Poultry feed cost ratio puts pressure on production margins

The cost of feed in relation to the price of eggs over the past year has placed severe pressure on producer margins.

This was according to Marco Torsius, CEO of El Azar Poultry Farm, which is part of the TopLay group, who said egg prices had been dropping steadily over the past year due to an oversupply on the market. “It varies from region to region, but prices have gone down 20% to 30% on average over the past year.”

Tortius said feed prices, on the other hand, had increased about 20% during the same period.

General manager of the South African Poultry Association’s (SAPA) Egg Organisation, Mogala Mamabolo, concurred: “The margins are getting smaller and this is affecting the profitability of producers.”

Mamabolo said it was even worse for smaller producers who could not unlock cost benefits provided by economies of scale.

An Egg Industry Production report by SAPA released earlier this year, indicated that an average of more than 420 000 cases of eggs were produced every week in February. According to the report, it was anticipated that the average weekly production up to May this year would be just below 430 000 cases, which was 10,6% higher than production levels in 2018.

Torsius said there had been a lot of new producers entering the market on the back of the high egg prices seen in 2017.

According to SAPA, prices had already dropped significantly by December 2018, with the average price per dozen for cage eggs in December 2018 at R15,40, down 14,7% from prices recorded in December 2017.

Torsius said another challenge for producers was the cost of replacing point of lay hens, which had also risen. He said previously the cost difference between an old hen and a young hen was about R20 to R30, but this had risen to R40 or more.

Many producers were now culling more hens than they were replacing, he said. – Sabrina Dean