The Competition Commission praised local retailers yesterday for implementing product rationing for eggs and chicken as the poultry industry reels from highly pathogenic avian influenza (HPAI) that is ravaging the country.
Competition Commission spokesperson Siyabulela Makunga said in an interview that they were encouraged to see that some South African retailers were rationing the sale of eggs and chickens to their consumers.
Product rationing measures are usually implemented by retailers at a time when a significant amount of produce has left the market. The measure provides more equal access rather than just letting those who can afford have everything to themselves. For example, amid Covid-19 supermarkets were forced to ration sales of toilet paper due to panic buying.
The poultry industry is reeling from a harsh avian influenza outbreak, which has seen the industry culling in excess of 30%, or more than eight million, broiler breeder flocks, knocking the industry.
Makunga said the immediate impact of this was that a significant amount of chicken and egg supply had left the market.
“Depending on how producers and retailers choose to respond, this may affect prices in the immediate term,” he said.
The commission said it was concerned that the poultry predicament could lead to price gouging that exploited consumers, but said competition law would protect customers.
Price gouging is the practice of increasing the prices of goods, services or commodities to a level much higher than is considered reasonable or fair.
“Our competition law can protect consumers in certain instances that are within the ambit of our act. Competition law guarantees our consumer right to choice and quality services and/products. A pro-competitive behaviour in markets produces lower prices.
“Section 8 1(a) of the Competition Act specifically protects consumers against excessive prices. Other institutions such as the Industry Trade Advisory Committees, National Consumer Commission and the Department of Trade, Industry and Competition also contribute towards consumer protection as part of their mandates,” Makunga said.
The Competition Commission monitors price gouging and companies can be penalised if found guilty.
“The industry is always encouraged to avoid opportunistic and exploitative behaviour,” Makunga said.
Meanwhile, Paul Makube, a senior agricultural economist at FNB Commercial said the price hikes due to the HPAI-induced supply/demand imbalance in the market would create a tighter supply situation normally followed by price increases and product rationing to ensure adequate spread of product for access to consumers.
He said that the recent increases in the price of diesel also meant higher input costs associated with running generators during load shedding.
“Additionally, the cost of distribution of produce to markets as well as input supplies will increase, thus squeezing profit margins. These additional costs will eventually be passed on to the consumer in the final product,” Makube spud,
John Hudson, Nedbank’s head of agriculture, said as far as the impact on egg prices went, the primary driver of the steep rise in egg prices was the shortage in supply.
With approximately 8.5 million birds affected by avian influenza, this represented about 30% to 35% of the national flock.
“Taking this number of birds out of production leads to reduced supply onto the market and, therefore, prices rise. The increase in the cost of diesel will only compound the problem with the cost of production and logistics costs rising, however the primary driver of the steep rise in egg prices is due to a shortage in supply,” he said.