In his recent article, Ivo Vegter has fumbled the facts surrounding anti-dumping duties and their impact on retail chicken prices, says Francois Baird. His accusation of “astronomical tariffs” causing food price hikes misses the mark. Contrary to Vegter’s claims, these duties combat unfair trade practices and protect struggling industries. Expert research indicates that the influence on chicken prices will be minimal, with competition and market dynamics reigning. The South African poultry industry’s efficiency is noteworthy, and while chicken prices are indeed on the rise, the true reasons are far from the sensationalist picture painted by Vegter.
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By Francois Baird*
Your columnist Ivo Vegter is always good reading, with an interesting take, well-reasoned. Imagine then my surprise when I saw his take on the imposition of anti-dumping duties. I hope you don’t mind me correcting the facts with you?
Vegter gets chicken prices wrong
Ivo Vegter, is wrong about anti-dumping duties and retail chicken prices.
In your introduction to his article “Patel’s headless chicken policy” on 5 August, Biznews summarised his accusation as “astronomical tariffs send food prices soaring”. That also summarised Vegter’s errors: these are not general tariffs, they are not astronomical, and they will not send food prices soaring. Vegter has got his facts wrong and in the process has misled Biznews readers.
The tariff issue.
As Vegter states, they are actually anti-dumping duties. He doesn’t explain the dumping issue, which is why they were imposed, but he goes on to treat them as general tariffs which he believes are in place to protect an inefficient South African poultry industry. Again, wrong and wrong.
Dumping is when goods are imported at unfairly low prices in order to gain market share. This contravenes World Trade Organisation rules, and is measured by the difference between what goods are sold for in the target country compared to the exporting country.
The anti-dumping investigation was not about retail prices – it was about a distressed poultry industry suffering because of dumped chicken imports. No industry can compete against dumping, which harms local industries and threatens local jobs.
Anti-dumping duties combat unfair and predatory pricing and restore fair trade within WTO rules.
The “astronomical” claim.
Anti-dumping duties are set after a thorough investigation and are applied at different rates to chicken producers, company by company, in the countries concerned – in this case, Brazil, Denmark, Ireland, Poland and Spain.
The lowest rates will apply to most bone-in chicken imports from these countries because these are the rates specified for the big exporters who engaged the South African authorities during their anti-dumping investigation.
The highest rates – 265% for Brazil, 96% for Poland, etc – are unlikely ever to be applied because those producers ignored the investigation and are unlikely to export at those rates. But those are the only rates that Vegter quoted.
It’s the low rates that matter – some 2% for Ireland and Poland, 3% for Brazil and 7% for Spain and Denmark. For four large companies, two from Brazil and two from Poland, the duty is 0%.
The low range is the important one, and it’s anything but astronomical.
Food price impact
Vegter says chicken prices will rocket because of the new duties. That’s because he believes the 265% nonsense.
He should read an authoritative study be Genesis Analytics, one of South Africa’s most respected economics and competition consultancies.
Genesis says the potential impact on retail chicken prices could average a maximum of 2.5%, but in reality it will be a lot lower. Prices will be kept down because of competition between importers, competition between local producers, the pricing power of retail groups and the fact that Brazil and other countries might lower prices to counter new duties, as they have in the past.
This is the market at work, so Vegter should applaud.
Efficient chicken producers
The South African poultry industry is not an inefficient industry in need of protection, as Vegter implies.
Studies have shown repeatedly that South African producers are among the most efficient in the world. They produce chickens cheaper than European Union countries, but not Brazil and the United States which grow their own feed.
The local industry has said it welcomes competition and does not need protection against imports – it needs protection against dumping.
Chicken prices are rising
Vegter got one thing right – chicken prices are going up, because of rapidly rising input costs such as feed, which accounts for 70% of the cost of raising a chicken. He didn’t mention load shedding, which is adding billions to the cost of poultry farming, or the impact of failing road, water and rail infrastructure.
Chicken producers have been absorbing these costs, subsidising consumers by selling chicken at a loss. This has been spelled out by Chris Schutte, CEO of Astral Foods, the country’s largest chicken producer.
This is not sustainable, so chicken will get more expensive. Mostly because of high input costs which are adding rands to the price of a chicken, and least of all because of anti-dumping duties, which might add a few cents.
It’s a pity this is not what Biznews told its readers.
Read also:
- The chickens are out for Patel – Ivo Vegter
- Court battle looms over additional tyre import duties
- Anti-dumping tariff could send tyre prices skyrocketing by 40%
*Baird is chairman of the FairPlay anti-dumping movement
