Chicken producers deny they are profiteering as prices surge

With the price of chicken soaring and set to hit record highs, local poultry producers have dismissed suggestions that they are profiteering at the expense of consumers.

Chicken is one of the most popular animal proteins consumed by cash-strapped South Africans, in part because it is still relatively affordable.

But prices, which have increased by at least 10% annually over the past decade and by as much as 17% in the past year, are set to hit record highs as input prices, including the cost of feed, spike partly due to the Russia-Ukraine war. Ukraine is one of the largest producers of oilseed and grain, the main ingredients of chicken feed.

At a media briefing on Monday, Izaak Breitenbach, the chair of the SA Poultry Association, which represents local producers, said contrary to popular belief, producers have not made enough profit in recent years to invest back into the industry.

Recent price increases have been forced on them by rising feed prices, Breitenbach said, adding that chicken feed makes up 70% of a producer’s input costs.

“Feed prices went up by 20% and Brazil [one of the major exporters of poultry] has raised chicken prices by 23%. Our increases are far lower than Brazil — our industry is actively fighting price increases,” he said.

The sector has in the past shed thousands of jobs and ascribed its struggles to cheap chicken imports mainly from Brazil, the US and Europe.

The Association of Meat Importers and Exporters has been calling on the government to remove all tariffs and suspend the consumption tax on all poultry to cushion consumers from the rising price of chicken. It often highlights that the local poultry industry enjoys unfair and excessively high levels of trade protection, with general tariffs, antidumping duties and safeguard duties in place, to the detriment of consumers.  

In an effort to protect the industry from unfair competition, the government in 2020 gazetted tariff increases to 62% on bone-in chicken portions while tariffs on boneless portions were raised to 42%. Critics argued that despite SA’s trade partners accounting for not more than 15% of all chicken consumed in the country, hiking tariffs would make chicken less affordable as local producers generally always priced their products higher.

While local producers have backed the removal of VAT on selected cuts of poultry consumed by lower-income families, they vehemently oppose the removal of tariffs, arguing that they did not cause the increase in price in the first place. Trade, industry & competition minister Ebrahim Patel is also against the suspension of tariffs, arguing that such an “extreme” step would destroy local jobs. 

Francois Baird, the founder of FairPlay Movement, an organisation that aims to fight predatory trade practices and poultry dumping in SA, suggested that importers are pushing for the suspension or removal of tariffs to maximise their own profits, not necessarily to protect consumers.

Baird was of the view that the low prices at which chicken is imported are not passed on to consumers.

He emphasised that for the past six years chicken imports have averaged R6bn a year. “If chicken importers sold those consignments for only 10% more than they paid — and we think it’s more because we believe their profits are substantial — then they are making R600m a year. Every year, for the past six years.

“What have they done with R3.6bn over the past six years? Expanded their business? Created South African jobs instead of buying imports which create jobs in Brazil and Europe? Or have they just enjoyed fat profits?”

Baird called on importers to cut their profit margins to make chicken more affordable to consumers, particularly lower- income shoppers.

Paul Matthew, the CEO of the Association of Meat Importers and Exporters, said in response to questions from Business Day that local producers should focus on alternative measures to boost growth instead of limiting imports. He said imports, even at marginal levels, are crucial as they provide the necessary competition to keep prices in check for consumers.

“It is troubling that local producers keep talking about further reducing imports, which are currently at a mere 9.4% (SARS data) if you exclude mechanically deboned meat ... If local producers truly want to increase production, which would boost jobs and benefit the entire value chain, they should focus their sights on seizing the opportunity to build a poultry export market,” Matthew said, highlighting that SA already has duty-free status in the EU, which means it pays no duties to sell its product there.

The EU has already said that it will buy SA poultry once the country meets the required health and safety standards.

phakathib@businesslive.co.za