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Poultry Producers Face Trade Battle with EU

03 October 2013

SOUTH AFRICA - South African poultry producers have warned that they may face a battle with the EU over alleged dumping of product on the market.

The warning follows the producers'victory at achieving significant customs duty increases on imported chicken.

According to BusinessDay, the tariff increases — which involve an overall average percentage point rise of 8.75, excluding whole chickens — relate only to non-European chicken imports.

BusinessDay also reports that CEO of the South African Poultry Association Kevin Lovell said on Tuesday he was "happy with what we got" from the state’s International Trade Administration Commission of South Africa.

"On two of the five categories of chicken — boneless cuts and whole birds — we got what we asked for. On the other three categories — bone-in portions, offal and carcasses — the duty increases were less than we asked for but were acceptable," Mr Lovell said.

But he added that "we won’t have finished our work" until the application against alleged dumping of chicken in South Africa by the EU has been dealt with.

Though Mr Lovell said Brazil still supplies most of the chicken imported into South Africa, most of the product that "causes problems" in the local market stems from the EU.

The poultry association CEO said he hoped the increased tariffs will put a brake on further job losses in the local industry.

The Association of Meat Importers and Exporters of South Africa estimates the market for chicken imports is about 10 per cent or 12 per cent of local production, but the poultry association’s estimate is higher.

The tariff rises that came into effect on Monday saw a rise on whole birds rose from the previous 27 per cent to 82 per cent; carcases from 27 per cent to 31 per cent; boneless cuts from five per cent to 12 per cent; offal from 27 per cent to 30 per cent; and bone-in portions from a specific duty of 220c per kilogram (roughly 17 per cent) to an ad valorem duty of 37 per cent.

With regard to the EU "dumping" application, Mr Lovell said "provisional measures" might be expected in the first quarter of next year.

"We still have to convince the commission that we indeed have a case and we are not at the first step of that yet."

In contrast to the industry’s elation, the Association of Meat Importers and Exporters of South Africa says it is "disappointed" by the tariff increases, which would be paid for by "poor people".

"The duties will be financed by consumers," said association CEO David Wolpert.

"But we are happy that at least the increases are far off those that were applied for."

The biggest "knock" to importers will be the 37 per cent duty, up from 18 per cent, to be levied on bone-in portions, he added.

"It will push up prices by 20 per cent-30 per cent at retail level and there will definitely be a big decrease in imports in this category.

"We are most unhappy about this because it takes away consumers’ right to choose. They will now have no choice but the inferior, highly brined local product."

The tariff on imported whole birds rises from 27 per cent to 82 per cent. Mr Wolpert said this category represents a small portion of imports and though he is unhappy about it, "we won’t go to war over it. The volumes are so small that we won’t lose sleep" over them.

On offal and carcases, he said, the "three to four percentage point increase" shows that Trade and Industry Minister Rob Davies is "sensitive" to the poor.

"But the poor will still be financing that import duty," he said.

The increase in the duty on chicken breasts from five per cent to 12 per cent would mean a price increase of about seven per cent to eight per cent, which Mr Wolpert describes as "reasonable and acceptable".

He said there might be job losses among the 15,000 people employed in poultry importation, but that it is "too early to speculate" what those might be.

"Let’s not pretend that local prices won’t go up because of this, and the inefficient local poultry industry is to blame," Mr Wolpert said.

"Their business models are flawed. They sell a highly brined product and they don’t export.

"This increase won’t get them out of trouble. It will just increase hardships for consumers."

Mr Lovell said: "We are among the top five countries in the world when it comes to turning feed into food, as measured by the Production Efficiency Factor of the global poultry industry.

"We are more cost-efficient producers than the EU. On the costs of producing, however, we are not in the top tier because we pay more for inputs such as labour and electricity."

He denied that the increased tariffs would necessarily translate into higher prices.

"The tariffs apply only to imported chicken, and retailers set the prices. We need to monitor how they respond to this. It might create a space for them to increase prices but it might also not. I can’t imagine there will be big price increases," Mr Lovell said.

The commission said it has arrived at its decision on the tariff increases after taking into account the rising imports, the "considerable" production, employment and investment in the domestic industry, relatively high input costs of local producers and that price increases would be "relatively low" while still allowing for further investment in the industry.

"The recommended tariff support would place the South African poultry producers on a similar competitive footing as their counterparts abroad, would allow for a fair and reasonable profit for producers and hence, further investment in the industry with a concomitant increase in production and employment, and would not have an undue cost-raising impact on consumers," the commission says in its report.

Further Reading

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