Building a mega business through egg production

Toyota South Africa/Agri SA’s Young Farmer of the Year for 2019, Johan van der Schyff, whose agricultural concern has operations across the Southern and Eastern Cape, has utilised the advantages of economies of scale and technology to build up his substantial concern. He spoke to Glenneis Kriel about his layer business and other enterprises.

Eggs are graded and sorted electronically.
Photo: Glenneis Kriel

Johan van der Schyff (36) had always wanted to farm, and needed little invitation to join his father, Johan Sr, on the family farm after completing school.

“I grew up on a maize and layer farm near Ventersdorp, but we moved to Plettenberg Bay in 1994 after my father had to sell the farm for health reasons. He had over 40 years’ experience, so I knew that having him as my mentor would be my best bet on becoming a successful farmer,” Van der Schyff recalls.

Johan van der Schyff

Johan Sr bought a smallholding near Plettenberg Bay as a property investment after moving there, but Van der Schyff’s desire to farm presented an opportunity to use the land more lucratively. The father-and-son team therefore started using all their free time to develop and build a layer facility.

“Helping to build the layer houses from the foundation up means that I know where every pipe and cable on the farm has been laid. This is a great benefit when there are breakages, we run into infrastructure problems, or want to expand the business,” says Van der Schyff.

Big and bigger

The business started out with six layer houses with a capacity of 18 000 birds each, and opened with 100 000 birds in 2000 while Johan was still in matric. He joined the business full-time the year thereafter.

Since then, another three houses have been added to the premises, bringing the farm’s capacity to 220 000 birds.

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To further diversify risk and improve economies of scale, the Van der Schyffs expanded production to Humansdorp in 2006, starting out with four houses with a capacity of 18 000 birds each.

Another seven houses were added later, bringing the total production of this plant to 250 000 birds.

In 2012, they opened a depot in Kraaifontein, which sources eggs from a large-scale commercial egg producer who no longer wanted to be involved in sorting and packing eggs, as well as a couple of emerging farmers who had struggled to acquire point-of-lay hens due to the small size of their operations.

The depot packages and distributes between 800 000 and one million packs of a dozen eggs per month, with the three packing facilities in total managing 1,8 million dozen packs per month.

Cracked eggs are separated electronically during the grading process and sold to the baking industry as liquid eggs.

Diversification has gone beyond egg production. In 2012, Van der Schyff established a feedlot in Willowmore with the capacity to feed 1 500 small-stock per month.

And in 2015, he and another farmer in the area, Johan du Pisani, started renting a farm near Aberdeen under the JJ Boerdery Ou Plaas partnership, with 110ha of lucerne under irrigation and a livestock component comprising 3 000 Angora goats and 1 000 Merino sheep.

All the wethers and poor-quality ewes produced on the farm are diverted to the feedlot in Willowmore, and additional animals are bought in via GWK, Vleissentraal and BKB.

“I prefer buying via agents than at auctions, as it presents fewer biosecurity risks and the animals come with traceable health and production records,” says Van der Schyff.

He adds that economies of scale are becoming increasingly important, as commodity prices are not keeping up with the cost of inputs such as fuel and feed.

“Economies of scale give some breathing space by providing a little more negotiation power and an opportunity to reduce costs by buying in bulk.”

Having both market and geographic diversification also reduces risk.

“Producing more than one commodity helps buffer the business against times when prices for specific commodities are low, while production in different regions helps reduce production risks, such as the impact of drought or disease, on production in general,” he says.

Farming smarter
With today’s pressure on profit margins, however, diversification and economies of scale are often insufficient to keep a farm viable. Farmers also need to farm as efficiently as possible, and Van der Schyff is achieving this through the use of technology.

For example, the business recently switched to Aquamatika’s record-keeping software, a cloud-based solution that tracks production, spending and sales almost in real time.

“Having this type of information allows you to act more quickly when you see anomalies, and to plan and manage sales, distribution, marketing and production better.”

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Better management of fuel, one of the main operational expenses, is another area where technology has proved invaluable.

Van der Schyff began using Digitrac about seven years ago to monitor the amount of diesel used by each of the 30 trucks in his fleet, as well as the routes travelled and driver behaviour.

“Digitrac has improved driver efficiency, with drivers returning much earlier than before, and has also helped reduce incidents of diesel theft,” he says.

The cost of electricity, too, has become prohibitive, running to between R100 000 and R120 000 a month at the Plettenberg Bay facility alone, and Van der Schyff therefore has plans to install a solar energy system, having calculated that the investment will pay for itself within three to five years.

The solar plant will also leave him less vulnerable to load-shedding, which drives up production costs as he has to use generators to keep the poultry houses operational.

“We’re highly dependent on electricity for climate control in the houses. Short outages have a negative impact on production by causing stress, which renders the birds more susceptible to disease. Longer outages can wipe out an entire house of birds in a matter of hours,” he says.

Van der Schyff buys maize contracts on Safex between December and February, depending on the prices, in an effort to reduce exposure to feed cost fluctuations, as maize accounts for 60% to 70% of his total feed bill.

Feed is purchased from Meadow Feed in Port Elizabeth and Nova Feeds in George.

“I use the supplier that provides me with the best price and service. If another company offers a better package, I’ll ask the existing company to match it. The job of an input supplier is to ensure my competitiveness on the market, and they are directly dependent on me for their business success.”

Pillars of success

Although Van der Schyff attended a number of short courses when he started farming, he is convinced that the key determinant of a farmer’s success is on-the-job experience.

“Books and courses can only teach you so much about a specific subject field. The true test is whether you can apply knowledge and adapt operations to the continually changing business and production environment,” he says.

The Plettenberg Bay facility has the capacity to house 220 000 layer hens at a time.

Having a strong support network and the right people employed in the right positions is also crucial, especially for the beginner farmer who is thrown in the deep end and has to learn on the job.

One of the first things Van der Schyff therefore did after joining the farm, was to scrutinise staff members to ensure they were qualified to do their jobs.

The business currently employs 300 full-time workers and has 25 people on its management team.

Each of the layer facilities has its own human resources manager to help with staff management, and Van der Schyff holds regular meetings with the teams.

While he had learnt a great deal about farming techniques from growing up on a farm and having his father as a mentor, he initially found the business side of the operation fairly intimidating. In particular, he was concerned that people would not take him seriously because of his age.

“I learnt early on that it was okay to ask questions and get advice when I was uncertain or didn’t know what to do, and not just blindly accept quotes and prices,” he recalls.

One of his biggest breaks came in 2006, when he joined TopLay Egg Co-operative, which markets eggs on behalf of its members.

“TopLay brings the market to you,” he says. “All you have to do is service the contracts and negotiate price.”

His business trades under the Dagbreek Eiers brand name.

Food safety, biosecurity and cleanliness are non-negotiables, as far as Van der Schyff is concerned. At least one person is on duty at each poultry house to keep it clean and identify any problems early on.

A food technologist has also been appointed at each of the three production facilities, and a food scientist monitors and manages food safety.

“If you can’t produce safe, good-quality food, you may just as well forget about farming,” says Van der Schyff.

Email Johan van der Schyff at [email protected]