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Anti-dumping Measures Boost South African Broiler Sector

09 July 2014

SOUTH AFRICA - Anti-dumping measures on chicken imported into South Africa from the EU imposed last week have helped boost share prices for South African poultry companies.

Shares in poultry companies have been rising as the industry’s prospects for margin improvements gain from preliminary anti-dumping duties on European chicken, reports BD Live.

The sector is also benefiting from a pull-back in maize prices, for the third consecutive month in June. Although maize futures ended slightly higher on 7 July, expectations are for the downtrend to continue amid early signs of good harvests in the US — the world’s biggest exporter of the crop. Country Bird’s share price rallied 5.41 per cent to close at ZAR3.90, while Sovereign Food’s stock jumped 4.58 per cent to close at ZAR8. Astral Foods’ shares, however, closed 0.35 per cent down at ZAR125.06 while RCL Foods’ dipped 1.18 per cent to ZAR15.98.

Shares in the sector have reflected an improvement in investor sentiment over the past three months. Country Bird is trading 44 per cent higher than its low of ZAR2.70 in early April, while Astral is up 57 per cent, RCL 20 per cent and Sovereign 58 per cent.

Last week, preliminary anti-dumping duties ranging from 22 per cent to 73 per cent were introduced against imports of frozen bone-in chicken from Germany, the Netherlands and the UK. Import duties against producers and importers from Brazil were raised last year.

Analysts and importers believe consumers are likely to fork out more for chicken as a result, reports BD Live.

Meanwhile, South African Poultry Association CEO, Kevin Lovell, said: "We have long maintained that dumping causes material harm to our industry and makes it impossible for our industry to compete on this basis. The anti-dumping action therefore has always been about levelling the playing fields – not stifling competition."

The industry has been contending with cheap imports, soaring feed costs, weak consumer demand and impending regulations to cap the levels of brining allowed in frozen chicken products.

Nine smaller producers have either gone under, filed for business rescue or have been absorbed by larger companies in recent months.

Chris Logan of Opportune Investments told BD Live that, while he was generally against import tariffs, it did seem the sector had a case as there was evidence of dumping. "I’m not surprised that they did get a favourable ruling because it seems we’re on a trend here where borders are being shut to protect jobs."

The protection "should, other things being equal, give (producers) greater pricing power", Mr Logan added. It was possible that prices would not need to be raised substantially, as margin pressure had abated, thanks to the lower maize price.

TheMeatSite News Desk

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