May 21, 2013

 

 

South Africa's chicken prices may rise by between 30% and 50% as a result of the proposed increase in customs duties on imported chicken.

 

This is according to the Association of Meat Importers and Exporters chief executive David Wolpert's warning on Friday (May 17).

 

This view was supported by Pick n Pay, which said any significant increase in the tariff would have a direct and serious impact on the price of chicken.

 

Wolpert was responding to complaints by poultry producers that their margins were being hurt by a rise in imports and high feed input costs. He believes the sector is blaming imports for its own poor operational performance.

 

Pick n Pay director of food merchandise Peter Arnold said that although the retailer sourced the large majority of its poultry from local producers, the industry was unable to fully satisfy demand.

 

"The total quantity of imports represents approximately 12% of the total poultry sold in the industry," Arnold said.

 

He said any increase in import tariffs, as proposed by the South African (SA) Poultry Association, would have a serious impact on the price of chicken.

 

"Chicken is one of the primary sources of protein and it is important to remember that poultry products include all parts of the bird," Arnold said.

 

Given that the retailer was concerned with food security at all levels, as well as providing its customers with the best possible prices, he said, "We are opposed to this tariff increase."

 

However SA Poultry Association chief executive Kevin Lovell has said the influx of chicken imports was causing a "crisis" that might result in job losses if it was not curtailed. The association has called for import duties be raised from 27% to 82%.

 

Lovell said on Friday that the association wanted the government to balance the volume of imports and local poultry products. He said the industry believed the price of chicken for consumers would only increase by 10-15% if the tariff was increased as chicken was the most popular animal protein and retailers would not increase the price by more. But Wolpert maintained that should the government approve such a tariff increase, the costs would be passed directly to the consumers.

 

When Shoprite was asked if higher import tariffs would affect chicken prices, it said it sourced all its chicken from local poultry producers and would refrain from speculation about chicken prices. Massmart refused to comment. Two of the largest fast food chains, KFC and Famous Brands, said they also only used locally produced chicken.

 

Woolworths said more than 90% of its chicken was sourced locally. However, the retailer did use a small amount of imported chicken for certain recipes. "We are currently assessing the impact of the tariffs," it said.

 

Recent interim and year-end results by major chicken producers Rainbow Chicken, Astral Foods, Sovereign Foods and Afgri showed that margins remained flat or declined.

 

Rainbow described the six months to December last year as the "toughest in its history". Afgri also did not hide the fact that it was continuously monitoring the valuation of the poultry business unit due to the distressed industry.

 

Astral Foods chief executive Chris Schutte said the company's inability to recover the high input costs was caused by higher stock levels in the poultry industry as a result or record poultry imports from Brazil and Europe. It said its interim results to March, published last week, were the worst in the company's history.

 

Wolpert disagreed with the blame being placed on imports, saying the poultry companies' recent financial reports showed numerous problems with their operating models which, if not addressed, "will necessitate large price increases".

 

He said his association was sympathetic to some of the problems faced by the industry, such as high input costs. "We keep on hearing about these imports but chicken imports have increased by about 32% over seven years, an average of 4.5% a year," he said. Wolpert said without the imports the local industry would not be able to satisfy demand.

 

Lovell had previously said that the industry was gearing up to supply the local market and would need to ramp up production if import volumes declined.