| Business Report Zandi Shabalala Johannesburg - Cheap imports and rising costs of production are forcing local poultry producers to shed a bigger chunk of the chicken industry to foreign players, recent results suggest. With cheap imports eroding profit margins for local producers, the industry is now seeking import protection from foreign players. But they are also learning not to put all their eggs in one basket, with many producers now spreading out to some of the booming African markets that offer more market share value. The local poultry industry recorded a loss of R24.7 million last year, climbing down from an operating profit of R56.6m the year before, as conditions tightened in the industry. Poultry imports rose to 33 194 tons in June, up from 26 558 tons a year ago, according to the data from the SA Revenue Service. Poultry producers such as Country Bird Holdings and Rainbow Chicken (which will be rebranded RCL Foods from Monday) this week reported significant declines in full-year earnings. Country Bird’s earnings dropped 17 percent, while Rainbow Chicken posted a 92.3 percent decline for the year. Country Bird said a combination of static volumes with no significant increase in selling prices resulted in margin erosion for the sector. The company said it would try to diversify its offering into the fast food industry to minimise its exposure. Country Bird said the poultry industry would “remain depressed and under threat” unless low import tariffs and other issues were challenged. Last year, the International Trade Administration Commission (Itac) introduced temporary tariffs against Brazilian imports. “Local producers have found themselves in an environment where no forms of state support, such as subsidies, are available,” the SA Poultry Association said in a recent research report. “Many members in the industry experienced a year of marginal profits, if any at all, an unfortunate event that has taken its toll on the industry.” Association chief executive Kevin Lovell said the problems faced by the top poultry producers were not unique. “The common thread running through all this is that there is a genuine crisis; no one is hyping it up or making it up. If government does not intervene it will get worse.” He added that it was important for imports to be of good quality. He said some of the chicken portions that were imported were “leftovers”, because of the trend in developed countries of preferring breast meat. The developing world was a good market for meat “straight off the bone”. “The polite word is surplus, but really it is waste,” Lovell said, referring to the leftover meat from the developed world. He said the price of imported chicken did not reflect the cost of production in its country of origin. Local chicken manufacturers could, therefore, not compete on pricing, as the cost of producing chicken locally was comparatively higher. The EU is the biggest importer of chicken owing to a trade agreement signed with South Africa. “It is the law of unintended consequences I suppose: we didn’t know that opening up our borders would mean we would suffer so much down the line,” Lovell said. On the other side of the fence, the Association of Meat Importers and Exporters (Amie) argues that raising tariffs would result in higher prices of chicken, which is not in the interests of lower-income consumers. Recently the battle between the two sides of the industry heated up as Amie made two separate supplementary submissions to Itac to counter an application by the SA Poultry Association for an 82 percent tariff increase on imports of frozen poultry meat. “The bottom line is that the industry needs to work with [the] government to forge a way forward. There must be a partnership,” Lovell said. Country Bird shares were unchanged at R3.40 yesterday, while Rainbow Chicken shares lost 1.82 percent to R16.21. |