Is South African Poultry Industry Going to Survive in 2018 and Beyond?

In the past three years, the South African poultry industry has been characterized by a host of challenges ranging from drought and the subsequent high costs of poultry feeds to the resumption of the EU and US poultry dumping, stiff competition and even bird flu. Throughout the last year, many industry players have been sounding the alarm that the South African poultry industry is on its last death knell. When will the last nail in the coffin be driven in? Will the South African poultry industry survive this perfect storm of challenges?

The biggest threat to the South African poultry industry has been export dumping by some of the big exporters, primarily the US and the EU. Thousands of jobs have already been lost locally due to this and there are thousands of more jobs that are currently threatened, and are hanging by a thread.

The smaller poultry farms are the worst affected. Many are unable to keep up with the onslaught of the larger poultry producers and cheap poultry imports which has undercut them in the market and forced them to go out of business. Industry players are now warning that the South African poultry industry might not even survive the next 12 months to 18 months if the EU and US imports persist.

The main culprit for South Africa’s poultry industry woes has been the imports of the bone-in leg quarters which are dumped by the European producers onto the South African market. These are brown meat portions of the processed poultry in Europe which are quite popular with many South African consumers but are not unwanted in Europe and other markets of the north. As a result, these producers are willing to sell them at any price to any exporters in their country willing to take them up. Many of these end up in South Africa and other African markets, in the process decimating the poultry industry there.

Between 2011 and 2016 alone, the bone-in quarter imports rose from 62,000 tons to 194,000. Currently, the imports provide the single largest poultry source in South Africa and exceed even the biggest local suppliers. The imports from Europe eased a bit due to bird flu fears but other regions have moved in to fill in the space thanks to the trade agreements that South Africa signed with these countries that gives them access to our local market.

The biggest beneficiaries of this import regimen are the middlemen and importers. The consumers don’t benefit from any form advantageous pricing even though these products are essentially being dumped locally. The chicken imports are carefully repackaged and sold at slightly below the market price. This aggressive pricing enables them to take a bigger market share while preventing local producers from recovering their input costs. Over time, this is leading to industry contraction and a crisis in the local poultry industry. Some of the large producers are now warning that the local poultry industry may not survive beyond 2018 if this dumping trend continues.

The South African poultry industry is a state-of-the-art agricultural industry that is now on the verge of the breaking point thanks to the constant industry pressure. It is also a major employer. More than 100,000 South Africans work directly in the poultry industry.

The South African poultry sector represents the largest agricultural component in the country. In 2016, the poultry sector contributed 18% to the agricultural gross domestic product. It also accounted for 39% of the country’s animal gross value.

A collapse of the poultry industry will have a kind of domino-effect and lead to the collapse of other agricultural and industrial sectors such as the grain industry, feed manufacturing industry among many others. All these support tens of thousands of jobs.

Poultry dumping over the past few years and the threat it poses to the local poultry industry also undermines the country’s food security. If the industry collapses and we have to import all our poultry needs, we are mortgaging our future food security. A future disruption in the source markets such as bird flu could entirely wipe out our poultry supply. It is critical that we have a vibrant poultry sector that supplies the population with an affordable source for proteins.

Because the poultry industry is largely rural-based, a collapse in the industry will devastate the rural economy bin South Africa. This is made worse by the fact that poultry farming is mostly carried out in parts of South Africa with very serious unemployment problems.

But there are efforts to stem the tide. The South African Poultry Association is working with chicken producers in the country on a robust advocacy work aimed at stemming the tide of poultry dumping through policy interventions. There is an active campaign both on the social media and on the ground to sensitize the public and policy makers on the need to take action and protect the local industry before it is too late.

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