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AMIE, Hume ask for more agile trade responses as chicken, egg supply tightens

23rd October 2023

By: Marleny Arnoldi

Deputy Editor Online

     

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The Association of Meat Importers and Exporters (AMIE) has welcomed Trade, Industry and Competition Minister Ebrahim Patel’s directive to the Import and Export Control Regime, administered by the International Trade Administration Commission of South Africa (Itac), to consider creating a temporary rebate on import duties for chicken as a shortage in the market looms.

AMIE, in particular, proposes that Itac reduce the import duties on frozen bone-in chicken from 62% to 37%, boneless chicken from 42% to 12% and to zero-rate for chicken offals such as carcasses, feet, heads, and liver, which are the chicken products most consumed by low-income households and consumers, for 12 months.

AMIE says a temporary, controlled relaxation of duties will help address the current chicken product shortages in the South African market, and ensure the most vulnerable in society are cushioned against rising costs owing to the latest Highly Pathogenic Avian Influenza (HPAI) outbreak.

South African Poultry Association (Sapa) last week confirmed that 7.5-million birds have been culled this year owing to the outbreak of HPAI and that 30% of the poultry broiler breeder industry has been impacted.

Sapa itself does not want a temporary import duty rebate to be imposed, as many poultry producers are already “with their backs against the wall” in terms of costs and the country is already open to many countries for chicken imports.

The association says there is no need for South Africa to drop the import duties it imposed on countries such as Brazil recently to protect the local market.

In turn, AMIE CEO Paul Matthew explains that the temporary rebate will help mitigate the supply shortage on households, particularly poor households that are increasingly vulnerable to food insecurity. Reducing the duties will allow chicken to be imported at an affordable price, while providing the local industry time to recover from the recent outbreaks.

AMIE also asked Itac to extend the rebate to shipments already on the water, to ensure immediate access to products.

The HPAI virus is highly contagious and poses a significant threat to various species of birds, including those in the food production industry, pet birds, and wild birds. Local producers are forced to cull birds to limit the spread of particularly the H5N1 and H7N6 strains of HPAI.

Retailers have faced severe shortages of chicken and egg stocks, with some retailers having to ration these products.

The lack of adequate supply to feed consumption in the country has also led to higher prices, which AMIE believes is deeply concerning considering that chicken and poultry products are the main source of essential protein for millions of low-income households.

In March 2020, government increased the duties on bone-in chicken from 37% to 62% and boneless chicken from 12% to 42%, with an undertaking to review this after three years, which expired in March this year. The duties were never reviewed.

AMIE’s recommendation to Itac is that, in light of the current HPAI outbreak, it considers returning to the original duties prior to the March 2020 increase, and that it considers applying a 0% duty on the import of chicken offal.

EGG SUPPLY

Although eggs are currently duty-free, food distributor Hume International industry expert Jonathan Katz says the ongoing egg shortage crisis requires immediate legislative intervention and assurances for importers to step up and plug the gaps on shelves.

Notably, government’s regulations regarding the grading, packing and marking of eggs intended for sale in South Africa, otherwise known as Regulation 345, prohibit the sale of imported eggs after 40 days from the date of hatching.

Yet, well-refrigerated eggs remain edible for up to six months, which could theoretically allow egg imports to bridge the supply shortage as local producers are hard-hit by a bird flu outbreak, Katz says.

He believes imports play a critical role in filling shortages in the local market if and when local suppliers fail to meet demand. Currently, South Africa imports about $1.6-million worth of eggs a year. To resolve the country’s current egg shortage crisis, this amount needs to substantially increase.

“Shell eggs, or table eggs, are not imported in large enough volumes to meet local demand at this time. With the onset of the recent egg shortage, we urgently need to re-evaluate the efficacy of South Africa’s fairly obstructive import restrictions. We need government to intervene to temporarily lower import restrictions on eggs, and relook the regulations to ensure this type of situation doesn’t happen again,” Katz explains.

He adds that, under optimal conditions, it will take two weeks to ship eggs from port to port from, for example, Brazil or Argentina. “However, if the shipping company chooses to transship, which involves moving the eggs from one vessel to another, it could add an extra two days to the schedule.

“Plus, if there are issues in getting the eggs out of the exporting country, that might be an additional week. Then, any issues at the local port would push the shipment beyond the tight 40-day period.”

A single container of eggs costs about R1-million and importers have little to no assurance that they will receive the dispensation needed to sell the eggs should a shipment exceed the allowed 40-day sell-by period. No importer wants to risk a financial loss of this size – importers are simply not willing to take that chance.

“While our clients in the food industry alone currently require some four-million eggs a month for the foreseeable future, we cannot assist with this demand without the necessary policy interventions and certainty from government,” Katz says.

He further explains that the local industry is struggling to get ahead of the curve, and is currently focussed on bringing fertilised layer eggs into South Africa to rebuild commercial flocks, rather than the table eggs that can be supplied directly to consumers.

While this may resolve the crisis in the long-term and stabilise the local market, the process will take a few months to complete and will not solve the immediate shortage.

PERSISTENT SUPPLY SHORTAGE

According to Department of Agriculture, Land Reform and Rural Development records, the domestic poultry industry has not been able to produce enough chicken to supply local consumption levels for some years.

During 2017/18, when the country grappled with one of its most severe HPAI outbreaks, the gap between what the country consumed and what was produced was 483 000 t.

In 2018/19 the shortage amounted to 511 000 t, while the shortage narrowed to 437 000 t in 2019/20 and 2020/21, and further to 287 000 t in 2021/22.

Current estimated shortages for 2022/23 are 460 000 t.

“If we consider the current HPAI outbreak as causing a 16% reduction in domestic production in 2023/24, this gap will escalate to 840 000 t. Given the long-lasting impact of HPAI, and the likelihood of its recurrence, South Africa’s options for supplementing shortages will be severely limited without a temporary rebate on the ordinary customs duty,” Matthew states.

He adds this is not the first time that South Africa is experiencing an HPAI outbreak. Since 2017, there have been 369 outbreaks of the virus across the country, which shows a need to think and act differently to ensure this vital protein source is always available, and always affordable.

“Extraordinary measures and close collaboration between government, local producers and importers will ensure that we can safeguard the poultry sector, food security, and public health,” AMIE notes.

While a 12-month rebate helps to alleviate shortages and temper prices, AMIE believes Itac should also consider a responsive rebate permit mechanism that can be quickly activated when needed, without the need for time-consuming processes and delays.

“Agility and speed are essential when we face crises like we are currently seeing in the local supply chain,” Matthew stresses.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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