influenza, which has led to losses in parental stock for breeders of layers and in broilers, resulting in egg supply constraints seen in various retail shelves across South Africa.
This is according to the Agricultural Business Chamber(Agbiz), which said yesterday that in the past week, it had participated in two critical meetings addressing this immediate challenge.
Wandile Sihlobo, the chief economist at Agbiz, said yesterday that in the first meeting, the Department of Agriculture, Land Reform and Rural Development (Dalrrd) had met retailers with the aim of assessing the severity of the egg supplies at the retail level and to assess various response measures.
"Second, the Dalrrd met with the poultry industry to receive an update on the spread of the disease and for the industry to obtain insights into the state's veterinary services. The significant steps following these engagements are the containment measures currently being implemented by industry and government to control the spread of the disease. This is an ongoing process and we will likely receive an update this week," Sihlobo said.
Regarding the egg supply constraints, he said the stakeholders and government had agreed on the assessment of the possibility of importing fertilised eggs to rebuild the parental stock lost from this disease and also to import table eggs (powder and liquid eggs that would help in the baking process and free the whole eggs for human consumption).
"These processes will take a few weeks because of the logistics around them and for individual businesses to make decisions without the government interfering with what strategies companies should follow. Therefore, in the near term, one can still expect supply constraints of eggs at the retail level to persist," he said.
Beyond these interventions, Agbiz said there were discussions about possible vaccinations to curb the spread of the disease.
"We understand from various conversations with Dalrrd colleagues that this was being considered, as well as protocols that will guide vaccination should these be agreed upon by industry and regulators. We suspect the regulators will be assessing the efficacy, quality and safety of such vaccines before providing a view on the path forward," it said.
Furthermore, Department of Trade, Industry, and Competition Minister Ebrahim Patel, through the International Trade Administration Commission of South Africa (Itac), and Minister of Agriculture, Land Reform and Rural Development Thoko Didiza were reviewing the possibility of a rebate for imports of poultry products. Itax was expected to communicate a view on this matter in the coming weeks.
Agbiz said the intention was to have measures in place to increase poultry imports in case of domestic supply constraints and to avoid possible significant price pressures to the consumers.
Sihlobo said such trade measures must be considered with an appreciation that the South African poultry industry had endured challenging years of higher feed costs (maize and soybeans), combined with intense load-shedding, which has increased production costs and constrained businesses.
"The current avian influenza is an additional challenge to one that has been under financial pressure for some time. Thus, any trade policy instrument will have to maintain a balance between consumer welfare and the sustainability of the domestic poultry industry."
With regards to price pressures on consumers, Agbiz said there was anecdotal evidence of various retailers that had adjusted egg prices significantly to manage the demand.
It said such price adjustments in a short period had raised concerns about the possible impact of the current avian influenza on food inflation.
Sihlobo said what would matter a lot was the duration of these higher prices, which they doubt would persist for a long period if the interventions of imports and control of the spread of the disease listed above were a success.
"The current increases could be a temporary blip, which will likely show on one-monthly inflation figures, and the trend would then continue to the expected path we were on before, which is deceleration or sideways. Also worth noting is that eggs have a lower weighting within the food inflation basket, at 0.4%, which means its impact may not be as pronounced in an overall inflation figure.
“Poultry products, which have a slightly higher weighting of 2.09%, have not increased at the retail level as significantly as eggs. Given that the poultry products supply is still relatively good and there are various trade measures under consideration, there should not be supply constraints over the foreseeable future," he said.
The organisation's chief economist said that ultimately, this was a challenging time for the South African poultry sector, and the exact financial impact of these dominant, highly pathogenic strains - H5 and H7- would be evident over the coming weeks.
"The consumers will continue to see a constrained supply of eggs in the near term. Still, we suspect the various interventions under evaluation will make a positive impact and that the current price levels of eggs at multiple retailers will not be for the long term and could adjust downwards as the supplies become more available," Sihlobo said.
BUSINESS REPORT