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Price can be a problem

Chicken is the main protein source for South African consumers, and the poultry master plan aims to keep prices down.

One of the objectives is to reduce the price of maize and soya, because feed constitutes nearly 70% of a poultry producer’s input costs. When feed prices go up, chicken gets more expensive.

However, while local feed prices are low compared to other countries, they are tied to prices on international markets. So, although there’s a bumper maize crop this year, maize prices have risen because international prices are high.

“We live in a global economy,” said Corné Louw of Grain SA. “International prices went up because of international shortages and big demand from China. That meant that although our prices are at export parity – which is much lower than import parity – our prices are relatively high because international prices are so high.”

Louw says that relative to other countries, South African grain prices are as low as they can be. Soya, for instance, is well below the United States export parity level, and really low compared to international prices.

Can local grain prices be brought down? Louw explains that intervention would create a distortion in the market because all other factors in the value chain are derived from international prices. Grain farmers import most of their fertiliser, chemicals and machinery, while fuel is based on the international oil price.

“Our farmers need to be able to compete internationally, and sometimes against farmers whose production is subsidised. We are not subsidised in the grain industry,” he said.