Higher chicken import tariffs will push up prices and inflation

Outbreaks of African swine fever and avian influenza in animals and coronavirus in humans have disrupted the world’s food supply and its global trade. While the health crisis in Asia is having a devastating effect on its own market, the ripple effect is being felt across the world, including SA.

The trend, unfortunately, is set to get worse. SA, which has always counted on the support of external suppliers to balance the supply of chicken meat to its population, must remain alert in the face of decisions that could put this balance at risk.

This picture of disruption is driven, in particular, by events in China. Since its outbreak in late 2018, African swine fever, a fatal disease for animals, has been causing incalculable damage. Before the onset of the disease, China produced 54m tonnes annually, half of the world’s total production. Projections by global food and agriculture bank experts at Rabobank point to a 25% reduction in Chinese pork production.

The expected production loss of more than 14-million tonnes greatly exceeds the entire global pork trade, which is less than 9-million tonnes. An additional drop may occur this year. The picture also affects several other producing nations in Asia. It will be years before the situation recovers.

This is a critical disruption in global food supply. As there is not enough pork on the market, there is a strong demand for chicken meat, which is an immediate replacement for pork.

Given the outbreak of the coronavirus, the picture has become even more bleak in 2020. Emergency, and necessary, actions put in place to contain the coronavirus have unfortunately hampered the distribution of feed to China’s poultry producers. China is the third-largest producer of chicken meat in the world, after the US and Brazil. The fine balance in protein production, supply and trade has been further disrupted by an outbreak of pathogenic avian influenza in Asia and Europe.

It is in this context of strong global pressure for food that strategic partnerships are fundamental to the food security of nations. SA has four important partners to supply its own demand for chicken meat. The first and most important is local production, which at full production can supply about 70% of local demand.

The balance is imported from the US, Brazil and the EU. Of these, the US and Brazil do not have active outbreaks of avian influenza. Indeed, Brazil is one of the largest producers in the world that is free from pathogenic avian influenza (H5N1) and Newcastle disease, which makes it a reliable and strategic provider to the global market.

Furthermore, in addition to stringent inspections on exports in Brazil, all chicken imports to SA are subject to strict and ongoing checks by the department of agriculture, forestry & fisheries at the port of entry. The department conducts veterinary inspection services and pathogenic testing using microbiological standards.

However, all partners, both local and global, continue their efforts to guarantee the supply of high quality poultry to the SA market. This equation balances supply and demand in a constructive way for local producers — proven by the positive financial results of SA poultry companies — and, critically, for the wallets of consumers.

Poor households spend 34% of their overall budget on food, and of the meat consumed 59% is chicken, so increasing import tariffs will have social consequences. Raising tariffs on imported poultry at this delicate time in the global food market is likely to make it near impossible for SA to import quality chicken, the most affordable and widely consumed animal protein in the country. The consequent lack of available chicken will drive up local prices and inflation, which is the last thing SA consumers need.

This imbalance could have long-term consequences for the SA consumer. Exports are extensive processes, which require logistical adjustments and market accommodations. When there is a break in this flow there may be a long period before it is re-established. This is driven by factors such as flow in ports, situation and viability of markets.

Food security is strategic for any nation. The inflationary situation resulting from protectionist attitudes penalises the consumer. As partners in SA food security, we are rooting for a rational decision amid debates over tariffs on chicken meat imports. Concern for social welfare must prevail, and if the quality is right there should be no boundaries for food.

• Santin is executive director at the Animal Protein Association of Brazil.