Uphill task for poultry producers

Astral CEO Chris Schutte says local producers operate on small profit margins, while importers made fat profits.

In a lengthy interview in the Sunday Times, Schutte said low-priced chicken imports were no longer cheap once they got to the shops.

“The importers bring it in cheap, but they sell it just below our price. So we don’t see where this cheap chicken that they import is, we don’t see it in the market. They make massive margins.”

On the importance of import tariffs for the local industry, he said the target of tariffs was not imports, but dumping.

A lot of competitors had closed down plants and retrenched people because of dumping, which he said had reached 32% of market share in South Africa and is currently around 25%. Because of anti-dumping duties, producers were now starting to reinvest in their businesses.

Schutte also noted the lack of any subsidies for poultry farmers.

“Most of our competitors in other countries get government subsidies, which we don’t get. Our electricity and diesel is 40% more expensive, our raw materials which we have to import are more expensive because of the weakness in the rand.

“Our maize and soya are not subsidised, as they are for poultry farmers in countries like Brazil and the US.”

That Astral was able to increase revenue and profits in those circumstances deserves applause, not criticism from importers.

Local chicken creates local jobs

Confirmation of the fat profits to be made from chicken imports came from someone who has seen it from the inside.

Writing in Business Day, K Lawrens said he has been a chicken farmer, cold store shareholder and poultry distributor. He said consumers don’t benefit from low import prices because imports are sold at the same price as local chicken.

Retailers who import or buy from importers make far better profits.
“Local stock is sold at a mark-up of 10% to 18%, whereas the profits on imports are 25% to 30%,” he wrote. “Most imports are repackaged either as a plain in-house brand, or in the deli. The consumer pays the higher price regardless.”

His advice to consumers? As there’s no price advantage, buy local chicken because local producers create local jobs.

That’s what FairPlay has been saying for years. It’s nice to see our view echoed by someone who’s seen where the profits are made.