That lockdown baking frenzy pushed out trouble for SA’s egg industry to 2021

Business Insider SA
Eggs. (Photo by: BSIP/UIG via Getty Images)
(Photo by: BSIP/UIG via Getty Images)
  • Egg prices were on the way down – way, way down – in early 2020, as a recovery from avian influenza pushed up output.
  • Then lockdown happened, and South Africans went crazy for baking and started making proper breakfasts, causing a huge spike in demand.
  • In the end prices were down just 2.4%, says mega-producer Quantum Foods.
  • But without another big change in the market, prices are definitely on their way down in 2021.
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By early 2020 South Africa's national poultry flock had recovered to the kind of level it had been before highly pathogenic avian influenza saw an estimated 4.7 million laying hens culled, and egg prices were starting to drop.

Then lockdown hit.

The surge in demand was startling, as some South Africans took to making proper breakfasts, and home baking took became something of a national pastime. 

For egg producers, the timing could hardly have been better.

In the end, the JSE-listed Quantum Foods said in an annual report published this week, its average egg prices decreased by only 2.4%. With volumes up 15.4%, it still earned R134 million in extra revenue for the financial year.

Quantum sold 1.2 billion eggs on the African continent during the year, many under its own Nulaid brand.

Even with that higher demand, the company recorded R32 million less in operating profit from its egg business, thanks in part to high feed costs.

"The decline in egg prices could have been significantly worse," the company said, had lockdown not "stabilised prices". 

Then the hard lockdown ended, and with just as many laying hens still around, wholesale egg prices started to drop again. Into next year feed prices may still be high, and there will still be a lot of laying hens around – but a weaker economy will not support lots of egg buying. 

Nulaid and eggs in general, Quantum warned, will be "under severe financial pressure."

"However, cyclical profitability is part of the egg industry’s natural cycle and might create acquisition opportunities," it said. 

(Compiled by Phillip de Wet)

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