Cost of soybeans will remain high for poultry industry- South Africa

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SA’s quest to improve its poultry industry depends on increased soybean production, a crucial ingredient in poultry feed. Roughly 50%-70% of broiler production costs in SA can be attributed to feed, 70%–80% of which comes from maize and soybean. Yellow maize production has been a success story for SA for decades and the country is usually a net exporter.

The opposite is true for soybeans — SA remains a significant net importer of soybean oilcake or meal.

That said, soybean oilcake imports declined by 56% from the record level of nearly 1-million tonnes in 2010 to about 420,000 tonnes in 2019. This coincided with an increase in domestic soybean production. SA’s soybean planting has been on an upward trajectory since 2009/2010, when plantings were just 311,450ha. The 2020/2021 plantings estimated at 806,000ha is underpinned by growing domestic demand from both the poultry industry and the broader livestock subsector. SA’s per capita consumption of poultry meat has almost doubled over the past two decades and is currently estimated at 33kg.

READ MORE South Africa livestock and poultry industry faced with rising input costs

To service the growing demand for meat SA agribusinesses, supported by the government, have made investments to increase domestic soybean processing capacity from roughly 860,000 tonnes in 2012 to more than 2.2-million tonnes.

The farmers responded positively to these demand changes, as evidenced by the growth in plantings over the past decade.

The record 806,000ha of soybean plantings in 2020/2021, combined with higher-than-usual rainfall since the start of the season, suggest SA could have solid soybean output. The largest soybean harvest on record was in the 2017/2018 production season, a crop of 1.54-million tonnes with an average yield of 1.96 tonnes a hectare. There is still uncertainty about the potential size of the yield in the current season, but if one applies a five-year average yield of 1.82 tonnes a hectare on an area planting of 806,000 tonnes this harvest could reach 1.47-million tonnes, which would be the second-largest on record.

It is also plausible that SA’s soybeans yields could reach 2 tonnes a hectare, as was the case in 2016/2017, a year of higher rainfall. Under such a scenario the soybean harvest would amount to 1.61-million tonnes, which would be a new record. The possible increase in soybean production would also mean soybean oilcake imports would soften somewhat from the 2019 levels of 420,000 tonnes.

However, the implications of increased domestic soybeans production on prices remain marginal. SA is a small player in the global soybean market, accounting for a mere 0.5% of global soybeans. Domestic prices are primarily influenced by market developments in significant soybean producing and consuming countries such as Brazil, the US, Argentina, India and Paraguay.  China is a significant consumer, importing more than 60% of globally traded soybeans.

On February 5 SA’s soybean spot price closed at R9,990 per tonne, up 65% year on year. This price increase was underpinned by higher global soybean prices, which are supported by growing demand from China, backed by a recovery in the country’s pig industry from the devastation caused by the African swine fever outbreak in 2019.

In sum, in the near term at least, the gains in domestic soybean production will not translate into lower price changes for buyers such as poultry producers. Their input costs are likely to remain elevated despite the increase in domestic soybean production. This is one of the critical issues we should be consistently thinking about in our efforts to boost the industry.

• Sihlobo (@WandileSihlobo) is head of economic and agribusiness research at the Agricultural Business Chamber.