South Africa’s big chicken problem

Several South African food producers have warned of operational difficulties in their poultry segments as the companies battle load-shedding and rampant bird flu, threatening the country’s chicken supply.

Six of South Africa’s nine provinces have been affected by the 50 HPAI H7 and 10 HPAI H5 subtypes of the virus, the Department of Agriculture said.

Avian flu usually affects wild birds but can sometimes infect commercial or domestic poultry.

While it rarely causes disease in humans, there’s no treatment for the birds, and the government requires farmers to cull poultry to control its spread.

Egg producer Quantum Holdings informed shareholders that a bird flu outbreak at some of its farms in Gauteng and North-West has affected approximately 1.5 million of its layer and breeding stock. 

Earlier this year, an outbreak also affected approximately 420,000 birds at its Lemoenkloof layer farm in the Western Cape in April 2023.

The company said the overall impact of the bird flu outbreak on the South African poultry industry, and its full financial effect on Quantum, is not yet known.

However, the estimated value of the company’s birds affected by the outbreak is around R106 million.

Foo d producer RCL Foods also said in a recent trading update that its Rainbow Chicken business has been impacted by the bird flu outbreak, which is currently impacting its commercial poultry layer and broiler industry.

“The outbreak has affected 11 of our 19 sites in the inland region, which is one of three regions in which this business operates,” the company said.

“The outbreak has moved at a rapid pace, and the situation is constantly evolving.”

To date, an estimated 410,000 birds have been culled, which has resulted in an estimated financial impact of R115 million for the company.

Poultry producer Astral Foods also informed shareholders that load-shedding and a bird flu outbreak would negatively impact its operations and results for the year.

The company reported a load-shedding bill of around R1.9 billion. These costs include:

• The additional cost of diesel to power standby generators.
• Costs associated with a cutback in poultry production to catch up with the backlog in the slaughter programme.
• Higher feed costs due to older broilers.
• Overtime costs for the additional shifts introduced in its poultry processing plants.

Astral said these costs amounted to R741 million for the six months ended 31 March 2023 and forecasted R919 million for the remainder of the financial year. 

The company said the cost to operate diesel generators is now an embedded expense burden of approximately R45 million per month. 

Astral’s total costs of load-shedding, including capital costs of R200 million, for the financial year will amount to approximately R1.9 billion. 

In addition to load-shedding’s impact on its operations, Astral said the bird flu outbreak saw the company and other producers incur additional costs to cull broiler breeding stock in line with regulated disease control measures. 

“The losses extend beyond the biological cost of the culled birds but also include costs relating to measures taken for the safe disposal of these birds and biosecurity measures implemented aimed at curbing the spread of the disease,” the company explained. 

“The poultry industry, in both the table egg and broiler sectors, has seen significant losses as a new strain of bird flu (H7N6) has spread across both Gauteng and Mpumalanga at an alarming rate.”

“The bird flu outbreak is the worst that South Africa has witnessed and goes well beyond the impact felt by the H5N8 bird flu in 2017.” 

Astral said that, to date, the total cost associated with the current bird flu outbreak amounts to approximately R220 million.

Bloomberg reported that vaccines aren’t yet available in South Africa, but government talks to finalize access are at an advanced stage, and registration of the medicines will be fast-tracked.

“The criteria under which vaccination will be permitted is almost in its final development, and only farms with good biosecurity and approved to vaccinate by the department will be given permission to vaccinate,” the Agriculture Department said.