According to the Pietermaritzburg Economic Justice and Social Dignity Group’s October Household Affordability Index, the price of eggs increased by 19% between September and October 2023, and 36% between October 2022 and October 2023. Chicken feet and gizzards increased by 8% year-on-year and chicken livers by 14%. These are the products most consumed by the poor.
The Association of Meat Importers and Exporters (AMIE) warned that there will be a hefty increase in poultry prices over the festive season and into 2024 as a result of the shortages caused by the bird flu outbreak and “the inability of the government to introduce a rebate on import tariffs timeously”, according to Paul Matthew, CEO of AMIE.
As reported on MoneyWeb, deputy president Paul Mashatile promised a support package for affected farmers a month ago, and the minister of Trade, Industry and Competition, Ebrahim Patel, asked for an urgent investigation into creating a rebate on poultry imports almost 2 months ago.
In the meantime, Matthew said that to address the poultry shortages caused by the bird flu outbreak, the local poultry industry has imported 83 million fertilised eggs on an urgent basis and flown in by air, which he said are 3 times the price of a locally-grown day-old chick.
A rebuttal
Meanwhile, Izaak Breitenbach, GM of the South African Poultry Association (SAPA) said that AMIE are “quite opportunistic in their assumptions”, adding that SAPA is not expecting any shortages of poultry products this festive season due to avian influenza, “thanks to its quick and focused action at the start of the outbreak”.
Due to culling of diseased flocks, the production of broiler hatching eggs was reduced by approximately 30%, he said. “Producers have made up the potential 30% shortfall by importing enough hatching eggs to alleviate any possible shortage,” he noted.
Between the various South African producers, Breitenbach said that over 100-million hatching eggs have been ordered, the imports of which have been arriving since early October, he said. These hatching eggs are used to produce day-old chicks which enter the supply chain after 5 weeks.
“This swift and decisive action has already negated the biggest impact on the consumer price. Additionally, fertile hatching eggs are not imported at “3 times the price” of locally produced eggs. While it is slightly more expensive, the cost of the hatching eggs is diluted and absorbed into the production cost of the whole bird,” he said.
A brief view of the current avian influenza and its likely food inflation effects
“Importing eggs is a far cheaper option than importing a whole chicken, or chicken portions for that matter, and secures local jobs in the poultry sector, while bolstering food security for the country. On the other hand, imported meat is a poor substitute for locally produced poultry, and more so now that the ports are overwhelmed…
Rebate debate
The International Trade Administration Commission said the investigation process to consider creating a temporary rebate on poultry products is ongoing.
Matthew says that while import tariffs subsidise and protect local poultry producers, they are in fact a tax that consumers have to bear. The government’s overall mandate, he said, is to act in the best interests of the people of South Africa – the consumers.
Import duties are “an extremely regressive form of tax”, he said, adding that it impacts consumers most directly. He said the 62% import duty on bone-in chicken introduced in March 2020 should have been a temporary measure, but it has been “institutionalised at the expense of consumers”.
Breitenbach, meanwhile, argues that a rebate to stimulate poultry meat imports would be a poor solution to balance supply and demand. “The chicken meat will be delayed on the water for weeks, and there’s fewer than 5 weeks to the new year, when demand for poultry products decreases significantly,” he said, noting that a rebate would only address a shortage of chicken in the market caused by avian influenza, but the industry has already taken the necessary steps to ensure this will not become a reality.
“Moreover, rebates on imports will have no impact on price as importers sell at market prices – retailers set these prices, not farmers or importers. Finally, it is simply too late for a rebate – by the time it is announced, it will be too late to address the perceived problem and the delays at port will fail to address the perceived issue,” he said.
If poultry supply and consumer pricing is a legitimate concern for policy-makers, they would do well to remember that a blanket rebate on import duties favours foreign producers and provides importers with a generous cost advantage over local producers, he flagged.
“Helping South African farmers recoup their losses and rebuild their flock faster would go much farther in stabilising South Africa’s food security by keeping the price of poultry low. Padding the importers’ bottom-line with rebates will do nothing to assist an industry in distress, other than hastening its demise,” said Breitenbach.
Biggest poultry producers reports massive losses
Poultry producers such as Quantum, RCL Foods, and Astral Foods have suffered huge losses. This comes at a bad as the industry – together with the country – faces higher costs due to South Africa’s electricity crisis.
South Africa’s biggest poultry producer, Astral Foods, recorded a loss of almost US$4 million as the ongoing electricity crisis, coupled with the bird flu outbreak, cost the company R2 billion rand (just over US$100 million), reported Reuters.
Astral processed about 4.9 million chickens weekly during the 2023 financial year, which is 16% lower than 5.8 million birds per week the previous year. The company reported a R621 million operating loss in the full-year that ended 30 September compared to a R1.4 billion rand profit last year. Its flagship poultry division’s R1.38 billion loss was partly offset by a R759 million profit from its feed division, which saw 12% revenue growth.
Meanwhile, Quantum Foods reported a R35 million (US$1.86 million) loss in the year to end September. The prior year the company posted a R37m profit. The company said it wrote off assets, such as layer hens and breeding stock, worth R155m during the financial year due to the bird flu outbreak. It also had additional costs from feed and eggs that had to be destroyed as part of measures to combat the avian flu.
