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South African Poultry Tariffs Yet to Produce Local Benefits

06 October 2014

SOUTH AFRICA - Local chicken producers had not yet derived the benefits of the new tariffs set against poultry imports from Brazil a year ago as the levels of imports were more or less the same as last year, “which were enough to cause harm”, the SA Poultry Association confirmed on Friday.

The association’s chief executive, Kevin Lovell, said that since the general tariffs took effect in September 2013, there seemed to be little impact on the total imports year on year. However, the source of supply had been diverted to Europe, reports IOL BusinessReport

“Europe became the biggest source of supply of leg quarters, which is the primary category of imports and causes much bigger harm.”

According to IOL BusinessReport in September last year, the government increased tariffs on imports of Brazilian whole birds to 82 per cent from 27 per cent. In July, provisional duties ranging from 22 per cent to 73 per cent on frozen bone-in portions were imposed on imports from Germany, the Netherlands and the UK.

The interim anti-dumping duties were introduced in July after imports reached a high of about 20 000 tons in June. Import volumes slowed down in July and August.

“It is too early to determine what the year-on-year figures are going to be because we stick to the calendar year before we do analysis,” Mr Lovell said.

Last year’s poultry imports of 390 542 tons were 3 per cent lower than in 2012, but were 12 per cent higher than in 2011, according to a report of the SA Poultry Association’s Broiler Organisation Committee.

Mr Lovell said the industry had experienced small improvements and changes but had not seen a shift in terms of volumes. “Without a shift in volumes the local industry will continue to struggle.”

Sovereign Foods, which released its interim results on Friday, said despite the anti-dumping duties imposed on leg quarter imports from three EU countries, poultry import volumes remained high.

“At this stage the group is uncertain of the exact effect that these duties will have on local poultry prices,” it said.

However, it said the future of the industry looked better with all the changes that had taken place a year ago.

Sovereign Foods said the introduction of additional import tariffs should lead to a more stable balance between supply and demand and bring some relief to the industry.

The group was able to lift its headline earnings a share by 49 per cent to 28.1c in the six months to August, while earnings a share grew by 47 per cent to 27.8c.

Sovereign Foods said the rise in earnings was mainly attributable to a 21 per cent increase in revenue, which was assisted by the 7 per cent increase in sales volumes.

The group increased its average product prices by 12 per cent in the six months.

Its operating profit was affected by illegal industrial action at an abattoir in August. This reduced operating profit by R10 million and earnings before interest, tax, depreciation and amortisation margins by 1.2 percentage points.

“Some consolidation has taken place as a result of the sustained pressure on the industry’s margins and it is possible that if the industry continues to be subjected to these constrained margins, further consolidation could take place.”

The shares rose 2c to R8.


ThePoultrySite News Desk

Top image via Shutterstock

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