Country Report for South Africa for 2010 Presented by: Kevin Lovell ON: November 2011 AT: SADC Meeting Small Footprint. Big Impact. A new era

Broiler Industry

An increase in broiler production of 4% from 2009 to ,04% from 2010 to 2011 Estimated 2,80% from 2011 to 2012 Broiler Industry Recent Developments

Chicken remains an affordable protein source relative to other meat protein sources. Comparison of average producer prices for 2009 and2010: Item Unit: R per kg % change Beef abattoir selling prices for class A2/A3R23,44R24,02+2,5% Beef abattoir selling prices for Class C2/C3R19,58R19,83+1,3% Pork, all classesR15,65R14,82-5,3% Broiler total realization ( less all discounts, rebates and secondary distribution) R13,66R12,28-10,2% Broiler Industry Recent Developments

Dominate the agricultural sector in South Africa and is the main supplier in kilogram and protein terms, more poultry products are consumed per annum than all other animal protein sources combined. In terms of consumption, beef is second. Poultry has shown an upward trend in consumption over the past six years Broiler Industry Recent Developments

Broiler Industry Consumption Trends

The per capita consumption of poultry meat was 32,96 kg per annum in 2010 broiler meat the main contributor at 32 kg per person per annum. met by increased imports (+15%) industry growth recovery in comparison with previous years (+4%). It is expected that producer expansion should meet increased demand. response to the demands by consumers and food service operators for value-added, brand-name and convenience products commoditised volume products. industry that is in demand Folks love chicken! opportunity for tremendous growth consumption in Brazil and the United States is in excess of 40 kg. safely grow by 50% in volume terms. Broiler Industry Consumption Trends

The following challenges remained critical: Higher input costs Stream of imports into South Africa threat that avian influenza poses food safety practices requirements of EIAs anti-dumping duties negative media comments Broiler Industry Current Issues and Challenges

Broiler Industry Input Costs Feed costs: Decrease in recent years (2009, 2010) not to levels before 2008 Increase in 2011 Prices driven upwards Competition with ethanol producers for the available maize low stock-to-usage ratios renewable fuels mandate and drive for bio-fuels in the United States will impact globally The average reported broiler-feed price for 2010 was R3 000,73 per ton, a decrease of 10% in comparison with the average feed price for 2009.

Broiler Industry Input Costs The average feed price for 2Q2011 was R3 249,86 per ton, an increase of 5,3% in comparison with 1Q2011, and an increase of 9,4% in comparison with 2Q2010.

FEED INGREDIENT IN FEED PRICE PER TON Randfontein % CHANGE Y/YPRICE PER TON Pietermaritzburg % CHANGE Y/Y BROILER STARTERR3 153,00+20,7%R3 186,58+23,0% BROILER GROWERR3 044,83+24,9%R3 115,63+27,3% BROILER FINISHERR3 044,83+33,2%R3 038,93+31,9% PULLET GROWERR2 489,52+30,3%R2 572,82+33,2% LAYERR2 487,75+28,7%R2 572,88+31,6% ESTIMATED FEED INGREDIENTS PRICES FOR NOVEMBER 2011 FOR DIFFERENT FEED TYPES: Broiler Industry Input Costs

Broiler and Egg Industry Disease and Animal Health long-term disease-reduction program emphasis on precautionary measures, disease surveillance and control, spread of avian influenza potential to reduce consumer demand. routine surveillance program Newcastle disease lack of bio-security linked to the commercial egg-layer industry

Broiler Industry Trade Developments The annual poultry imports for 2010 into South Africa were tons, which constituted a 15% increase or tons more in comparison with the total poultry imports for Broiler meat accounts for 90,4% of all poultry imports, an increase of 1,4% in comparison with 2009, the balance largely being turkey products. The value of annual poultry imports (FOB) for 2010 into South Africa amounted to R1,766 billion, which constituted a 13% increase or R200 million more in comparison with the value of total poultry imports for The origin of imports into South Africa enforces this picture with 73% of the poultry imported into South Africa originating in Brazil. Brazil remains a threat to world poultry due to the exchange-rate dynamics, competitive advantages in terms of climate, feed costs, economies of scale and government support.

Broiler Industry Other continue producing in an environment of increasing costs. responsible application of bio-security to prevent and contain avian influenza should it appear. Pressure will mount on pricing convince the market of the realities that face our industry with regard to cost of production and other challenges.

Egg Industry

Egg Industry Recent Developments An increase in egg production of 3,5% from 2009 to ,7% from 2010 to 2011 Estimated 2,1% from 2011 to 2012

Egg Industry Recent Developments Agricultural Product Standards Act, act 119 of 1990 Regulations re the grading, packing and marking of eggs Labelling and advertising of foodstuffs The National Environmental Management: Waste Act Code of Practice Consumer Protection Act

Egg Industry Consumer Consumption Trends 132 eggs per person per annum (+2%) Scope for an increase price competitiveness of eggs expected to increase during 2011

Egg Industry Current Issues and Challenges 2010 in comparison with 2009 Egg production (+3,4%) feed prices (-11%) 2011 in comparison with 2010 The total annual egg production is expected to increase from 18,53 million cases in 2010 to 19,2 million cases in 2011 (+3,6%)

Egg Industry Input Costs 2010 compared to 2009: Average layer feed price: R2 102,77 per ton (-11%) Profit margins still under pressure Driven mostly by international factors increased bio ethanol production in the US rapid depreciation of the SA Price.

Egg Industry Disease and Animal Health DISEASE Better position in 2010 long-term disease-reduction ANIMAL HEALTH emphasis on precautionary measures, disease surveillance and control, The spread of avian influenza

Egg Industry Trade Developments Exports low base long-term business opportunity tons in 2010 Imports low base 210 tons in 2010

Egg Industry Other environment of increasing costs application of bio-security generic marketing campaign more than double in size Pressure will mount on pricing environment of decreasing inflation demonstrate their skills to convince the market

Broiler and Egg Industry Trade Developments

South Africa is a member of the Southern African Customs Union (SACU) with Botswana, Lesotho, Namibia and Swaziland being the other members. The SACU countries are also members of SADC which implemented a free trade area under the SADC Trade Protocol in SACU already grants tariff free access to other SADC countries while they have been phasing in their tariff reductions. SACU has a common external tariff with a zero tariff on eggs in the shell but tariffs on poultry meat and egg products.

Broiler and Egg Industry Trade Developments SADC, COMESA and the EAC have agreed to negotiate a Tripartite FTA. The members of the three regional economic communities are currently discussing the framework for the FTA and a tripartite summit is to be held on 8 – 12 June 2011 in South Africa. SACU has signed a Preferential Trade Agreement with Mercosur that covers a limited number of products and excludes poultry meat, eggs and egg products; and an FTA with EFTA under which Switzerland and Norway grants limited tariff preferences on imports of on these products from SACU but SACU will not grant preferences. The SACU- EFTA FTA came into force in 2008 and the SACU-Mercosur agreement is likely to come into force in 2012.

Broiler and Egg Industry Trade Developments Under the SA-EU Trade, Development and Cooperation Agreement or TDCA, the EU eliminated tariffs on imports of poultry meat, eggs and egg products from South Africa over the period up to South Africa has been phasing out tariffs on imports from the EU and tariffs will be zero in 2012.

Broiler and Egg Industry Trade Developments An Economic Partnership Agreement or EPA is being negotiated between the EU and a configuration of SADC countries, the five SACU countries, Mozambique and Angola. An Interim EPA was initialled at the end of 2007 but excluding South Africa and Angola. South Africa was not prepared to accept some of the ECs conditions in the Interim EPA while Namibia initialled it conditionally. South Africa, Namibia and Angola are conducting further negotiations with the EC with a view to amendments that will enable them to participate in the final EPA. If South Africa becomes a participant in the EPA, the TDCA will lapse. If not, the TDCA is to be reviewed.

Broiler and Egg Industry Trade Developments SACU has committed to a preferential trade agreements with India and negotiations are in progress. Request lists for tariff preferences were exchanged in February India did not include poultry meat, eggs and egg products in their request for tariff preferences.

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