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Chicken imports pressure SA’s poultry industry

| Supplier news

Cheap poultry imports and rising feed costs due to the drought have put the South African poultry industry under tremendous pressure, threatening growth and jobs. Local listed companies, such as Astral Foods, face stiff competition from cheap poultry imports.

Astral chief executive Chris Schutte said it was becoming more difficult to compete with foreign companies because they charged lower prices when they entered the local market.

The local producers had to deal with input costs caused by rising feed costs. Also, the drought in the country had put the local industry under tremendous pressure.

Profitability

The SA Poultry Association (Sapa) said the poultry industry was the largest agricultural sector in the country contributing about 22 percent of agriculture income in 2012 with a combined gross income set at more than R37.81 billion.

It said profitability of the poultry industry was heavily dependent on the price of chicken feed, which could make up 75 percent of a producer’s total costs.

Chicken feed, in turn, was dependent on maize, which made up more than 50 percent of broiler feed and soya bean prices.

US poultry and other meats have started to come into the South African market as per the African Growth Opportunity Act (Agoa)… Lower sales volumes and the high level of Brazilian and EU poultry imports led to a build-up in poultry stock levels and combined to put pressure on the poultry division,” Schutte said.

Astral saw its operating profit drop by 44.73 percent to R194 million in the half-year results released last week.

Schutte said about 65 000 tons of US poultry would enter the South African market annually, free of anti-dumping duties as per Agoa agreement.

Feed prices

Paul Makube, a senior agricultural economist at FNB, said the cheap imports were not the only thing that local producers had to deal with.

“The feed prices have risen alarmingly over the past year, partly because of the drought. We have witnessed the price of maize, which is used to manufacture chicken feed going up at an alarming rate,” he said.

Makube added that as difficult as it was now, the country needed small farmers to boost job creation as small medium enterprises (SMEs) were crucial for job creation.

A 2014 report by Best Exporters said South Africans ate about 1.8 million tons of broiler meat annually.

Schutte said the government had done little to help the local industry in the past 10 years.

“My biggest worry is the emerging farmers who are pushed out of the system because they can’t compete. We are losing jobs and, with our country’s unemployment rate of 26.7 percent, (this) is not good for our small players.”

Monopolising

Mandla Buthelezi, the provincial chairman of the National African Farmers’ Union, a body that represents emerging farmers in KwaZulu-Natal, said it was not only difficult to compete with importers, but also local producers who were monopolising the industry.

“At least they are feeling what we have been complaining about for so many years. We need to come together, big and small producers, to save our industry. If we speak with one voice the government will listen,” he said.

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