Fears that SA will run out of chicken by Christmas exaggerated, but prices will increase

South Africa will not run out of chicken by Christmas and chicken prices have not increased much due to import duties implemented again since last month.

The International Trade Administration Commission’s (ITAC) investigation earlier found that producers in Brazil, Denmark, Ireland, Poland, and Spain were dumping poultry products onto the South African market, placing the industry, worth R59 billion, at risk.

Fred Hume, managing director of Hume International, that imports and exports food, warns in a statement that “South Africans should brace for a chickenless festive season this year as multiple industry issues come to a head, resulting in a perfect storm of supply shortages and rapid price hikes.”

However, Izaak Breitenbach, CEO of the South African Poultry Association, says South Africa is a big country and produces in the region of 21.5 million broiler birds per week. “I would expect the highly pathogenic avian influenza to impact the supply of chicken meat to the industry, but I do not think we will run out of chicken meat coming up to Christmas.”

He adds that we must remember that this is also the time of year when people eat a lot more chicken and that is also the time of year when prices tend to increase between September and December.

According to Hume, the latest figures from the Pietermaritzburg Economic Justice and Dignity Group’s household food basket show that the price of a 10kg bag of frozen chicken pieces increased by R11.33 from R383.37 in July to R394.70 in August. “As local market pressures hit supply chains, South Africans should expect this trend to only increase in ferocity.”

He says these “runaway prices” have three potential causes: non-tariff trade barriers that blocked imports from major international suppliers, anti-competitive anti-dumping duties levied against South Africa’s most important poultry trading partners and underwhelming local supply exacerbated by an ongoing bird flu epidemic and other pressures.

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No high increases in chicken prices

Breitenbach does not agree and says chicken prices have not increased due to the implementation of the import duty. “The duty was implemented on 3 August. Imports will still come in at the normal reasonable rate up until this point in time. It takes about six weeks to three months for the impact of the duties to take full effect.”

He says therefore we have certainly not seen an increase in prices due to the duties. “What we have seen is price increases due to avian influenza and the impact of raw material cost. Raw material cost came down since January and now stabilised with a slightly upward movement.”

Is chicken getting so expensive that low-income consumers cannot afford this important protein in their diet? Breitenbach says he does not think so. “To date chicken prices have not increased to such an extent that low-income consumers are unable to afford the chicken produced by South African companies.”

While Hume argues that South Africa has been dragging its feet in reopening poultry trade with countries such as Poland, Belgium and Argentina, although they have been declared bird flu-free, Breitenbach says his latest information is that Belgium and Poland are still highly pathogenic ovary influenza positive and the disease is circulating in Europe.

“Therefore, the reduction or suspension of the duty will have no impact in those two countries. There is also ample product available from Brazil that can be imported at any point in time since there is no highly pathogenic ovarian influenza.”

Hume also contends that Ireland got the green light, but is a far smaller producer than Poland, Belgium and Argentina, “raising the concern that trade permissions may currently be guided by political rather than phytosanitary motivations”.

He says South Africa’s punitive tariffs have already disincentivised imports, which have historically served to enhance competition and keep prices low for consumers, while augmenting local supply in times of shortage.

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Anti-dumping duties ‘absurd’?

“Originally intended to protect local producers and encourage job creation, these absurd anti-dumping duties and other anti-competitive regulations have alienated our most important trading partners and have led to zero job creation. In fact, we might see scores of workers being furloughed or retrenched or, in the best-case scenario, working less hours and receiving lower incomes.”

Hume says, “topping off the powder keg”, a new strain of bird flu called H7N6 has spread through Mpumalanga, Gauteng and the Free State over the past couple of months, “leading to the death of more than one million chickens this year by the most conservative estimations, resulting in billions in lost revenue”.

He believes this, coupled with unfavourable import tariffs, will inevitably lead to meteoric price increases, lower supply availability and an alarming drop in consumption of this protein which is so integral to the majority of South Africans.

“Worse still, the recent bird flu outbreak is hardly a black swan event. Bird flu is endemic in every poultry flock in the world, but under normal circumstances, imports would cushion the blow and keep prices in check. That is no longer the case.”

Breitenbach says there is indeed an outbreak of bird flu in South Africa, but it will only affect supply in about six weeks’ time as producers are slaughtering less than normal volume at the moment.

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Other pressures on chicken prices

Hume says the cost pressures facing local producers, such as load shedding and deteriorating water infrastructure will remain and South Africa is inevitably passing these expenses onto already vulnerable consumers by forcing exclusive dependence on local producers.

“In the past two weeks alone, clients in the industry have reported that chicken prices from local suppliers have already jumped as much as 15% in the past two weeks in response to growing supply pressures. And given lengthy lead times for food supply chains, we are likely to only see the full impact of decreased imports and the pressures on local producers within the next two to three months.”

That is why he advocates for another temporary suspension of “harmful anti-dumping duties” for at least six months. “During this time, the government should further reassess the appropriateness of the anti-dumping duties and include prominent importers in the conversation.”

He also wants government to update its poultry quarantine regulations, but Breitenbach says these regulations are there for importing poultry, poultry meat and poultry products. “With that we can also import disease and that is why we have quarantine regulations. A change in the quarantine regulations will not necessarily actually stop any product.

“We do not want to import genetic material, breeder stock eggs and fertilised eggs. What we would like to import would be frozen poultry products and that can be imported. There is therefore no need for quarantine regulations to be changed in that regard.”