The South African Poultry Association (Sapa) has warned consumers to brace themselves for an increase in the price of eggs for 2017.

The association said that 2016 has been a difficult year for egg producers in the country as the local farmers had seen the feed price increasing by a minimum of R1 000 per ton between January and August due to the drought.

Charlotte Nkuna, senior executive at Sapa, said farmers struggled to cope with the high feed prices and the low market prices for eggs.

 “The farmers were unable to recover any of the losses suffered as a result of the increases in the price of feed. This hardship resulted in the exit of many of the small scale farmers, those with between 5000 and 40 000 hen capacity. Some of the farmers depleted their flocks early, moving the average depletion age from 74.8 weeks in 2015 to 71.8 weeks in 2016.

She said the above factors have resulted in a shortage of eggs. “The consumers can expect an increase in egg prices due to the shortage of eggs on the market. The indications are that prices are likely to increase on average by about 7 percent to 8 percent. This scenario is likely to persist while farmers attempt to increase their production to meet the market demand,” said Nkuna.

Between January and April 2016, the egg prices dropped substantially as a result of excess eggs on the market.

Statistics South Africa’s producer price index showed that cereal prices double between August 2014 and December 2016 while milk and egg prices remained flat. The association said egg prices fell between January and April 2016 as farmers going out of business dumped their stock.

Paul Makube, senior agricultural economist at FNB, said the drought played a role in the increase of egg prices. “To some extent the drought had a negative effect, but at this stage the high feed price is the cause of the expected rise in egg prices,” Makube said. “We saw the maize price climbing to the highest levels in 2016. It is used to produce feed and that is why some small farmers decided to exit the industry and this led to a shortage in stock of hens.”

Makube said maize prices had since come down since January compared to the similar period in last year. “In April it was 34percent down year-on-year,” he said.

Currently the price of white maize is R1 959 per ton while in January 2016 it reached a high of R3 037 per ton.

Makube said it is too early to predict that other food prices might go up as a result. “With the exception of meat, we expect other food prices to remain stable in the short run. The rand will have to return to the R15 or R16 to the US dollar for us to see a sharp rise in food prices,” he said.

Eggs remain the cheapest and most complete form of animal protein available and as competing protein sources have increased in price, so there has been a migration to the consumption of eggs, exacerbating the increase in demand.

Nkuna added that the current trend was viewed as more medium-term in nature and should endure through to the latter part of 2017 at least.

Makube said as meteorologists had forecast a probable return of El Niño towards the end of the year, this could have an impact on the agricultural sector. “There are 50 percent chances that we might see the return of El Niño towards the end of the year. However, the weather patterns can still change, but we will monitor the situation,” he said.

BUSINESS REPORT