Chicken Industry

Chicken prices may spike by up to 32% due to tariff increases, says importers

Reproduced courtesy of BusinessDay. First published on 17 April 2019. Article by Siseko Njobeni. Access the original article here

The Emerging Black Importers and Exporters SA and the SA National Consumer Union have accused local industry for protectionism

Increasing tariffs on imported poultry products could hike chicken prices by up to 32%, says consumer bodies and importers and exporters organisation.

The South African poultry industry, under the auspices of the SA Poultry Association (SAPA), has applied to the International Trade Administration Commission of SA (ITAC) to increase tariffs on chicken to 82%.

But the Emerging Black Importers and Exporters SA (EBieSA) and the SA National Consumer Union (SANCU) on Wednesday slammed the local industry for seeking protection against imports.

“Their rationale is that imports are damaging the local industry, but EBieSA believes they are simply seeking to protect their profits to the detriment of consumers and emerging black importers,” EBieSA, which represents 105 black businesses, said.

In a report, released in January, SAPA — whose members include RCL Foods, Astral Foods, and Rainbow Chickens — said Brazil accounted for 61.5% of chicken imports in 2018. It was followed by the US (16.1%) and the EU (12.6%).

EBieSA chair Unati Speirs said the local industry had created an impression that the imports hurt local producers.

“This is not true. In 2018, some local producers posted bumper profits of more than R1.4bn for the year. This perception is being created in order to drive further protection for local producers, in an already concentrated and untransformed market,” Speirs said.

SANCU vice-chair Clif Johnston said any increases in chicken prices would hurt consumers. “Our experience is that the imposition of import tariffs or the increase of existing tariffs eventually results in proportional increases in the price of the protected local commodities as paid by the consumer. If there is no price impact, why do it?” Johnston asked. He said the imports kept the chicken prices in check.

Nontwenhle Mchunu, founder and director of Mkabayi Group, a black-owned importer of chicken, said the local poultry industry should take up export opportunities.

“Both imports and exports create valuable jobs and revenue, yet local producers continue to ignore export opportunities. For example, the EU has opened up its borders to our chicken at 0% duty and we could be selling our chicken breasts in the US. Why is the local industry not doing it?” Mchunu questioned.

Izaak Breitenbach of SAPA on Wednesday said the two organisations’ claims were opportunistic and sought to protect the interest of chicken importers “ahead of tens of thousands of people, including thousands of emerging black farmers, who rely on the poultry industry for a living, and who battle to survive due to predatory trade practices such as dumping that undercut their prices.”

Breitenbach said SAPA welcomed fair competition and imports of whole chickens. But he said huge volumes of chicken portions were “dumped” in SA at prices that are under the cost of production in their countries of origin.

He said Brazil made profits selling breast meat to northern hemisphere customers, “and can cut their prices for the leftover brown meat because these are a by-product of their breast-meat production and has no value to them.”

Breitenbach said it was a fallacy that the cheap imports benefitted consumers as the importers pocketed the profits. “You can see this by checking prices of imported chicken in any shop, prices are the same as local chicken or only slightly under. But the importers have no input costs like local producers do. It does not provide employment to thousands of South African workers. It also does not support thousands of grain producers and logistics companies.”.