Chicken Industry

Material injury in SA Poultry’s anti-dumping application

Details of the application for anti-dumping duties against Brazil and four European Union countries – Denmark, Ireland, Poland and Spain – have been published by South Africa’s International Trade Administration Commission (ITAC).

ITAC will investigate and assess the voluminous evidence produced by the South African Poultry Association (SAPA) in support of its application. ITAC will then make recommendations to the Minister of Trade, Industry and Competition, who will make the final decision. The process could take a year to 18 months. 

For anti-dumping duties to be granted, the applicant must prove that chicken was imported at dumped prices, and that those imports caused material injury to the local industry. 

A non-confidential version of the application, together with multiple supporting documents, has been made available. Details of the financial performance of the companies involved in the application, and the material injury suffered by each of them, have been kept confidential.

The application focuses solely on imports of frozen bone-in portions, and it relies on extensive evidence and calculations based on imports from the five named countries over three financial years from July 2017 to June 2020.

Over those three years, it says dumped imports from the five countries named in the application totalled nearly 426 000 tonnes of frozen bone-in chicken, with a total landed import value of R6.4 billion.

The application says these dumped imports have caused material injury to the South African industry, and they will cause continued injury unless action is taken. It says anti-dumping duties are needed to “stem the flood of unfairly priced dumped imports”.

The application seeks anti-dumping duties based on dumping margins – the difference between what frozen chicken portions are sold for in the producer country and the lower export price of frozen chicken portions to South Africa. SAPA has calculated significant dumping margins of 110.76% (Brazil), 177.67% (Denmark), 158.42% (Ireland) 35.0% (Poland) and 91.58% (Spain). 

“There would be no price undercutting or price disadvantage if dumped imports were sold at the price they are sold at in the dumping countries,” the application says.

The “material injury” caused or likely to be caused is dealt with at considerable length. This is done under a number of headings, including price depression (price decreases), price suppression (inability to raise prices), reduced gross and net profits, reduced market share and significant unused production capacity due to dumped imports. Details of the injury suffered were not published because they are in the confidential portion of the application.

Local producers had managed a slight increase in sales volumes over the period under investigation, but not enough to prevent a loss of market share as local demand increased. The reduction in market share denied local producers the opportunity to achieve economies of scale, which would improve efficiency and increase profit margins. 

The application said the reduction in profits correlates with an increase in the import volume and market share of dumped imports and continued price undercutting, and had forced producers to reduce production volumes, worsening economies of scale and reducing profits.

Reduced production had resulted in “significant unutilised production capacity”. This limited capacity utilisation, profitability and the sustainability of operations.

Despite continuing to suffer injury caused by dumped imports, the participating producers had managed to increase employment in in 2019 and 2020, demonstrating their commitment to sustainable employment.

“If no action is taken to remedy the material injury caused by dumped imports, then the participating producers may be forced to consider reductions in employees, as they were forced to do in 2016 and 2017.”

The same consideration applied to investment in future expansion projects.

The application says the lower volumes of chicken imports during the coronavirus pandemic in 2020 is “likely to be temporary” and “is expected to reverse as the pandemic abates and the global economy returns to pre-pandemic levels and practices.”

The application also notes that Brazil and the European Union have excess production and a considerable oversupply of chicken. They are likely to target South Africa with volumes of dumped brown chicken meat.

Brazil is the second largest global producer and the largest exporter of chicken meat. Brazilian chicken meat production is expected to grow by 2.5% and export by 5% in 2020.

Broiler meat production in the EU is growing and has exceeded consumption over the last few years.

“The EU poultry industry has excess capacity of undesired frozen brown meat. EU exports of dumped poultry meat, which consists mainly of frozen brown meat portions, are growing and will probably continue to grow at the expense of SACU chicken producers.”

The local industry has been shown to be globally competitive. “The material injury suffered by the industry is not caused by the industry not being competitive with dumped imports”.

Dealing with the industry’s export potential, the application said there were limited export opportunities for frozen bone-in chicken, with little or no demand in North America and Europe. Exporting boneless chicken was extremely difficult.

“Despite enjoying tariff preferences, SACU producers are excluded from exporting boneless products to North America or Europe by sanitary and phytosanitary standards that the SACU producers cannot comply with without the co-operation of agricultural producers in other industries (for example nearby farms) and the SACU governments, which has not been provided. 

“This may change with the implementation of the poultry master plan,” the application said.

The participating producers named in the application are Astral County Fair, Astral Festive, Astral Gold, Daybreak, Grain Field, RCL Foods and Supreme. Poultry producers from other countries in the South African Customs Union (SACU) have joined in the application as interested parties.