What does this chicken shortage mean for the food industry?

Head of Supplier Relations at Foodbomb, Nathan Lo Russo said, food scarcity and shortages were becoming commonplace in Australia with lettuce, leafy greens and potatoes all experiencing major supply issues this year.?

“The food industry usually feels it first, ahead of consumers, because major supermarkets get first dibs on supplies due to contractual reasons. Food suppliers, hospitality, venues and caterers are left to fend for whatever supplies remain and this doesn’t really trickle down to affect customers for weeks, sometimes months,” said Nathan.

"While the shortage is currently at a supplier level, the reality is it will hit all of Australia soon” said Nathan.

"We haven't seen any price increase on our free range chickens for five years, but recently we've had two price increases. Overall chicken prices have gone up 25 percent and we've been told to prepare for more, with another price increase coming next week,” said Jim.?

Australian supplier Oroso Poultry also said their prices will soon be increasing anywhere from 2 to 12 percent in the coming weeks.

“It’s the new potato shortage, which we knew about months ago at a wholesale level, but has only really hit customers in the wider market via chips shortages now,” explained Nathan.

“The industry has never seen this before, because historically the prices go up and then they come down, but now they just keep going up. Over the last 30 years chicken has consistently been the same price, but we're hitting record prices now. We're telling our customers to prepare for rolling shortages because even if they shop around, other suppliers will tell them the same thing," said Jim.?

Why have there been so many shortages of produce this year?

Most of the shortages we've seen this year (lettuce, potato, chicken) are the result of three combined factors:?the wild weather patterns affecting growing regions at the worst possible time, the impact of the Ukraine war on the price of fuel, feed and other essentials and the aftermath of the pandemic whoch dramatically reduced labour in Australia.

Nathan Lo Russo also said that whilst suppliers have previously been reluctant to pass on price and market fluctuations, they’re being forced to do so now in order to survive.?

“Historically, suppliers would absorb price increases, as they were minor and usually temporary, but now due to various factors like inflation and staff shortages those price increases are too high for suppliers to absorb alone. As a result, chicken prices will not come down for supermarkets, hospitality venues or food service businesses, they’ll just keep going up to a point and then plateau, creating the new norm,” said Nathan.

After Astral Foods took the first blow in the market from the avian influenza outbreak, announcements came through from Quantum Foods and RCL Foods.

The outbreak has dealt a severe blow to Quantum Foods, starting with the devastation at its Lemoenkloof layer farm in April 2023. Unfortunately, this poultry nightmare continues, as the virus has now spread to its farms in Gauteng and North West.

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The financial impact is enough to seriously ruffle feathers, with an estimated R106-million hit.

That’s a significant number in the context of Quantum Foods’ market cap of R880-million. The company has released a trading statement noting that profits are a thing of the past, with no indication of how large the loss will be.

There is a silver lining: farms in the Western and Eastern Cape are unscathed. Nevertheless, the poultry industry as a whole is facing turbulent times. Astral Foods’ recent update highlighted industry-wide challenges, including blackouts and weakened consumer spending.

RCL Foods has announced that 11 of its 19 inland sites have been affected by avian flu. About 410,000 birds have been culled, with an estimated financial impact of R115-million.

It’s a complete disaster in the industry. In a world of chicken or beef, you may soon have no choice.