REPORT OF THE EGG ORGANISATION COMMITTEE Presented by Willie Maree MEMBERSHIP The membership of the Egg Organisation remained at 47 members. With the approval of the statutory levy, we will need to ensure all producers contributing to the levy are motivated to join as members. COMMITTEE The committee presently consists of: Willie Maree (chair) Dr Dave Allwright Marco Torsius Jimmy MurraySimon Armstrong Nic Elliot Freddie Kirsten Snr André Wohlfahrt Gawie Rossouw Dr Naudé Rossouw Four members will be stepping down, two of whom indicated their willingness to serve a further period, while two have resigned. INDUSTRY OVERVIEW As in 2008, the calendar year 2009 was a challenging one with production decreasing by 4,13%, and feed prices decreasing on average by 3%, after an increase of 32% the previous year (2008). The slight increase in hen numbers towards the end of 2009 coupled with the outcome of the recession is likely to cause problems in egg sales early in 2010. TURNOVER At a gross turnover of R6,986 billion at producer level, eggs take their place as the fourth largest animal-product sector in agriculture in South Africa. About 536 million dozen eggs were sold in 2009 through various channels. EGG PRODUCTION Day-old pullet production Day-old pullet placements for the year 2009 amounted to 23 543 000. Compared to 2008 this represents a decrease of 19 200 chickens (0,08%). On average 451 000 day-old pullets were placed per week during 2009. Laying flock and egg production The laying cycle was extended by two weeks, which implies that during 2009 the depopulation age of laying hens increased from 69 weeks to 71 weeks of age. The average laying flock of 22 230 000 hens for 2009 was 850 000 hens less (-3,7%) than the 2008 flock. A total of 17 906 900 cases of eggs were produced in 2009. This is 817 500 less (-4,4%) than the total production for 2008. During the first seven months of 2009, production decreased from 335 608 cases produced per week in January 2009 to 334 682 cases of eggs per week by July 2009. By December 2009, egg production had increased to 352 569 cases per week. The average cases of eggs produced in 2009 was 343 500 per week. Prospects for 2010 Based on day-old pullet placements since September 2009, it is evident that egg production will further increase during the first half of 2010. An increase to approximately 346 470 cases per week by April 2010 was expected at the stage this report was being compiled. The indications are that the decline in cases of eggs produced per week on a monthly basis will level off towards the first quarter of 2010. If day-old pullet placements during the first quarter of 2010 remains at the same level as those of the previous quarter (Q4 2009), an upswing in production can be expected towards the middle of 2010. PER CAPITA CONSUMPTION The per capita consumption for 2009 was 130 eggs per annum, a decrease of 5,6% compared to 2008. From the following graph, depicting egg consumption in 2008, it is clear that considerable scope exists for increase in per capita consumption, particularly taking into account the price competitiveness of eggs as a protein source compared to other animal proteins. INPUT COSTS The layer feed prices maintained an upward momentum in 2008 on the back of rising maize and protein prices with an average increase of 32%. In 2009, the average layer feed price was R2 387,73 per ton, a decrease of 3% in comparison with 2008. EMPLOYMENT With an estimated 10 000 workers employed all over the country, the egg industry remains an important player in rural employment. MARKETING During 2009, the egg industry continued with the generic marketing campaign, although at a lower level due to the limited financial resources. It gave the committee the opportunity to reassess the strategic approach. Once again, the approval of the statutory levy will enable SAPA to spend more time, energy and money on an updated marketing campaign. We will continue with the taxi branding as well as commuter radio programme, where we will be able to reach a substantially large portion of the taxi commuters. I want to thank Marco Torsius, Kevin Lovell, Sabine Frielinghaus and all committee members for their valuable inputs to ensure the growing success of this campaign. The Galliova Awards ceremony was once again held in Stellenbosch on the 9th October 2009. The response from both food and health writers towards this award was once more something that we as egg producers should appreciate. According to Peter Veldsman this award, now in its 20tth year, is still regarded as the ultimate food and health writers' award and exposure that we get from this could hardly be quantified. To Mathilda Pansegrouw and her team, a hearty thank you for your valued contribution. I am proud to announce that at the IEC conference South Africa has won the Egg Marketing Award with its “Eggs are Magic” campaign. At the same time, one of SAPA's members has won the Crystal Egg Price for marketing. Indeed a great achievement for the SA egg industry. THE GLOBAL EGG INDUSTRY The total volume of hen eggs produced in the shell globally is estimated at just less than 61 million metric tons of eggs. Asia, the largest egg-producing region, produced 36 million tons in 2008 with China, the worlds’ largest egg producer, producing just fewer than 22,8 million tons (37% of the global egg production). Europe produced around 10 million tons, while North and South America produced just over 12,3 million tons. Africa produced 2,4 million tons. South Africa is ranked 25th in the world in terms of egg production with approximately 23 million layers, which produced 485 250 tons of eggs in 2008. The pie chart shows the top eight egg-producing countries compared to South Africa and the rest of the world. (FAO Database, 2008). INTERNATIONAL AND LOCAL TRADE CONDITIONS (SAPA) Egg exports continued to operate from a low base and could perhaps become a long-term business opportunity for South African producers. Imports of egg products were also pleasingly low. During 2009, egg exports totalled 2 441 tons. While still operating from a low base, this is 167% or 1 526 tons more than the previous year. Although on a declining trend from 2002 to 2005, export of shell eggs started increasing from 2006 and increased to 2 345 tons in 2009. Shell eggs contributed to 96% of egg exports. Total imports of eggs, including shell eggs and egg product (liquid and dried), were 251 tons in 2009, 423 tons or 63% less than the previous year. Total egg imports attributed for 0,07% of egg consumption in 2009. Taking only the shell-egg component into account as can be seen on this graph, shell-egg imports decreased by 63% from 438 tons in 2008 to 26 tons in 2009. Egg prices on a per-kilogram base was at around R15,50 per kg in December 2009. This compared to R13,41 per kg for broiler meat, R15,38 per kg for pork (at abattoir level) and around R19,83 to R22,18 per kg for red meat at abattoir level. Eggs thus remain one of the cheapest broad-based food protein available to the South African consumer. INTERNATIONAL COMPETITIVENESS According to the Urner Barry Weekly Insider's Dairy & Egg Letter Market Guide and Forecaster, the egg price for the region Northeast in the USA for white medium was US$1,03 per dozen in January 2010. Expressed in Rand terms it amounted to R7,72 per dozen. The egg price for the region Northeast in the USA in January 2010 for brown large was US$1,48 per dozen or R11,05 per dozen in Rand terms. The SA egg price for January 2010 was R9,99 per dozen (average of all sizes on producer level). ANIMAL HEALTH AND DISEASES The continued prevalence of a wide spectrum of diseases in the poultry industry is a matter of real concern. The industry has during the past year been in a better position with regard to disease in general but live-bird movement, poor bio-security and vaccination programs not executed as per specification will continue to be a hazard to the industry. The Poultry Disease Management Agency, once implemented, will contribute to improved liaison with the division of veterinary services in the national department as well as provincial departments. ANIMAL WELFARE With an increased awareness of the general public on animal welfare we as an industry will have to ensure that our practices meet with both international and local expectations. The experience with one of the layer breeders has not contributed to the image of the industry and the general public's view on this has been described as “disastrous”. We need to ensure that all producers do heed the Codes of Practice applicable to the culling of non-saleable chicks as well as the transport of both point-of-lay and cull birds. FINANCES The financial statements of SAPA reflect a healthy financial position and for the third year in a row SAPA has received an unqualified audit report. FOOD SAFETY The Consumer Goods Council of South Africa had taken up as a priority the international pressure to ensure that safe food is available at all levels. Council members applied various standards for food safety and as producers we welcome the initiative to standardise these tests, ensuring possible cost reduction in the production process. The proposed egg mark will help us to have a practical and unified standard for food safety in South Africa. LEGISLATION The new regulations on egg packaging and grading, as well as on free-range production, were agreed upon and the new draft was circulated for comment in January 2010. THE FUTURE The cyclical changes in consumer demand contrary to the non-cyclical production patterns will in future require greater attention from the industry to ensure that we are able to overcome the lower EBB in the cycle and utilise the opportunities in the higher ranges. SAPA may need to take a serious look in advising our members on possible future demand trends. We may take a lesson from Grain South Africa on their recommendations to their members, but in the end every producer will have to decide on future production levels. Cost of production will remain an unremitting problem. The lack of reliable production cost figures will hamper every member but also the industry in enabling us to inform government on the implications of costs, especially electricity, fuel and results of poor road infrastructure in ensuring food security. The approaching World Cup Soccer may offer certain growth; we will, however, need to consider what will happen once this tournament ends. For that particular reason the management of the generic egg marketing campaign is considering a special promotional programme during August and September to ensure we overcome a decrease in demand and are ready for a possible upswing during the last quarter of 2010. CONCLUSION I wish to express my thanks to committee members for their contributions to the Egg Organisation during the past year. To all the SAPA staff members, my sincere thanks for your dedication and support. I wish to express my thanks to all the members of the Egg Organisation for your co-operation and assistance in dealing with the collective issues of our industry.