LETTER: Getting to bottom of chicken wars

I refer to the huge volume of media coverage of many tariff actions initiated against imported chicken by local poultry over the past 21 years.

Without going into detail on the specifics or outcomes of any of these actions, I would like to address the broader issue of the competing products. 

First let’s look at volumes. Total consumption of chicken in SA is well in excess of 2-million tonnes a year. 

According to documents shared at the recent chicken Master Plan review meeting chaired by the government, imports excluding mdm (mechanically deboned meat, a chicken paste used in the manufacture of sausages and polonies) has a 13% market share. If mdm is included, this figure, according to the same table, rises to 19%.

Local poultry maintains this figure is 4% or 5% points higher. 

The reasoning for mdm inclusivity in statistics by local poultry is that it is used to manufacture “competing products”. 

This raises two further points. First, two major local poultry groups are large mdm importers, so do we adjust for these two? Second, if we include competing and allied products then it would make sense and be totally consistent to include eggs, chicken soups and sauces, pasta, pizza, bread, and certain meats and fish, in local poultry volumes; all of them compete with local chicken for consumer spend.  

So what are the true market shares of truly comparable imported and local chicken?

Whatever the accurate numbers when comparing like for like, it’s obvious that local poultry is hugely dominant. 

Seventy percent of local frozen poultry sales consists of individually quick frozen packs (IQF) containing nine pieces of chicken or more. Most of these packs are “mixed portions” — a combination of different cuts such as drumsticks, thighs and wings. IQF packs are not imported, and importers largely trade their products as individual cuts.

The biggest dispute relates to leg quarters, which are NOT sold locally in IQF packs. Their individual component parts are, but they are mixed with other chicken cuts. 

Local chicken does sell stand-alone frozen leg quarters but these volumes are relatively low because, as said above, IQF totally dominates their businesses.

Leg quarters are a big part of importers’ trade. There lies the rub. 

The bottom line is that the local and imported products are different, and there exists a lot of smoke and mirrors in this dispute. 

SA frozen chicken cuts have a 15% injected brined water content. Imported chicken cuts are almost never brined, in itself a huge difference. 

So David and Goliath are battling it out over different products, even if David has a price advantage as claimed by local poultry. Even if true, how relevant can it be if the products are not the same ?

Are loin ribs the same as shoulder ribs, or lamb shanks the same as lamb chops? They are not, and they are sold at different prices without any disputes. 

Boerewors and braaiwors water content differs, and they are classed as different products with different labelling, and sold at different prices. 

I spent decades in the furniture business. We imported eight-piece wooden dining room suites consisting of a sideboard, table and six chairs, as well as five piece metal kitchen sets — table with four chairs. In each case local manufacturers copied and sold the chairs at higher prices. The items were considered different products and no dumping actions were initiated. 

The bottom line is that because of water content and different selling formats and combinations, affecting huge sales volumes, imported bone in chicken cuts are not directly comparable with local IQF chicken, and differing cost prices are irrelevant, meaning that the chicken wars are being fought under a totally false premise of like products. 

The real problem is not dumping. It’s a drive to reduce imports and achieve localisation goals. However, it’s difficult to achieve that through MFN (most favoured nation) tariffs alone, so dumping regulations are manipulated and abused to do that. Our trading partners know this and don’t trust us. The key question is whether the SA chicken market is important enough to them to go the World Trade Organisation route. The last time Brazil took this step against us SA lost. 

It’s also relevant that SA excluded the US from its current dumping action despite the large volume of bone in chicken imported from the US at prices similar to those of other countries. This is because it has been made clear that if we do, we will lose benefits under AGOA (African Growth and Opportunity Act). This is blatant hypocrisy by SA.

There is only one big loser: the consumer. But which one of the players really gives a hoot?

David Wolpert, Rivonia 

JOIN THE DISCUSSION: Send us an email with your comments  to letters@businesslive.co.za. Letters of more than 300 words will be edited for length.  Anonymous correspondence will not be published. Writers should include a daytime telephone number.