Higher chicken and red meat prices are also on the menu for consumers who are already punch-drunk from fuel, electricity and food price increases. Experts predict a chicken price tsunami, while foot-and-mouth disease is causing prices to increase due to decreased supply.
According to the SA Association of Meat Importers and Exporters (AMIE), the chicken price tsunami is the result of a perfect storm of inflation, rising costs and unemployment, as well as a global economy risk to food security.
All these factors will affect consumers’ ability to afford chicken, a vital protein source for low-income consumers after the price of chicken already increased by 10% every year for the past ten years.
The AMIE is calling for trade tariffs to be removed and a 3-year moratorium on new tariffs, as well as the removal of VAT on fresh chicken, saying that the removal of tariffs alone could translate into a 33% decrease in the price of bone-in chicken pieces and between 18-20% on chicken offal.
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“We know that chicken is the primary, most affordable and therefore the most important source of protein for local consumers,” says Paul Matthew, CEO of AMIE. He says the chicken price tsunami is due to:
- Rampant inflation
- Global food and commodity shortages
- The state of the economy post-Covid-19
- The impact of the war in Ukraine on global food security
- The escalation in fuel, transport and electricity costs
- Increasing trade tariffs
- Supply chain disruptions and
- The fact that wages are decreasing and unemployment is increasing.
According to the Pietermaritzburg Economic Justice and Dignity Group’s Household Food Basket for March, the price of chicken increased by 11% between March 2021 and March 2022 after a steady 10% annual increase over the past ten years. The price of the basket increased by 10.2% year-on-year.
Matthew says bone-in chicken pieces and chicken offal are the most popular chicken product categories for low-income households. If tariffs are dropped, for example, consumers could save 33% on the delivered price of bone-in-cuts in the Gauteng market, while the price of chicken offal could be reduced by between 18-20%.
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Import tariffs on poultry increased from 37% to 62% for frozen bone-in chicken portions in March 2020 and from 12% to 42% for frozen boneless portions. In December last year, government levied new provisional duties on poultry imports from Brazil, Poland, Spain, Denmark and Ireland.
These provisional duties range from 6% to 265.1% for various poultry producers from Brazil, from 39% to 67.4% for Denmark, 158.42% for Ireland, 5% to 96.9% from Poland and 3% to 85.8% from Spain and will remain in place until 14 June this year.
Chicken imports account for only 14.9% of all chicken consumed in the country but are critical in maintaining a healthy balance between availability and affordability. South Africa is currently only producing around 80% of the country’s overall poultry demand.
According to Sars data, chicken imports decreased by 41% between 2018 and 2021, with bone-in imports decreasing by as much as 53% for the same period.
At the same time, South Africans are getting poorer. With the price of fuel at R21.96 per litre, transport costs for low-income consumers increased by 14.3% year-on-year and electricity costs increasing by 9.61% this month, wages decreased on the other hand to the point where 55.5% of South Africans and 64.2% of black South Africans are now living below the upper band poverty line. People are already struggling to survive and are likely to underspend on food by 37.2%.
During the fourth quarter of 2021, unemployment increased to 35.3% from 34.9% in the previous quarter, the highest level since 2008, with youth unemployment at a staggering 65.5%, according to StatsSA.
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Government should drop tariffs
Matthew says it is clear that South Africans are under extreme financial pressure and the most effective way to help them is for government to place a 3-year moratorium on imported poultry tariffs and remove VAT on poultry products.
“Last week, in an effort to take economic pressure off consumers, government cut the fuel levy by R1.50 per litre and postponed the proposed increase of the Health Promotion Levy (sugar tax) for a year. Government recognises the extreme pressure on consumers are under and knows it can meaningfully intervene by changes to administered prices and regulation. It can do the same for chicken,” Matthew says.
Grant Hendricks, a black South African business owner and MD of Umoya Meat Importers and an AMIE executive committee member, runs a South African meat import business and sells chicken products largely to the lower end of the market.
“I have seen how consumers in the townships increasingly struggle to afford chicken. Their wages stay the same or even decrease and they find it increasingly difficult to put nutritious food on the table.”
Donald MacKay, trade economist and director at XA International Trade Advisors, says this paints a very bleak picture for all South African consumers and especially the poor and unemployed.
“With the conflict in Ukraine not yet evident in the figures, we are at the beginning of a sharp inflation curve. Government must act quickly to ensure growing food insecurity does not translate into further social unrest as we saw last year.”
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Red meat prices also increasing
While it is clear that consumers will soon be battling even more to afford chicken, the picture for beef and lamb is not much better.
Gerhard Schutte, CEO of the Red Meat Producers Organisation, says it is firstly important to remember that the red meat industry operates in a free-market system and red meat prices are dictated by supply and demand.
“The current price decrease on the side of producers, especially for weaner calves, are a direct outcome of the outbreak of foot-and-mouth disease. Larger feedlots already stopped buying in weaners as they are concerned about the movement of infected animals.”
He points out that feedlots that buy in infected animals are shut down and placed under quarantine when the disease is detected. It is therefore understandable that weaners are not bought in now. Feedlots also cannot operate at below capacity for a set period of time as they need to supply the consumer market with beef.
Schutte says this influences ordinary producers where foot and mouth were detected because these areas are also quarantined. According to the economic principle of supply and demand, prices will automatically increase although consumers will eventually resist the higher prices.
He also emphasises that meat from infected animals is safe for human consumption, as foot-and-mouth disease is not a zoonotic disease and cannot be transmitted to humans.