SOUTH AFRICA - Poultry and pork producers in South Africa are struggling to keep their heads above water, not only because of the impact of dry climatic conditions on production, but also because they have to compete with “cheaper” imported products. Glenneis Kriel reports.
South Africa, which has an unemployment rate of over 25 per cent, is exporting thousands of jobs each year due to poultry and pork imports.
Gary Arnold, director of business development at Astral Foods, explained that imported poultry directly competes with locally produced products for market share, as the imported products are exported at lower, largely subsidised, prices making it difficult for local producers to compete.
Imports in effect limit the potential of the local industry to reinvest and expand production with the creation of much needed jobs.
The poultry industry employs more than 120,000 people through both direct and indirect jobs. The South African Poultry Association (SAPA) has estimated that another 18,000 jobs could be created if poultry meat imports were stopped.
“It is estimated that we lose a thousand jobs for every 10 000 tons of poultry imported,” Mr Arnold said.
The same is happening in the pork industry. According to Simon Streicher, CEO of the South African Pork Producers Association (SAPPO), South African producers have the capacity to increase production by at least ten per cent to meet the country’s full demand.
“Increasing production would however result in an oversupply in the market, because we have signed a trade agreement that allows Europe to export pork to South Africa,” he said.
Imports were also having a negative impact on up-stream supply chains, such as the feed industry and raw material farming businesses that supply ingredients for feed production.
Andy Crocker, managing director of Meadow Feeds, said the feed industry had spare capacity, which was not being filled by growth in the livestock producing sectors, because of imports that have become a significant competitor in the poultry, pork and dairy sectors.
High production costs
There are various reasons why South African producers are struggling to compete with imported products.
Feed for one is more expensive. Arnold pointed out that maize is currently R1500 (about £71) more expensive than the Chicago Board of Trade (CBOT) price, because of the drought that has turned South Africa from a net exporter into a net importer of maize as well as the weakness of the local currency, the South African Rand, against other major currencies. The Rand has deteriorated by about 40 per cent against the American Dollar and British Pound over the past year.
“Maize makes up 65 per cent of the average broiler diet in South Africa. A further 20 per cent is made up of soy bean meal.
"The price of soy bean meal is import parity based, but also subjected to export taxes in South America and import duties in South Africa. This makes it much more expensive for us to produce chicken than our Brazilian counterparts for example,” Mr Arnold said. Mr Streicher added that pork feeding prices increased by almost 70 per cent over the past year.
Administered costs, particularly energy costs, are high relative to competitors and these continue to experience double digit increases well above inflationary levels. Labour costs are also high, especially when measured in terms of productivity level, according to Mr Arnold.
The main reason why poultry producers were struggling, however, was that South Africa had to compete with whole birds, while the competitors export their “waste products” from the North American and European eating habits, according to Mr Arnold.
He explained that breast meat in these countries were in high demand and priced at levels high enough to cover the cost of the whole carcass: “Bone in portions, such as leg quarters are then exported to any receptive country, such as South Africa, for a price that exceeds the relative value that can otherwise be attained by including these low value portions in pet food.”
There wasn’t such an issue with imported pork, as the quality of these products were generally high, according to Mr Streicher.
South Africa also has a shortage of ribs, which cannot be supplied by the local industry on its own. The problem was that the import ratio of pork products have gone from 70 per cent ribs and 30 per cent other cuts, to equal volumes of ribs and other cuts over the past five years. “South African high value cuts in effect has to compete with these high value subsidised cuts,” he said.
Mr Streicher is also concerned over the potential impact that the AGOA agreement with America could have on South African production, as South Africa has agreed to import pork with lymph nodes to maintain this agreement.
“Up until now we only allowed imported pork meat with the lymph nodes removed to prevent Porcine Reproductive and Respiratory Syndrome (PRRS) as well as Classical Swine Fever. Producers have lots thousands of Rands due to these diseases in the past. They won’t be compensated by government if there is another of these outbreaks,” he said.
Resolving the issue would be difficult, as a number of measures, such as anti-dumping duties and the weak local currency, have not really had an impact on these imports. “Brazilian and European poultry producers have merely reduced their export selling prices in order to offset the depreciation of the currency and anti-dumping duties that were imposed on them,” Mr Arnold said.
The country also recorded a record level of poultry imports in July 2015 at 48,357 tons for the month, in spite of these measures. This equates to the equivalent of about 8.6 million bird per week.
“To place this in perspective, Astral in its financial year 2015 processed on average 5 million birds per week. The local industry produces and processes about 19,5 million birds per week,” Mr Arnold said. Total imports increased by 20 per cent from 2014 to 39,500 tons per month or about 7 million birds per week.
The same happened to pork, with imports hitting 35,000 tons last year in comparison with the long term average of 25,000 tons to 30,000 tons per year.
“Our market was flooded when the Russian market closed for pork and the EU decided to stop subsidising the storage of this meat,” Mr Streicher said.
Mr Arnold strongly feels that countries should only be allowed to export whole birds to South Africa to level the playing field, bone in chicken pieces should otherwise be subjected to anti-dumping tariffs.
“SAPA is busy with an Article 16 agricultural safe-guard of the Trade Development Cooperation Agreement with the EU action.
"This is an action that will take place against all EU producers providing tariff protection against all EU countries. Currently poultry imports into South Africa from the EU are not subject to any import tariff except the Netherlands, UK, and Germany, against which anti-dumping duties were granted in February 2015,” he said.
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