Hume International, the import, export, and distribution of frozen foods company, has warned of high chicken tariffs if the government doesn’t reduce the anti-dumping duties by July.
In a statement yesterday, the group said food distributors have celebrated the government’s recent decision to lift the ban on Irish chicken after the country had been declared free of bird flu, stating that this would provide an important supplement to the local market as global supplies come under pressure.
“But with punitive 158% anti-dumping duties on the horizon, this relief will be short-lived unless the government decides to extend the current suspension on tariffs past July this year,” Hume said.
Hume International managing director Fred Hume said: “In keeping with international trade standards, South Africa’s decision to lift the trade ban on Ireland has come three months after the country was declared free of bird flu.
“Given that government’s stance to date has been that it needs to inspect facilities personally before allowing trade to resume, we believe that this example will set an important precedent for how bird flu outbreaks should be treated with other trade partners.”
However, if exorbitant anti-dumping duties were reinstated in August, countries such as Ireland would effectively be locked out of trade with South Africa, as their chicken will be too expensive and uncompetitive for the local market.
“Notably, in 2022, the International Trade Administration Commission (ITAC) announced that it would be implementing new tariffs of 158.4% on chicken imports from Ireland; 265% on Brazil; 96.9% on Poland; 85.8% on Spain; and 67.4% on Denmark.
“But in August, Minister of Trade, Industry, and Competition Ebrahim Patel confirmed that the government would be suspending the implementation of these tariffs to mitigate the effects of rising food prices on poor and vulnerable households, for whom chicken is considered a staple protein. Should this suspension lapse, reducing competition in the local market, chicken prices could rise significantly higher,” he said.
Hume said this was a particular concern as local chicken producers had warned of the dire impact of soaring feed and load-shedding costs on their operations, placing severe pressure on poultry profits, and raising the risk of price hikes.
“Two bird flu outbreaks were reported in commercial chicken farms in the Western Cape in April – and, should these outbreaks spread, this could place an added burden on local supplies.
“The simple reality is that the local industry already cannot produce enough chicken to fulfil South Africa’s needs, which is why we are dependent on imports to fill the supply gap. And while producers are facing extreme cost pressures such as rising energy prices, water shortages, and infrastructure challenges, the South African poultry sector has cut back production rather than increasing it, making the supply gap even wider,” said Hume.
He said the industry was currently facing one of the worst global bird flu outbreaks seen in modern history, which has substantially decreased international supply. For example, the US was a major supplier to South Africa, but only three of its states were currently able to export chicken because of bird flu.
“So, where the US has traditionally provided a cheaper option, it’s chicken prices are now on par with exports from other countries,” he said.
Meanwhile, independent analyst Anthony Clark of Small Talk Daily, said in a note this week that the media had just picked up on the latest case of avian influenza (HPAI), which hit South African shores early this year. It recently spread to the Western Cape with outbreaks reported on April 21 and 25.
He said Quantum Foods revised its first half of 2023 results, and said they would not be awful as initially estimated back in January, down 100%, like-on-like. Now headline earning per share (Heps), due to an improvement in the egg segment would see Heps declining by only between 76% and 87% to a range of 2 cents per share to 3.8 cents per share.
“This is a long way from the past HPAI egg price boom of FY2018 (financial year) when Heps rocketed 234%, and a dividend of 70 cents was paid that year.
“Eggs have always been the boom or bust product within Quantum and the agricultural food production chain. Many factors drive its performance, much driven by supply, input costs, as well as, disease,” he said.
Clark said in 2022, a storm was underway with soaring input costs, high energy prices, an inability to increase prices to match costs, and industry overproduction. Slaughter occurred in the sector as many weaker players simply cracked. That has seen material de-flocking via culling and lower layer re-population.
“The strong will survive, and with avian influenza now hitting production and prices rising. The egg corner from being pancaked may start to look more souffle-like from September (if) my scenario transpires… the same is true within the commercial poultry sector,“ he said.
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