The impact of feed costs on the production of eggs in South Africa in period 1970-2007: An analysis using a demand-supply simultaneous equation model

High feed costs are always top of the list of factors affecting business performance for any poultry producer in South Africa. Producers may react to a significant increase in the price of a variable input, such as feed costs, by reducing production. This study evaluates the impact of feed costs on the supply of eggs in South Africa from 1970 to 2009 by estimating simultaneous equations for the demand and supply of eggs, since the decisions of suppliers interact simultaneously with the decisions of consumers. It was found that fluctuations in supply of eggs were not primarily due to changes in feed costs. Since eggs have few close substitutes and their demand is price inelastic, higher prices of eggs did not significantly influence the demand and supply of eggs. However, the supply of eggs in South Africa in the period 1970 to 2009 was heavily driven by the increasing demand for eggs rather than feed costs. Population growth and rising levels of disposable income resulting from improved job opportunities associated with economic growth, factors such as affirmative action and employment equity policies, created an ever increasing demand for eggs that led to the increase in supply of eggs in South Africa during the period 1970 to 2009.