Record levels of dumped chicken imports and an oversupplied domestic poultry market contributed to as much as an 80-percent drop in profit for RCL Foods Ltd., South Africa’s largest chicken producer, Bloomberg reported.
The Durban-based company says its sugar and poultry units were affected after it wrote down $48 million in its milling business.The drought didn’t help.
“The sugar and chicken business units have been adversely impacted by the worst drought in southern Africa in the past 100 years,” RCL said in a statement. “Chicken results have also been adversely impacted by the massively oversupplied poultry market as a result of surplus domestic volumes as well as record levels of dumped imports.”
Formerly known as Rainbow Chicken, RCL has been trying since 2013 to diversify into sugar and other food products, making acquisitions to reduce its reliance on meat, Bloomberg reported.
Imports of bone-in chicken portions have never been as high as they were between January and June, Business Day Live reported.
If this persists, imports will have a devastating impact on local producers, said Keith Lovell, CEO of the South African Poultry Association.
But don’t be so quick to blame the U.S.
South Africa’s poultry imports from the European Union rose dramatically in 2016 while U.S. bone-in chicken imports have been far below expectations.
E.U. poultry imports represented 47.9 percent of all South African poultry imports of 54,514 tonnes in May. Imports from Brazil represented 43.2 percent of the total or 23,523 tonnes.
U.S. bone-in chicken imports had been “far below expectations” and “very disappointing, said David Wolpert, CEO of the Association of Meat Importers and Exporters.
“Importers are still importing from the E.U. because they can get it duty free and the quality is excellent,” Wolpert said.
According to the African Growth and Opportunity Act, U.S. chicken producers have an annual import quota of 65,000 tonnes of bone-in chicken portions free of anti-dumping duty.
That means South Africa could expect to receive over 5,400 tonnes of bone-in portions per month from the U.S., according to the association website.
But U.S. chicken imports were delayed. Since starting in February, they’ve been erratic, with 2,299 tonnes imported in March, 6,906 tonnes in April and 1,238 tonnes in May, according to South African stakeholders.
There are several reasons why the U.S. hasn’t reached its quota for chicken exports, including logistical hurdles, according to U.S. Embassy deputy spokesman Heidi Ramsay.
“Unique among the many countries exporting poultry to South Africa, the U.S. agreed to set aside half of our quota for SA’s historically disadvantaged individual importers, many of whom are new to the poultry market,” Ramsay said. “We continue to work with our poultry industry and disadvantaged individual importers to build capacity. Second, the first imports of chicken only arrived in February. Finally, we believe the volatility of the rand has had an impact on U.S. export volumes.”
The E.U.-South Africa trade agreement allows safeguards if the local industry can show that the imports are causing a serious disturbance to the local poultry market.
South African imports from the E.U. could slow down if a proposed 37-percent duty is imposed on E.U. bone-in chicken. A decision is expected within two months.
The South African Poultry Association is challenging the U.S.-South Africa AGOA agreement on the grounds that it lowers the health safety standards for imported U.S. chicken (specifically the level of salmonella) while all other countries must comply with higher standards. This was the original sticking point in AGOA negotiations between SA and the U.S..
U.S. President Barack Obama gave South Africa an ultimatum in 2015 to to resolve the issues blocking U.S. meat imports by Dec. 31, or lose tariff benefits for its agricultural products entering the U.S., Mail & Guardian reported.