Market 9BroilersEggs
Market 9BroilersEggs
Market 9BroilersEggs
Introduction
This paper is divided into two sections. We will discuss broiler marketing in South Africa followed by a review
on egg marketing.
Overview
Statistics
The broiler industry in South Africa contributes to economy in the following ways:
Gross producer value of the industry is over R5 171 million per annum.
Employs approximately 57 804 staff in the formal sector and main input supply industries.
In 1999 broilers produced / slaughtered per week amounted to 9,8 million birds.
Per capita consumption increased over ten years from 15,5 kg to 18,5 kg (an increase of 19 %).
(See Figure 1.)
However, 10 % of the industry is under judicial management, liquidation or already closed.
The broiler industry contributes 16,2 % to the total gross value of agricultural production.
A small number of large producers constitute the formal sector of broiler production. These large organisations
handle approximately 80 % of the total broiler production, while the informal sector produces the remaining
20 %. (See Figure 3: Market share diagram.)
Figure 1. Per capita consumption of broiler meat in RSA (Source: SAPA, SSA, National Department of Agriculture, October 2000)
Figure 3 reflects the major market share of broiler supply in South Africa. It is important to note that imports
rank as the third most important supplier.
FURTHER
PROCESSING PLANT
PROCESSING PLANT
Slaughter, eviscrating and
cut-up
Breeders
Breeder feed
Eggs
Hatching-egg farm
- Contract
- Company
Import Tariff
The South African broiler industry currently finds itself in a difficult position, mainly due to high input costs, low
producer prices and imports. In this regard, the Government imposed a tariff on cuts, offal and bone at R2.20
per kg. Imports from the USA have dampened the market. An anti-dumping duty of an added R 2.35 per kg is
levied on cuts and offal, bone and portions for the USA.
Marketing channels
Figure 5 shows the different marketing channels.
RETAIL
GROCERY
STORES
Further
processors
BROILERS
Broiler Further
processors processors
Further
processors
Further
processors
PUBLIC EATING
Further PLACES
processors INSTITUTIONS
GOVERNMENT
Further OTHER
processors
The sale of live birds mainly occurs at the townships, peri-urban areas and in the rural areas. This activity
occurs right through the year with peak times during holidays and the Christmas periods.
The sale of live birds can occur in the following ways:
Producers or growers selling to consumers.
Broiler producers load broilers on their bakkies and sell to consumers.
Hawkers buying from producer for resale to consumers.
Usually broiler producers, including small-scale producers, sell broilers through their farm stalls. Hawkers
buying in bulk get a better price than the others.
Hawkers buying chickens from Spent-Hen Depots for resale to consumers.
Spent hen depots are owned by entrepreneurs who have a link with egg producing companies (farms),
breeder farms and broiler producers. They buy these chickens and then sell them to hawkers.
Some producers hand slaughter chickens for their customers.
In this situation big drums are used for boiling water, then farmers will kill and pluck the birds. The hygiene
situation is not at its best in this case.
Some producers do custom-processing.
In custom-processing producers make an arrangement with an abattoir to kill their chickens at a fee.
One custom processor (Orion) in Gauteng is currently charging R1.70 (VAT included) to process and
package one bird. An additional R0.50 is charged if the bird has to be cut-up.
Table 2: Weighted average cost structure in Rand per live broiler weight (kg)
The cost prices of live birds vary based on the quantities bought and the season (holidays, Christmas, etc.).
Some hawkers do slaughter based on customers requests. The price of the processed chicken is the same as
that of the live one!
Value adding
Processing activities
Receiving
Off-loading of birds from truck(s).
Removing birds from coops (crates).
Hanging
Hanging birds on shackles upside down.
Stunning
Can be done by a knife or water bath.
Immobilising birds.
Help in calming birds.
Blood flow to the head for proper bleeding.
Killing
Cut the jugular vein.
Head not removed from the body.
Scalding
Putting the bird in warm water to relax feathers.
Picking or defeathering
Remove feathers by picker(s).
Evisceration
Opening the body cavity to remove intestines.
Cut hock and neck
Cut the hocks and remove the neck bones.
Cut-up
Cutting the carcass into pieces.
Packaging
Wash the carcass and giblets thoroughly.
Chill in ice water 2 to 3 hours.
Remove from chill water and drain.
Place giblets in a small plastic bag.
Place giblets in crop area of carcass.
Place legs of carcass under the strip of skin left after the horizontal cut below the breast.
Place carcass in plastic bag, draw out as much air as possible, and tie the bag with a wire tie.
Storage
Dressed poultry:
can be stored in the refrigerator for several days and
should be frozen if it is to be stored for more than seven days.
Live birds
If the market is for live birds, then it is important to determine what quantity and quality of the produce is
required and what weights are looked for. Transport (bakkie or van) for chicken crates are a requirement
for marketing live chickens.
Processed chickens
For marketing processed chickens (whole birds or cut-up), an abattoir, packaging material, transport and
chicken crates will be required.
Production scheduling
To ensure constant supply right through the year the broiler enterprise must be planned in a way that every
week sales of birds occur. Ideally, eight houses must be erected to ensure constant supply. The broiler enterprise
must have a viable business plan, indicating all the aspects of the business.
Day-Old Chicks
It is estimated that about 20 million Day-Old Chicks
are produced per annum (SAPA). The market of Processing
Day-Old Chick production is dominated by three plant
major companies, e.g. Nulaid, Golden Lay and
National Chicks/OTK. Other smaller producers are
also involved.
Packing
Layer replacement hens facility Culls Eggs Chickens
This involves the rearing of Day-old chicks into layer EGGS
replacement hens. Most of the Day-old producers
and other smaller producers or specialist rearers Egg laying
are involved in the production of layer replacement facility
hens.
Point of lay
Pullets
Egg production
This involves the rearing of birds to sexual maturity
Rearing
and then keeping them in lay for a year. The eggs facilities
produced are infertile and they are called table
CHICKS
eggs. Some producers begin their production
process by raising the day-old pullets, while other
buy point-of-lay pullets (e.g. 20 to 22 week-old
Hatching facility
pullets) that are ready to begin production. hatchery
Statistics
Gauteng and Western Cape produce approximately 26 % and 24 % of the total production, followed by
North West with 15 % and KwaZulu-Natal with 13 %. (NDA - Trends in the Agricultural Sector, 1998)
The South African layer flock consists of approximately 15,8 million birds in lay.
National egg production volume of 12,5 million cases (1 case = 360 eggs) in 1998 represents an increase
of 8,5 % over 1997.
Per capita consumption was 111 eggs in 1999 which includes egg products. When excluding the egg
product it was 105.
The growth rates in egg consumption have been as follows:
1965 to 1975 66 %
1975 to 1985 20 %
1985 to 1995 57 %
Almur Smit (Hyline) Supply D-O pullets Based in the Free State but operates nationwide
Malan Chix (Hy-line) Supply D-O pullets and Gauteng
Lay ready hens
Bergvlei Chicks (Hybro) Supply D-O pullets and Western Cape, KwaZulu-Natal, Gauteng
5 week lay pullets
National Chicks (Hy-line) D-O pullets Nationally
Nulaid Integrated egg producer Gauteng, KwaZulu-Natal, Western Cape, Eastern Cape
OTK Integrated egg producer Gauteng, KwaZulu-Natal
Golden Lay Integrated egg producer KwaZulu-Natal, Gauteng
Highveld Cooperative Integrated egg producer
Eggbert Integrated egg producer Gauteng
Egg Board
The Egg industry, like the other agricultural sectors, used to be controlled by a Board. The Egg Board ceased
to exist in 1993.
Outlet Percentage
Wholesaler 14 %
Retail stores (e.g. Pick n Pay, Shoprite, Hyperama, Woolworths, Spar) 59 %
Small retail outlets (Butchers, cafes and quick shop petrol stations) 19,4 %
Cash sales from farms to mine hostels, learning institutions, as pulp for bakeries, 6,9 %
or to Ovipro, the egg processing plant
At present emerging farmers sell their eggs to black-owned shops, Spaza shops, butchers, hawkers,
restaurants, hotels and to a small extent to white traders (e.g. Cafes). Farmers do better when selling to
black customers since grading and packaging requirements are not as stringent. Farmers just clean
the eggs, sort them by size and package them either in plastic bags (in 6 or 12) or trays (30 eggs). At times
a mix of small and medium sized eggs are packed. (See figure 7.)
Spent-Hen depots
Spent-hen depots are owned
by entrepreneurs who have an
arrangement or contract with Retail
egg producing company/farm
and/or breeder farms to buy
culled birds for resale. The
depots also sell ungraded eggs Wholesaler
to hawkers.
Due to the demand for live
Grading
birds, the selling of spent-hens Formal and Franchise
(at the end of lay) is a sector stores
packaging
relatively lucrative activity in
South Africa and, as a result,
hen depreciation costs are
Processing
lower in South Africa than
developed countries, where
birds are often used for dog
or cat food. EGGS
Export
Hawkers
Informal Spazas
sector
Spent-hen
depots
Cooperative marketing
The black-owned cooperatives could be a vehicle for penetrating the formal marketing channels in
South Africa. Through cooperatives the produce of farmers can ensure larger supply of quantities, create a
brand name, and have muscle to negotiate prices on behalf of farmers. The function of the cooperative
can be to look for markets for members and also assist in preparing the produce (grading and packaging) and
marketing it.
Grading of eggs
Eggs are classified in the following three Grades:
Grade 1
Grade 2
Undergrade
Egg standards
Size Minimum mass per egg (grams)
Jumbo More than 66 g
Extra large More than 59 g
Medium More than 51 g
Small More than 43 g
Mixed sizes Not specified
Egg Handling
Eggs should be collected at least twice a day.
More frequent gathering is recommended, especially during extremely hot or cold weather.
When eggs are allowed to stay in the nest, the incidence of dirty and broken eggs increase. Broken eggs
encourage egg eating by the hens.
Dirty eggs should be dry cleaned or washed with an egg washing compound as soon as possible after
gathering.
Eggs should be dried, placed in a clean carton, and refrigerated as soon as possible after gathering and
washing.
Eggs sold to retail stores must be graded according to the specified legislation.
Packaging
Plastic packaging material can be bought from wholesalers. Egg trays, specialised for packaging eggs, are
manufactured by Van Leer whom has setup distributors in the different provinces. (See Annexure C.)
Quality control
External: shell quality, cleanliness, size and weight.
Internal: size and condition of the air cell, condition of the yolk, condition of the egg white, presence of blood
spot and meat spots or other abnormalities in the white. This is examined through candling:
Live sales-culls
Main requirements
Working capital is required to procure stock and to cover overheads such as wages and fuel.
Long-term finance would be required for the purchase of vehicles and equipment such as chicken crates.
Constraints
Mortalities and cash in transit are the main risks.
Packaging of eggs
Main requirements
A fully equipped pack station which has access to labour, egg producers and markets is the main requirement.
Constraints
The aspect of the value chain is high tech. and capital intensive requiring a high level of skills in respect of
regulations, stock control and plant maintenance. Reliable sources of quality eggs are imperative.
Opportunities
Small packaging plants are a possibility.
Larger packaging plants can be established by organisations such as cooperatives and associations.
Opportunities
Have less formalised requirements than the retail sector. The volumes required are lower, pricing practices are
more flexible and demand is more regionalised. This provides the small producer an opportunity to supply into
this market. It also has fewer barriers for new entrants to enter into the market.
Contracting
To provide basic understanding of the contract requirements, expectation and rewards of the contract.
Costs
How much does it cost to produce a chicken?
How much does it cost to produce a dozen of eggs?
Contracting. Small-scale farmers can enter into a contract Contract chicken growing and egg
with a processing or a packaging plant or an production is currently dominated by
integrated company to supply a stipulated white farmers. The contractor
number of chickens or eggs at a time. This specifies certain requirements (e.g.
provides a steady market for the small-scale size of building, type of feed,
farmer. vaccination programs) that the
contractee must adhere to, or face
penalties.
Supply to consumers. Consumers can buy chickens or eggs at the For the door-to-door and the
farm stalls. The farmer can employ a door-to- Yapee market the farmer may be
door sales representative to take orders in the requested to slaughter the chickens at
township. Yapees who have moved into the no extra charge because it is just a
suburbs can still enjoy fresh real farm chicken service.
or free range chickens and they can afford to
pay the price.
Supply to hawkers. Live chickens or eggs can be sold to hawkers The farmer must provide transport
on a regular basis. Since most hawkers have a and crates (for chickens). Though it
transport problem, the farmer can entice them seems as a weakness, it is a
by delivering the chickens or eggs at their mechanism to ensure business with
sheds or holding area. Hawkers must place the hawkers.
their orders so that deliveries can be carried out
by Friday in preparation for the weekend.
Supply to hotels, There are many tourist initiatives and A processing plant (or custom
restaurants, caterers, developments in the townships that need to be processing1), packaging plant and
township bed & catered for. Unfortunately at the moment they transport will be required to supply
breakfast (B&Bs), are under-serviced and still depend on the these clients. Quantities demanded by
guest houses, and traditional distribution channels. Entrepreneurs these clients fluctuate over time,
tourist shebeens. can intercept by servicing this clientele. meaning that the farmer must have an
assertive sales person.
Supply to township Besides the well known (e.g.. Kentucky and The requirement is to process, cut-up
chicken-outlets. Nandos) chicken outlets, there are several new and package the product. The clients
ones mushrooming in the townships. need small sized pieces, meaning that
the chickens can be slaughtered at an
early age of five to six weeks instead
of seven.
Supply to township Some entrepreneurs have positioned The small-scale farmer has to
cold storage themselves in the townships and other former process and package the chickens.
distributors. black areas to distribute eggs and chicken The distributor has to assist in
meat. The concept here is TO BRING THE securing refrigerators for his clients
PRODUCT TO THE CONSUMER to reduce (especially for chickens in Spaza
the transport constraint. Small-scale farmers shops). This may need some creative
can supply these distribution centres. thinking in forming cooperatives and
involving other stakeholders.
1
-Custom processing occurs when a producer without a processing plant makes an arrangement with a processor to
process his/her birds at a given fee.
Market through The black owned cooperatives could be a In South Africa, unfortunately the black
cooperatives. vehicle for penetrating the formal marketing owned cooperatives have not being
channels in South Africa. Through cooperatives doing well. There is a need to revamp
the farmers can ensure larger quantities, create these cooperatives.
a brand name and have a muscle to negotiate
for better prices. The function of the cooperative
can either be to look for markets for members or
assist in preparing the produce (grading and
packaging) before marketing.
Supply through Every year tenders from the government This requires processing, packaging,
tendering. departments (e.g. correctional services, grading and refrigerated trucks. Such
hospitals, etc.) are published for the supply of tenders can also be done as a Joint
chickens and eggs. Small-scale farmers stand a Venture (JV) with established
chance because of the ten point system companies.
designed for the Previously Disadvantaged
Individuals (PDIs) provided they can meet the
price, quality and quantity requirements.
Supply mining houses. Mines have kitchens and hospitals that are This requires processing, packaging,
serviced by caterers (in-house or as an out- grading and refrigerated trucks.
sourced service). Some of these mines are now
owned by Black Empowerment Groups who can
be lobbied to empower small-scale farmers.
Other rural-based enterprises capable of supplying additional income for a small-scale farmer.
Transportation. Many chicken and egg producing companies High capital input needed to secure
out-source transportation in their business since trucks and crates.
it is not their core function.
Executive summary
Country information
General information, statistics and facts, geography, sociopolitical information..
Provincial information
General information, statistics and facts, geography.
Contracts
Will you get a written contract to sign, can you refuse to sign or discuss the terms?
Supply of inputs (e.g. day-old-chicks, feed, medication).
Is there a provision for arbitration or mediation?
Have you done a cost flow analysis on the contract?
What happens if disease hit the farms, or it is a poor stock to start with, can you refuse to take the stock?
What happens if stock dies in a heat-wave or other disaster, is the loss shared?
About pay
If the contract covers several years, what adjustments are made for inflation or changes in interest rates?
What basis are you going to be paid? Concentrate on being paid on what you can control.
Can birds be rejected at the processing plant?
Case studies A
Broiler industry
Ms. Thenjiwe Ngqula Chicken Breeding Project
Thenjiwe Ngqula and her sister Nomvula are involved in a poultry production business at Umzimkulu in the
Eastern Cape. Thenjiwe is a pharmacist by profession and Nomvula is a farmer.
Thenjiwe started the poultry business because she felt that the eggs and chicken she bought from the shop
taste differently from the farm produce. She started farming in 1992.
Marketing
Some of the stock that she keeps goes to farmers who grow them out to layer stage for selling and slaughtering
purposes or as breeding stock to egg producers. The community also buys many of her fowls to improve their
own stock, at R16 per bird.
Conclusions
When Thenjiwe started the poultry business it was very difficult to obtain the breeding stock. This
meant that she had to search for breeding stock from farmers that were located far away. As her
operation became bigger she was able to breed her own stock.
The business is now flourishing and is becoming difficult for her to keep up with the demand. Due
to this, Thenjiwe plans to build what she calls a deluxe hut with electricity, fans and heaters. This
will enable her to raise chicks up to the age of 18 weeks before selling them as breeders or layers.
Mr. Thlongwane
Mr. Thlongwane started farming early in the 1960s when a black person was not allowed to own land and get
involved in farming. He started chicken farming on a 1 ha plot in 1969 and built his first chicken-house. He now
has the right to occupy 33 ha. He has developed the land and set up infrastructure.
Production activities
Mr. Thlongwane produces 2 000 broiler chickens a week. He cultivates tomatoes on 20 to 24 ha of land,
cabbage on 18 ha, mealies on 6 to 10 ha and senano chillies on 2 to 5 ha annually. He produces bananas on
5 ha and mangoes on 5 ha. He keeps a herd of 80 cattle on another 1 000 ha of leased land.
Broiler business
They first started with laying hens flattening them. At first they did not do well but after getting some advice,
bought 1 000 day-old broiler chicks and raised them on a small and rather dilapidated plot. When the broilers
were old enough they were slaughtered under a tree. They used old baths as water containers and stored the
cleaned chickens in a domestic refrigerator.
Market
Charleen and her sons are now supplying more than 60 chain store shops in the area with whole birds. Their
contracts with supermarkets have grown significantly which means that they have to slaughter more birds and
they need more houses to keep up with a steady supply.
Conclusions
Became a profitable business because they diversified into the added value of slaughtering and
selling direct to retail shops.
Rooykop
Transvaal Broiler Breeders (TBB) and the Development Bank of Southern Africa (DBSA) have assisted the
Rust De Winter community to grow eggs on contract for Transvaal chicks.
Nulaid
Workers of Nulaid have bought a stake in the Nulaid egg-producing farm near Kaalfontein. Such an
empowerment deal is a new concept for the poultry industry, unlike in other agricultural sectors where worker
have bought stakes in their companies.
Price list B
Broiler industry
1. Producer price
Table: Yearly average broiler price in South Africa
2. Production costs
Description of cost 500 birds per week 1 000 birds per week 3 000 birds per week
(cents/bird) (cents/bird) (cents/bird)
1. Egg prices
2. Production costs
Number of layers
2 000 4 000 8 000 1 6000
(c/doz) (c/doz) (c/doz) (c/doz)
Marketing
Useful information C
South African Poultry Association (SAPA) List of distributors of egg packaging material
SAPA provides information on poultry statistics in Van Leer manufactures egg trays (specialised for
their monthly Poultry Bulletin. The statistics pertains packaging eggs). The distributers in the different
to broilers and layers. Statistics captured include:
provinces are:
Broiler prices.
Potential weekly broiler processing.
Day Old Broiler parents placed. A&X Beleggings
South African poultry meat imports. Bronkhorstspruit, GAUTENG
Raw material report, etc. Tel: (013) 933 3225
Contact: Louis van Zyl
Farmers Weekly
The First National Bank (FNB) provides information Jerikan Bemarkers
on agricultural commodities through their article Springs, GAUTENG
called First National Agricultural Market Price Tel: (011) 813 1200 (ext. 298)
Trends. The following statistics are covered: Contact: Johan de Vries
Poultry price trends. (Broiler).
Livestock price trends. (Beef, mutton, pork and L. Komm Wholesalers
wool.) Vereeniging, GAUTENG
Crop price trends. (Yellow maize, white maize, Tel: (016) 422 2097
wheat, oilseeds.)
Jamaica Wholesalers
SA Poultry Association
Brakpan, GAUTENG
PO Box 1202 Tel: (011) 740 1718
Honeydew 2040 Contact: Louis De Agreta
Tel: (011) 795 2051/2
Fax: (011) 795 3180 Driesan Plastic
E-mail: [email protected]
Groblersdal, MPUMALANAGA
National African Farmers Union Tel: (013) 262 3353