Australia appears to be using South Africa as a dumping ground for its chicken, with Australian producers somehow managing to land chicken portions here at prices below those of other countries known to be dumping chicken in the country.
According to the FairPlay Movement, Sars data shows these extraordinarily low prices.
In December chicken drumsticks to the value of R626 000 were imported at R8.89/kg, about half the price of the drumsticks that Brazil was accused of dumping in South Africa.
The FairPlay Movement is a not-for-profit trade movement that fights for jobs with the goal to end predatory trade practices between countries to enable big and small nations to play by the same rules. It supports the principle that penalties for transgressing those rules apply equally to everybody.
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Chicken drumsticks cheaper than chicken necks
And, adds FairPlay, the Australian drumsticks were cheaper than chicken feet and the processed meat paste, mechanically deboned meat (MDM).
Then, in January, Australian drumsticks to the value of R1 million were imported for even less at R8.74/kg, again cheaper than chicken feet, which are classed as offal.
The latest Sars statistics show another price drop in February with a price of R8.71/kg for Australian drumsticks to the value of R2.2 million.
The February price for Australian drumsticks undercut Brazil’s price of R20.14/kg, Spain’s at R10.56/kg and the United States’ at R12.16/kg.
Government has just imposed anti-dumping duties on Brazil and Spain, but the US can dump chicken here legally because it negotiated a substantial quota free of anti-dumping duties.
FairPlay says even after the 62% tariff applicable to Australian bone-in portions, these drumsticks are landing here far below the South African producer price of R35.93/kg for frozen drumsticks and R36.21/kg for Individual Quick Freezing (IQF) drumsticks in December.
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How are these low prices possible?
How can Australian producers land the chicken in SA at such low prices? According to Izaak Breitenbach, GM of the South African Poultry Association (SAPA), it is actually impossible and can only be explained as dumping or under-declaration of product.
“These prices are below the selling price and the cost of production in Australia.”
How can drumsticks be cheaper than chicken necks?
Breitenbach says it is impossible because drumsticks are a meat product and chicken necks are a by-product.
“It can only be that drumsticks are under-declared to save on paying the tariffs and neck prices increase because it does not carry a tariff to enable them to make up the price of the basket.”
The problem is that there is no anti-dumping duty yet against Australia. However, there is a Most Favoured Nation (MFN) duty of 62% on bone-in portions and 42% on boneless portions. Sars is the authority enforcing the payment of the tariff.
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How dumping affects local chicken farmers
Local chicken farmers are not happy about this. Breitenbach says they cannot compete with these extremely low prices although it is a globally competitive industry.
“This causes small farmers to go out of business and big businesses do not to make enough money to reinvest in the industry.”
He says this causes economic decline and job losses, not only in the poultry industry, but also in the feed manufacturing industry and the grain industry that relies on the poultry industry for growth.
Local chicken farmers have been dealing with higher input prices already, with feed prices that increased by 20% since April last year due to price increases for maize and soy on the global market.
Breitenbach says this put upwards pressure on poultry meat prices, while other cost increases on fuel, fertilizers for grains, packaging added to their problems.
Chicken prices increased by 17% since April last year due to the 20% increase in feed prices.
Breitenbach points out that feed constitute almost 70% of all input costs for chicken farmers.
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Anti-dumping tariffs
He says tariffs are designed to level the playing field and mainly prevent dumping.
“The remedy for dumping is anti-dumping duties and currently we have anti-dumping duties against nine countries. Dumping is widespread and the quantum of these duties vary from 6.5% to 265%.”
Less than 30% of all chicken meat is imported, but Breitenbach says import tariffs are really necessary.
“In the masterplan or the industry growth plan dumping is defined as under-declaration of prices and mis-declaration of product under the wrong tariff heading to reduce the payment of tariffs.”
Dumping is the sole cause of the industry in distress, he says.
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Other problems for chicken farmers
The war in Ukraine also affects chicken prices in South Africa as the prices of maize and soya are determined on the international Chicago board of trade.
“As Ukraine is a net exporter of not only fertilizer but also maize and soya and because the war disrupted their logistics, it is causing a reduction of supply of maize and soy on the global market, driving up feed prices.”
The reduced supply of fertilizer is also causing an increase in fertiliser prices and therefore down the line for maize and soya prices.
Chicken has always been a low-cost source of protein for low-income consumers. Will tariffs not make imported chicken too expensive for low-income consumers? Breitenbach says if imported chicken gets too expensive, consumers will buy more locally produced chicken.
He says it is a problem that the US is allowed to export 70 000 tonnes of chicken to South Africa free of duties and tariffs, also at prices equivalent to dumping.
“In essence the African Growth and Opportunity Act (AGOA), a US trade act, was forced on the industry, causing “legal dumping” that is hurting the industry.”
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What about low-income consumers?
Breitenbach says we should worry about low-income consumers who get almost all their protein requirements from chicken and simply want the cheapest way to feed their families.
“The local industry is globally competitive and supplied cheap chicken to the masses for the past 90 years. We must not sacrifice this long-term benefit for a short-term gain. The tariffs have not caused an increase in chicken prices to date and therefore the current strategy is helping to supply cheap chicken. Our South African rand cannot buy cheaper chicken anywhere else in the world.”
