SOUTH AFRICA – Animal Feed Manufacturers Association (AFMA), the association that represents South Africa’s animal feed industry has reported that feed manufacturers in South Africa have been forced to adjust their feed prices upwards in response to the increasing cost of raw materials.
According to World Grains, South Africa has reported a net effect of high prices due to the high cost of corn and oilcake, the main raw materials in the manufacture of animal feed.
South Africa’s animal feed raw materials are dominated by maize which takes up 45.57% of the total feedstock utilized by feed manufacturers. Soy oilcake, sunflower oilcake, and fishmeal make up 14.6%, 4.06%, and 0.29%, respectively, of the total raw material used in South Africa’s feed industry.
The dip in the feed sector is attributed to the disruption of the global grain supply chain largely due to the Ukraine-Russia conflict that has impacted the feed industry in many countries including SA.
“While recovering from the disruptive effects of COVID-19 during the past two years, the grains and oilseeds value chain was dealt an additional blow with the Russian invasion of Ukraine, which added pressure to an already challenged value chain,” said De Wet Boshoff, AFMA’s executive director.
There are indications, however, that the situation may change during the 2022-23 marketing year as South Africa experienced above-average rains over most parts of the production area during the November and December 2022 seasons.
This, according to the US Department of Agriculture (USDA) boosted crop plantings and provided conducive growing conditions.
The USDA estimates South Africa’s corn production at 15.6 million tonnes for the marketing year 2022-23, an output that would enable the country to maintain its status as a net exporter of the commodity.
Global supply and demand for feed is to blame
Liesl Breytenbach, interim executive director and technical and regulatory manager at the AFMA, said that “despite record South African grain and oilseed crops, commodity prices are at higher-than-normal levels.
According to him, this is due to global grains and oilseeds value chain demand pressure, driven by global supply and demand for commodities.”
Although AFMA has not provided precise figures showing the correlation between the increase in raw material prices and animal feed prices, the association says global feed demand “is the most significant driver of feed commodity prices.”
In 2022, feed manufacturers affiliated with AFMA reported a 2.2% increase in feed sales to 6.9 million tonnes, after a 1% year-on-year growth in the previous year.
However, total South Africa feed production peaked in 2020-21 when 11.9 million tonnes were produced, nearly a 0.2% increase from the previous year.
“This growth was achieved despite a vigorous combination of simultaneous challenges impacting the poultry and livestock sectors,” said Breytenbach in reference to the devastating effect of poultry diseases reported since April 2021.
Top feed manufacturers hurt big
Meanwhile, Top feed manufacturers in South Africa including AFGRI, Bokomo Voere, Epol, KK Animal Nutrition, Meadow Feeds, Noordwes Voere, Brenco Feeds, Senwesko Voere Astral PLC and Quantum have in their latest reports highlighted key issues that are likely to hamper growth of South Africa’s feed industry.
They pointed out raw material input costs coupled with weakening local currency and increasing energy costs as factors wreaking havoc on the sector.
“We are expecting raw material input costs to reduce and poultry efficiencies to return to normal from July onwards,” said Dries Ferreira, chief financial officer of Astral Foods.
However, Ferreira said the benefits that could be derived from lower global grain prices “are at risk due to the continuing weakening of the local currency, and further escalations in the diesel bill, which is included in the cost base for Stage 6 load shedding at approximately ZAR 45 million (US$2.5 million) a month.”
Despite the hurdles, however, Astral announced a 37.4% increase in revenues of its feed division for the six months ended March 31, 2023, to ZAR 6.4 billion (US$349 million) up from ZAR 4.7 billion (US$256 million) for the same period in 2022.
The increase, the company said, is “a direct result of higher selling prices on the back of significant increases in raw material costs.”
AFMA, therefore, recommends that the future of the country’s feed industry likely will depend on how the far-reaching adverse effects of the Ukraine/Russia on global grain trade, and the consequences of climate change jolting production circles are tackled both at the global and national level.