From the Desk
Board changes, egg developments, Avi Africa, trade and dumping
Last month, I started with news of the breaking of the Brazilian meat scandal in the media. What has proved remarkable in this matter is how the Brazilian government pulled out all the stops to deal with the crisis. The President of Brazil was directly involved, calling the heads of government of key customers, inviting all Ambassadors in Brasilia to a quickly arranged braai, and sending his Minister of Agriculture on a whistlestop tour of the world to their major markets. By doing all these things, and doing them so quickly, the harm to Brazil’s image has been contained. That doesn’t mean of course that there hasn’t been a problem, but most commentators now seem to accept that this is limited in nature and has been fully uncovered. Masterful work, if I may say so.
This month also brought a resolution from one of our egg organisation members which could lead to the dissolution of the Egg Organisation after our upcoming AGMS and Congress. I really hope it doesn’t come to that.
There will be a lot more detail on egg matters in Charlotte’s letter, although there are a few items I’d like to raise. Firstly, everyone knows that the funding of the Egg Organisation has been problematic since the cessation of the levy. One of the larger members has now tabled a resolution for discussion at the Egg Organisation AGM, and therefore at the Broiler Organisation AGM and the Congress that follows.
This resolution will lead to the dissolution of the Egg Organisation at some time in the future. This resolution needs strenuous debate and I hope all Egg Organisation members will make the effort to attend the AGM to discuss such an important matter. We need more egg members. Please join up again to make this a better body at your service. For those who are currently members, please note that the membership formula is based on the eggs that you sell, not those you farm, so if any of you are buying in eggs from contract farmers or from other packers, these numbers need to reflect on your monthly returns.
As the two organisations are not independent bodies in their own right, the poor financial performance of the Egg Organisation affects the financial status of SAPA indirectly because the Broiler Organisation and SAPA itself carry the deficit that exists in the books of the Egg Organisation. This reduces the respective reserves of these organisations, but one can’t persist with a continual loss in the Egg Organisation without eventually putting SAPA itself at risk.
Right now, the Egg Organisation has a number of threats on the horizon. First and foremost is the low margins being earned. Then the issue of the assignees is likely to add a cost burden that is difficult to properly quantify. There is also the welfare issue to consider. Charlotte is organising three meetings of egg producers, not only members, all around the country so that the revised SAPA Code of Practice can be debated before the upcoming AGMS and Congress. Although welfare measures should be based on science, they also have to take opinions and social pressures into account. Please make a point of trying to attend these meetings. The Broiler Organisation accepted the draft Code of Practice at its most recent meeting.
The Broiler Organisation Committee met on 19 April, the day before the Board meeting. As mentioned above, the committee approved the draft Code of Practice as it applies to broiler producers and broiler breeders. Jake Mokwene was confirmed as the new BO member on the Board to replace Justice Zotwa until the rising of Congress, and Andy Crocker will replace Theo Delport on the BO Committee until the rising of the Broiler Organisation AGM. Theo’s place on the Board will be taken by Gary Arnold until the rising of Congress. Mabel Motlhale and Jaco Viljoen will become alternate members to the Board until the rising of Congress.
One of the veterinary companies held an international conference in Greece last month. Fortunately for us, one of our SAPA members was at the meeting and noted production cost information being presented placed South Africa in the wrong place on the ranking and was incorrect. Through rapid intervention form our side, the information was retracted and corrected. Please repeat after me: we are one the most competitive producers in the world and those countries who produce at a lower cost than us do so by having access to maize and soya at lower prices than we do - not because they are much better farmers. That said, we should continue to improve with our farming skills while we try correct issues in the grain markets that raise our production costs unnecessarily.
At last we have some important news to celebrate. Minister Zokwana has approved our transformation trust in order for us to make use of the levy surplus. To our knowledge, this is the first such evergreen trust to be formed and marks a significant step forward in our transformation journey. Both DAFF and the NAMC have accepted the draft trust deed as submitted, so what remains to do now is to register the trust; have its tax exempt status granted; and get the monies transferred into the trust. To register the trust requires that the trustees are appointed. The Board has appointed the four trustees who will represent SAPA, being three small producers (Willie Bosogo, Aziz Sulliman and Achmat Brinkhuis) and one large producer (Gary Arnold). The initial large producer representative is from the Broiler Organisation and at the next cycle of trusteeship, the large producer representative will be from the Egg Organisation. We now await the nomination of trustees by DAFF and the NAMC to start the registration process.→
In the interim, we’ve written to the Auditor-general to get authorisation for the transfer of the monies once the tax exemption has been granted. As this is a first for the AuditorGeneral, they’re considering what the requirements for the transfer of the monies should be. Although some readers might be frustrated to hear this, it is likely to take a good few months for the process to be finalised.
The hearings in Parliament on the state of the broiler industry continue. The presentations by AFMA and the EU are available to those who wish to view them. In the most recent round of hearings, the EU had the temerity to bring up the hormone myth and try tarnish not only us, but also to blame DAFF for our alleged transgressions. They then used the word “myth” to describe their pricing model being a case of dumping. Normal people know that when you produce too much of a good, the easiest way to get rid of the surplus is to drop the price. There are always sales being advertised. In the EU, the price of bone-in portions is low and yet Europeans still don’t buy the products in sufficient quantities to get rid of the surplus. That means that what you can’t sell is waste. If the products were produced for a third country, packaged and prepared for consumer use as the EU producers do for their products intended for local consumption, you might want to think otherwise. This, of course, they’re not doing because producing a product for someone means you need to know that the recipient is going to buy that product.
Then of course one gets to Economics 101. The value of a good is not the same thing as its cost. When the value is less than the cost, your business would normally fail. In the EU, the margins on the breast meat are so high that they mask the true losses on the dark meat. None of this explains the obvious point that no one in the world has worked out how to grow chicken pieces on their own - you have to have a whole chicken that went cluck before you can have pieces of a slaughtered chicken that people might want to eat. So will the EU ever face the truth and develop some moral integrity? I don’t think so, for then they’d have to publicly acknowledge, mea culpa, “we have abused the poorer countries of the world by using them as waste disposal sites”. Sound like colonial excess to me, the misjudged writings of a local politician not forgotten.
The government task team is continuing its work. As this is a team - in other words, the parties are meant to be working together towards a common goal - we need to make commitments to government as to what we’ll do to bring about an improvement to our industry and the country as a whole. Now I realise that many will say “first do something government and we will then reciprocate”, but that isn’t how a team works. Teams are formed, practice together and play together. We will need to make commitments. We are working hard at providing government with the reliable data they need to justify some of the proposed actions. To those who have provided data, we thank you. To those who’d like to assist, please let me know your interest.
One of our suggestions will deal with the restrictions we face by paying more for grains than some of our international competitors do. Minister Zokwana has mentioned in public that South Africa might consider a strategic grain reserve. This doesn’t have to mean that we revert to the days of controlled marketing as some commentators have rushed to say. If done well, what it means is that the Porsche brigade will have to find other ways of making money without working, for that is what speculating using your perceived greater knowledge than others to make a margin which benefits no farmer and adds a few billion Rand to the cost of the total maize crop, is all about. Of course, no matter how such a reserve might be formed, it will involve some costs. It’s our view that these costs will be much less than the speculative margins made by the traders. DAFF, during their presentation to Parliament,
seemed not well inclined to deal with the soya bean and soya oilcake tariffs. This needs us to try harder to get their support, as removing these tariffs has a benefit far greater than the tariff income itself, since all soy beans or oilcake (mostly oilcake) sold, including local production, have their prices upwardly adjusted to accommodate the tariff effect.
The AGOA quota for the year 1 April 2017 to 31 March 2018 won’t increase from the current 65 000 tonnes according to our calculation, and we await confirmation of this from DAFF, who have the responsibility for quota setting and administration. A clause inserted by the dti in the quota allocation process gazetted in December 2015 has come back to hurt us, as March 2017 provided a veritable flood of US waste even though the annual imports were slightly less than the 65 000 tonnes we had agreed to. We’d been especially cautious to manage both volume and volatility and then the dti amended the agreed system. Well, that’s what we now live with and the ongoing AI outbreaks in the EU have already led to import deflection to other sources. Clearly these are next in line to be resolved in the proper way. We are hard at work here. The initial comments on the sunset review have been requests for extensions to submit data, all of which have so far been denied.
We continue to work on the Salmonella court case where we are contesting the decision by government to lower the import standards to suit the needs of the USA. I think there a number of more iterations between the parties before this matter has any chance of getting to Court.
I attended the International Poultry Council meeting in Colombia this past month. While there, I had a number of meetings with our EU counterparts to discuss possible solutions to their problem which will hopefully come to pass when a safeguard of sufficient extent is gazetted, making it unaffordable for them to treat us as waste disposal site number one. Can exports of breast meat traded in the normal course of trade i.e. fairly, ever be a quid pro quo for them to dump their waste here? They think this is a terrific idea; we remain unconvinced. If we keep talking, a solution may be found, but we aren’t there yet. All indications are that by the time you read this, ITAC will have finished their deliberations on our submissions for the EU safeguard and would’ve made a recommendation to Minister Davies. I’m hopeful we’ll have something to cheer while we’re at Avi Africa when his announcement is made, although it may well be that we only hear his decision at the end of June.
None of us know what the effect of Brexit will be on our trading relationship with our former colonial masters. Quite clearly the UK will want to try get a better deal than they currently have, and I hope our negotiators are thinking the same way. The Brexit dilemma for the UK has an interesting lesson for us. Since the UK has been a member of the EU for so long, they no longer have trade negotiating skills - the EU did this for them. Now in a short period of time, the UK has to suddenly become expert without many resident experts. We’re rather in the same boat as, even though we’re a developing country, we need highly skilled civil servants in the Chinese mould if we’re to compete against the big and nasties. Do we have enough of such people in our government’s service? Certainly when it comes to the veterinary services of DAFF we have good people but surely not enough of them; imagine if we had more highly skilled veterinarians in service how much further we’d be with many of the outstanding matters that hold back our export programme?
The most recent set of competitiveness data has been supplied by the LEI institute in collaboration with BFAP. Even though 2015, the next benchmark year, was a terrible drought year for us with higher feed costs, we’re still cheaper producers than all the EU countries they survey. Although AMIE (and others) tried to make out that the drought was our main problem, this independent study proves this to another false statement by these various commentators. Clearly the drought has been terrible, and it has affected us, but our problems with the EU come from their dumping of waste bone-in portions.
This past month has seen a number of meetings with the assignee appointed by DAFF to
implement the poultry meat and egg regulations under the APS Act. Now if we forget for a moment that this assigneeship was foisted on us without any consultation on the purpose, the need and the impact of the assignment, we’re left with some serious problems. Firstly, what level of inspection is needed to ensure an adequate level of monitoring of the implementation of the regulations? Then secondly what is a fair fee for the work involved in the monitoring? Further, we have questions as to interpretation of the term “owner” of these products as the Act determines the seller in a particular way and this confers obligations on the seller rather than the buyer. I hope that before you have read this, we’ll have been able to meet with the respective parties in a more open way to see if a practical solution can be found. It’d be best to not have to go the legal route again when compromise is surely possible. In the constrained circumstances that the egg and broiler industries find themselves, all extra costs are an unaffordable burden.
Preparations for Avi Africa continue apace with registrations to date a couple of hundred delegates ahead compared to the same time last year. I hope this trend continues and that we have a bumper set of delegates attending. With the addition of an evening session for smaller producers, we’re hopeful day two will have lots to offer to all producers, including the smaller ones. The planned partnership with the FAO for next year will bring a whole range of new delegates from many other African countries.
The Media Relations Committee (MRC) met before the Board meeting to discuss our own PR drive. While the Fair Play movement has been giving us a lot of media airtime it isn’t a SAPA idea or project; it was started by investors in the poultry industry and is now supported by some local poultry producers. It is now also supported by SAPA even though we weren’t party to its formation. Dumping is not a one product issue - think of cotton, potato products, sugar and a number of other commodities in agriculture as well as steel and clothing, to name but two othes. We hope the Fair Play movement develops momentum and deals with the bad treatment of the developing world by mostly developed world countries. It is the view of the MRC and the SAPA Board that we should develop our own PR strategy and service providers will be asked to present proposals after Avi Africa for consideration by the Board. The MRC agreed to hold over reconsidering the editorial brief until a new SAPA communications strategy is approved.
At the Board meeting, new awards criteria including for transformation were discussed and drafts have been circulated for discussion and approval after Congress and the establishment of a new Board. Jake Mokwene was confirmed as a Board member in place of Justice Zotwa. The 2016 financials were signed during the Board meeting, allowing them to be taken to Congress and the AGMS for member approval.
At the IPC meeting held last month, the IPC got close to finalising a global broiler industry protocol on AMR. I will circulate the final version when the last comments have been included. One of my roles at the IPC is to chair the Animal Health and welfare working group of the IPC, which working group is charged with drawing up the global protocol. All IPC presentations are available to members if they so desire.
Last month was also the time of the first IEC meeting, and all those presentations are also available to members. The global expert panel on AI, on which I sit, met on the sidelines of the IEC meeting. This panel and its work have met with approval from the DG of the OIE, the OIE being represented on the panel through Dr Alex Thiermann.
After the IEC meeting I went to see the FAO on behalf of the IEC. Apart from matters of direct relevance to the global egg industry, we had a chance to discuss the position of animal welfare and the country specific AMR strategies in the various African countries. The FAO have asked to be allowed to have a side event at Avi Africa next year, where they’ll bring a range of producer representative and officials from a number of African countries. This will be a huge boost to the broader relevance of Avi Africa.
Regards until next month, Kevin Lovell, CEO.¡