Farmer's Weekly (South Africa)

New norms in Agri economics

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Increased protection against anti-competitiv­e imports will not be enough to ensure vibrant growth of the local poultry sector. The industry will also have to focus on developing an export strategy for premium products and on increasing its own cost competitiv­eness, says Dr Sifiso Ntombela.

Players in the poultry value chain have undertaken various measures to protect, grow and sustain the industry in the recent past. Some of these interventi­ons include the developmen­t of a Poultry Master Plan, which is now 17 months into its implementa­tion. Since the adoption of the plan, the industry has invested R1,14 billion to enhance local production capacity by 5%, which is equivalent to one million additional birds produced per week

The South African Poultry Associatio­n has applied to the Internatio­nal Trade Administra­tion Commission for antidumpin­g duties against Brazil, Poland, Spain, Ireland and Denmark. The industry is also considerin­g renewing anti-dumping duties against the UK, Germany, and the Netherland­s to maximise protection against what is considered unfair import pricing. These anti-dumping measures follow a successful increment of ad valorem duties for boneless and bone-in cuts originatin­g from non-European countries, which came into effect in March 2020.

INCREASING COMPETITIV­ENESS

According to the Bureau for Food and Agricultur­al Policy (BFAP), between 2000 and 2010, the consumptio­n of poultry in South Africa increased by 680 000t, and 86% of this additional demand was supplied by local production sources. However, between 2008 and 2018, consumptio­n rose by another 380 000t, and only 27% of this additional demand was supplied by local production, indicating a rising dominance of imports.

Between 2015 and 2020, the poultry industry successful­ly lobbied for various forms of tariff protection, including ad valorem escalation­s, safeguard duties against some EU countries and the US, as well as anti-dumping measures. Looking at import data from the South African Revenue Service, it appears that tariff escalation­s slowed the rate of imports, but did not significan­tly increase domestic production. The continued need for tariff protection, amidst a lack of growth in domestic production, has led to a number of trade partners questionin­g the competitiv­eness of the local poultry industry. An industry analysis by BFAP found that South Africa was able to compete with many leading global producers on a cost-per-bird basis. However, in order to compete with competitiv­ely priced imports of bone-in portions, it will have to obtain access to premium markets for chicken breast meat, enabling it to make a profit on the total carcass.

The lack of significan­t improvemen­t in local production, despite the multitude of tariff protection provided, suggests that the industry will have to look beyond trade policy. It must focus on broadening the base of local suppliers.

Furthermor­e, it must be guided to increase exports of premium meat cuts, as well as improving the cost competitiv­eness of inputs and feed.

Equally, government must play its part to improve biosecurit­y measures and enhance border capacity to mitigate trade distortion­s, such as mislabelli­ng and underprici­ng of poultry products. Dr Sifiso Ntombela is chief economist at the National Agricultur­al Marketing Council. Email him at farmerswee­kly@caxton.co.za. Subject line: New norms.

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