Directorate Marketing Private Bag X 15 Arcadia 0007 Tel: /6 Fax: DM@daff.gov.za

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1 A PROFILE OF THE SOUTH AFRICAN BROILER MARKET VALUE CHAIN 2010 Directorate Marketing Private Bag X 15 Arcadia 0007 Tel: /6 Fax: DM@daff.gov.za 1

2 1. DESCRIPTION OF THE INDUSTRY Production areas Production trends Local consumption Employment. 2. MARKET STRUCTURE Import Export analysis Exports Share Analysis Imports. 3. BROILER MEAT MARKET VALUE CHAIN. 4. MARKETING CHANNELS FOR BROILER MEAT. 5. EMPOWERMENT STRATEGIES BY THE INDUSTRY AND GOVERNMENT. 6. BARRIERS TO PARTICIPATION BY THE EMERGING SECTOR. 7. OPPORTUNITIES AND WEAKNESSES. 8. MARKET INTELLIGENCE Export tariffs for broiler meat Import tariffs for broiler meat PERFORMANCE ANALYSIS OF SOUTH AFRICAN POULTRY INDUSTRY IN ACKNOWLEDGEMENTS

3 1. DESCRIPTION OF THE INDUSTRY. Broiler production, especially broiler meat production, was the largest segment of South African agriculture by 24% in 2009 while all animal products in South Africa contribute 48%. The farm income from broiler meat for 2009 was R23, 165 billion. Broiler production dominates the agricultural sector and it is the main supplier in protein terms of food than all other animal proteins combined followed by beef. The growth had spillover effects in the grain and chick industries. Broiler meat accounts for about 93.6% to the total poultry-meat production, with the rest made up of mature chicken slaughter (culls), small-scale and backyard broiler meat production and other specialized broiler meat products (geese, turkey, ducks and guinea fowl). Pure lines are imported at great-grandparent level. Currently 7.8 million parents are required to produce commercial progeny for the broiler meat industry from grandparents and 4000 pure breed lines. The gross value of broiler meat is depended on the quantity produced and prices received by producers. The trend in gross value follows a pattern of production. The contribution of broiler meat industry to the gross value of production increased continuously during the period under analysis due to increasing production and consumption. The average gross value of production amounted to R 1,045,500,000 over ten years. Although the broiler meat prices declined in 2007/08, the contribution to the gross value continued to increase due to higher production. Figure 1 below show the contribution of broiler meat to the gross value of production. 3

4 Figure 1: Gross value of broiler meat production Rands ('000) / / / / / / / / / /09 Period (Years) Source: Agricultural Statistics Production areas. Broiler meat is produced throughout South Africa with North West, Western Cape, Mpumalanga and Kwa-Zulu Natal Provinces being the largest producers accounting for approximately 79% of total production. Figure 2 below show the distribution of production during 2008/09. 4

5 Figure 2: Broiler meat production per province 2008/09 Gauteng 6% Eastern Cape 7% Limpopo 1% Free-State 6% Northern Cape 1% North West 25% KwaZulu- Natal 15% Mpumalanga 18% Source: Agricultural Statistics. Western Cape 21% During 2008/09 North West Province produced 25% of the entire broiler meat in South Africa followed by Western Cape by 21%, Mpumalanga 18% and KwaZulu Natal 15%. Limpopo and Northern Cape were the least producers, producing 1% each of South African broiler meat 1.2. Production trends. The number of birds slaughtered has significantly increased by about 40% in 2009 compared with the year 2000, leading to 59% in 2009 compared to This is mainly driven by the increasing demand. Figure 3 below shows the production trends from 2000 to

6 Figure 3: Broiler meat production and slaughterings Kilograms 1,600,000,000 1,400,000,000 1,200,000,000 1,000,000, ,000, ,000, ,000, ,000, ,000,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000,000 0 Numbner of broilers slaughterd Period (Year) Production Broilers slaughtered Source: Agricultural Statistics and SAPA. Figure 3 above shows that production of broiler meat and the number of birds slaughtered increased continuously from 2000 when 850 million kilograms was produced to 2009 when million kilograms was produced Local consumption. Figure 4 below depicts local consumption of broiler meat comparing it to total production for each year to determine if the country is self sufficient. 6

7 Figure 4: Broiler production and consumption Kilograms ('000) / / / / / / / / / /09 Period (Years) Production Consumption Source: Agricultural Statistics. Figure 4 indicate that in South Africa consume more broiler meat than it is produced. This is the reason why South Africa became the net importer of broiler meat. The gap widened from 2004/05 as rising living standards are pushing larger numbers of consumers towards protein filled diets. The per capita of broiler meat consumed in South Africa has increased from 19.7 kg per person in 2000 to kg per person in Broiler meat has the highest per capita consumption than all other animal protein sources Employment. Commercial broiler meat producers are estimated at 404 (199 producers and 205 contract growers). Smallholder farmers are estimated at around These farmers produced million chickens in 2009 and employ around workers. 7

8 2. MARKET STRUCTURE. The domestic market consists of approximately 265 formal abattoirs. These abattoirs sell mainly to 5 main retailers (Pick n Pay, Shoprite- Checkers, Spar, Woolworths and MassMart) and SMME s in the retail sector. These retailers buy the largest share of domestic production. Figure 5 below show the price movements from 1999/00 to 2008/09. Rand per kg Figure 5: Average annual producer prices 1999/ / / / /04 Years 2004/ / / / /09 Source: Agricultural Statistics. The price increased from 2000/01 and reached the highest level in 2006/07 before declining in 2007/08, then increased slightly in 2008/09. The decline in 2007/08 may be due to global economic recession that occurred from August Figure 6 below show the market shares in the broiler meat industry. 8

9 Figure 6: Market shares of larger commercial broiler producers Rocklands 4% Argyle 2% others 10% Chubby Chick 4% Daybreak 4% Rainbow 36% Tydstroom 5% Country Bird 8% Astral 27% Source: NAMC The broiler meat industry in South Africa is dominated by 2 large producers, namely Rainbow and Astral. Together these 2 companies produce 63% of the total broiler meat production. The other 4 mediumsized producers (Tydstroom, Daybreak, Chubby Chick and Rocklands) produce more than broilers each per week or 15% of the market. Argyle owns 2% of the market with more than broilers per week followed by approximately 49 smaller producers producing less than broilers per week each and around 1745 subsistence farmers (selling approximately 500 live chickens per week). Rainbow which owns the Rainbow, Bonny Bird and Farmer Brown brands is the largest vertically integrated broiler meat producer in South Africa holding an approximate market share of 36% and produces 4.1 million broilers per week. Astral (27%) and Earlybird farm both broiler meat producers are subsidiaries of Astral Foods. On the 08 th September 2004 the Competition Tribunal approved the merger of the two subsidiaries. Astral produces 3.4 million broilers per week and Country Bird produces 1.2 million broilers per week. 9

10 Tydstroom Pluimveeplaas which belongs to Pioneer Foods and holds 5% of the market share, Daybreak farms subsidiary of AFGRI which owns the superior brand holds 4%. It currently processes broilers per week. Chubby Chicks (also known as Fourie s poultry farm) based in Uitenhage holds 4% of the market share. Rocklands is a subsidiary of JSE-listed Sovereign Food Investments. It is the seventh-largest broiler producer in South Africa and its broiler meat is marketed under the Crown label. Its market share is 4%. Table 1: Total production, number of birds slaughtered, consumption, exports and imports. Broilers slaughtered Production Consumption Exports Imports Years (Kilograms) 1999/00 671,055, ,000, ,000,000 6,228,237 93,390, /01 652,995, ,000, ,000,000 7,393,777 78,470, /02 724,132, ,000, ,000,000 9,002,249 93,900, /03 690,900, ,000,000 1,032,000,000 4,009, ,006, /04 704,392, ,000,000 1,082,000,000 3,577, ,996, /05 774,322,500 1,019,000,000 1,204,000,000 1,765, ,022, /06 837,112,500 1,143,000,000 1,383,000,000 1,950, ,598, /07 870,555,000 1,200,000,000 1,470,000,000 1,507, ,016, /08 927,832,500 1,276,000,000 1,508,000,000 2,548, ,278, /09 937,807,500 1,349,000,000 1,551,000,000 18,657, ,106,632 Source: Agricultural Statistics, SAPA and Quantec EasyData. Table 1 above shows that although the number of broilers slaughtered increases, South Africa still does not produce enough to justify the domestic demand and therefore, the shortfall is imported after exporting smaller quantities Import Export analysis. Figure 7 compares quantities of imports and exports of broiler meat from 2000 to

11 Figure 7: Broiler meat import and export quantities Quantity (Kg) Period (Years) Import Quantity Export Quantity Source: Quantec EasyData. Figure 7 indicates that from 2000 to 2009 South African broiler meat exports were far less than the imports. South Africa is therefore a net importer of broiler meat Exports. The broiler meat industry is also an earner of foreign exchange through the export of broiler meat. South Africa experienced a drastic increase of 18.7 million kilograms for broiler meat exports in 2009, yielding approximately R 239 million. Figure 8 below indicates the export of broiler meat from 2000 to

12 Figure 8: Broiler meat exports Quantity (Kg) Value (Rands) Period (Years) Export Quantity Export Value Source: Quantec EasyData. Broiler meat exports quantity and value are followed the same trend throughout the decade. From 2000 to 2003 broiler meat have been exported at a lower rate due to the stronger South African exchange rate. Broiler meat exports reached its lowest level from 2005 to 2008 due to increased domestic demand. Figure 9 below shows the main export market of South Africa s broiler meat from 2000 to

13 Quantity (Kg) 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, Figure 9: Broiler meat exports to SADC Angola Malawi United Republic of Tanzania Period (Years) Democratic Republic of the Congo Mozambique Zimbabwe Source: Quantec EasyData. Figure 9 above indicates that Mozambique was an important export market of South Africa s broiler meat throughout the decade though the quantities of exports declined significantly from 2003 to In 2009 Zimbabwe commanded the greatest market share of 15.7 million kilograms of South African broiler meat. There were recorded fluctuations among Malawi, Angola, Democratic Republic of Congo, United Republic of Tanzania and Zimbabwe from 2000 to

14 140,000 Figure 10: Broiler meat exports to Eastern, Middle and Western Africa Quantity (Kg) 120, ,000 80,000 60,000 40,000 20, Period (Years) Source: Quantec EasyData Congo Ghana Nigeria Saint Helena Uganda It is clearly indicated from figure 10 above that from 2002 to 2006 Nigeria commanded the greatest market share of South African broiler meat while Ghana & Saint Helena competed for the second level over the same period. Figure 11 below shows the main export destinations of South Africa s broiler meat in Most of South African broiler meat is exported to Mozambique which obtained 42% of South African broiler meat followed by Zimbabwe by 33%, Malawi 7% and United Arab Emirates by 5%. It is noted that South African broiler meat is exported mostly to SADC countries which constitutes 88% of the total broiler meat exports. 14

15 Destinations of broiler meat in 2009 Not allocated 3% Angola 1% Democratic Republic of the Congo 1% Mozambique 9% Zambia 1% Zimbabwe 85% Source: Quantec EasyData. It is noted that South African broiler meat is exported mostly to SADC countries. Zimbabwe commanded 85% of South African broiler meat followed by Mozambique with 9%. This shows that Zimbabwe is the net importer of South African broiler meat. Values of broiler meat exports from various provinces of South Africa are presented in Figure

16 Figure 12: Value of broiler meat exports by Provinces 120,000, ,000,000 Value (Rands) 80,000,000 60,000,000 40,000,000 20,000, Source: Quantec EasyData. Period (years) Western Cape Eastern Cape Northern Cape Free State Gauteng Kwazulu-Natal Mpumalanga North West Limpopo Broiler meat exports originate mainly from the Gauteng, Kwazulu-Natal and Western Cape provinces. This is due to the fact that these provinces are the main exit points. Gauteng province has recorded the greatest values in broiler meat exports between the periods 2000 and 2003 with the highest value in From 2004 to 2008, export values fluctuated between Kwazulu-Natal, Western Cape and Gauteng provinces. Free State experienced the greatest values in Mpumalanga province was a regular exporter while Northern Cape, Eastern Cape, North West and Limpopo provinces registered intermittent exports. The following figures (Figures 13-21) show the values of broiler meat exports from the various districts in the nine provinces of South Africa. 16

17 Value (Rands) Figure 13:Value of broiler meat exports from Western Cape Province 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 Period (Years) City of Cape Tow n 3,434,917 17,813,27840,218,763 8,351,398 5,624,826 6,844,787 9,577,628 10,484,442 17,030,01870,731,779 West Coast ,019,646 2,210, Cape Winelands ,130 Overberg , Eden 0 72, ,945, ,683 0 Source: Quantec EasyData. The greatest share of broiler meat exports from Western Cape Province originates mainly from City of Cape Town district municipality. Broiler meat exports originating from City of Cape Town district municipality have shown increases in 2001 and 2002 but declined dramatically in 2003, thereafter the value of broiler meat exports experienced a drastic increase in Small intermittent export values were recorded in West Coast, Cape Winelands, Overberg and Eden district municipalities. 17

18 Figure 14: Value of broiler meat exports from Eastern Cape Province Value (Rands) Period (Years) Cacadu Nelson Mandela Source: Quantec EasyData. Broiler meat exports from Eastern Cape Province were from Cacadu district municipality during 2000 to 2004 while Nelson Mandela district also realized exports of broiler meat between 2001 and 2003, and resumed in 2006 to 2007, diminished in 2008 and experienced another broiler meat imports in ,000 Figure 15: Value of broiler meat exports from Northern Cape Province 500,000 Value (Rands) 400, , , ,000 0 Period (Years) Pixley ka Seme , Source: Quantec EasyData. 18

19 From Northern Cape Province, broiler meat exports were from Pixley ka Seme district municipality only. Export values of broiler meat from this district municipality were experienced only in Figure 16: Value of broiler meat exports from Free State Province 120,000, ,000,000 Value (Rands) 80,000,000 60,000,000 40,000,000 20,000,000 0 Period (Years) Motheo , ,097,585 Source: Quantec EasyData. In Free State Province, broiler meat exports were mainly from Motheo district municipality only. Export values of broiler meat from this district municipality were experienced from 2008 to ,000,000 Figure 17: Value of broiler meat exports from KwaZulu-Natal Province 60,000,000 50,000,000 Value (Rands) 40,000,000 30,000,000 20,000,000 10,000,000 0 Period (Years) Ugu Umgungundlovu Uthukela , Uthungulu , ethekw ini Source: Quantec EasyData. 19

20 From KwaZulu Natal Province, the export of broiler meat were mainly from ethekwini district municipality with increasing export values recorded since 2000 and a dramatic increase in 2003 followed by dramatic decline in 2005, thereafter the value of broiler meat exports experienced slight increases until 2008 then decreased again in Umgungundlovu district municipality obtained the second level during 2004, 2005 and Intermittent exports of broiler meat were recorded in Ugu, Umgungundlovu, Uthukela, Uthungulu and ilembe. Figure 18: Value of broiler meat exports from North West Province 350, ,000 Value (Rands) 250, , , ,000 50,000 Period (Years) Bojanala , ,355 Southern , , , ,267 0 Source: Quantec EasyData. The value of broiler meat exports from Southern district municipality of North West was recorded from 2005 and increased to the highest level in 2006 but showed a decline between the periods 2007 and 2008 and diminished in From Bojanala district municipality exports of broiler meat were experienced in 2006 and

21 Value (Rands) Figure 19: Value of broiler meat from Gauteng Province 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 Period (Years) Sedibeng 0 2, ,840,028 1,919,659 1,646,221 1,834, Metsw eding ,893, ,536,819 West Rand ,893, ,536,819 Ekurhuleni 5,324,587 17,504,222 1,316, , , ,088 7, ,299 City of Johannesburg 275,471 12,898,263 57,731,913 12,739,765 3,173, , ,205 3,050, ,926 1,981,838 City of Tshw ane 20,891,060 11,796,257 6,242,247 7,874,522 10,660,521 8,382,432 6,991,231 7,928,697 19,115,262 33,837,782 Source: Quantec EasyData. In Gauteng province, broiler meat exports arose mainly from Ekurhuleni, City of Johannesburg and City of Tshwane district municipalities. The value of broiler meat exports originating from the City of Johannesburg district municipality increased to the highest level in 2002 and then declined drastically in City of Tshwane district municipality continually obtained the greatest share from 2004 until it reached the highest level in Sedibeng, Metsweding and West Rand district municipalities showed some irregularities throughout the decade. 21

22 12,000,000 Figure 20: Value of broiler meat exports from Mpumalanga 10,000,000 Value (Rands) 8,000,000 6,000,000 4,000,000 2,000,000 0 Period (Years) Gert Sibande ,234 Ehlanzeni 129,887 1,971,453 96,387 2,042, , ,795 3,250,382 38, ,908 11,211,444 Source: Quantec EasyData. In Mpumalanga Province, the values of broiler meat exports from the Ehlanzeni district municipality were fluctuating between the periods 2000 and 2010 with high values recorded in 2001, 2003, 2006 and the highest in Figure 21: Value of broiler meat exports from Limpopo Province 2,500,000 2,000,000 Value (Rands) 1,500,000 1,000, ,000 0 Period (Years) Mopani , Vhembe , ,651 0 Capricorn ,074,471 Source: Quantec EasyData. Figure 20 indicates that exports of broiler meat from the Limpopo Province occurred from the Vhembe district municipality in 2002 and 2008, in 22

23 Mopani district municipality exports were recorded only in 2007, while Capricorn district municipality experienced some imports in Share Analysis. Table 2: Share of Provincial broiler meat exports to the total RSA broiler meat exports (%) Years Province Western Cape Eastern Cape Northern Cape Free State Kwazulu-Natal North West Gauteng Mpumalanga Limpopo Total Source: Calculated from Quantec EasyData. From Table 2 above, Gauteng Province commands the greatest share of South African broiler meat exports followed by KwaZulu Natal and Western Cape provinces. This is mainly due to the fact that most exporters of broiler meat are situated in these provinces and also that they are the exit points. Mpumalanga province was a regular exporter while Northern Cape, Eastern Cape, Free State, North West and Limpopo provinces registered fractional exports of broiler meat. The accompanying Tables 3 to 11 shows a share of the various districts broiler meat exports to the various provincial broiler meat exports. Table 3: Share of district broiler meat exports to the total Western Cape provincial broiler meat exports (%) Years District City of Cape Town West Coast Cape Winelands Overberg Eden Total Source: Calculated from Quantec EasyData. City of Cape Town district municipality has commanded the greatest share of broiler meat exports in Western Cape Province during the period between 23

24 2000 and During the same period, Eden and Overberg district municipalities recorded intermittent exports of broiler meat and West Coast district municipality exported from 2006 to Table 4: Share of district broiler meat exports to the total Eastern Cape provincial broiler meat exports (%) Years District Cacadu Nelson Mandela Total Source: Calculated from Quantec EasyData. FromEastern Cape Province, the export shares of broiler meat fluctuated between Cacadu and Nelson Mandela district municipalities. There were no exports of broiler meat from 2005 to 2008 in Eastern Cape Province. Table 5: Share of district broiler meat exports to the total Northern Cape provincial broiler meat exports (%) Years District Pixley ka Seme Total Source: Calculated from Quantec EasyData. Northern Cape recorded exports of broiler meat only in 2003 from Pixley ka Seme district municipality and diminished from 2004 to Table 6: Share of district broiler meat exports to the total Free State provincial broiler meat exports (%) Years District Lejweleputswa Total Source: Calculated from Quantec EasyData. From Free State Province exports of broiler meat occurred from Motheo district municipality in 2008 to

25 Table 7: Share of district broiler meat exports to the total Kwazulu Natal provincial broiler meat exports (%) Years District Ugu Umgungundlovu Uthukela Uthungulu ethekwini Total Source: Calculated from Quantec EasyData. From KwaZulu-Natal Province, ethekwini district munipality has commanded the greatest share of broiler meat exports throughout the period under analysis. The broiler meat exports also occurred in Umgungundlovu district municipality from 2004 to Fractional exports of broiler meat were recorded in Ugu, Uthukela, and Uthungulu district municipalities. Table 8: Share of district broiler meat exports to the total North West provincial broiler meat exports (%) Years District Bojanala Southern Total Source: Calculated from Quantec EasyData. Southern district municipality has commanded the greatest share of broiler meat exports in North West Province during the period between 2005 and Fractional exports of broiler meat were recorded in 2006 and 2009 from Bojanala district municipality. There were no exports of broiler meat from North West Province before Table 9: Share of district broiler meat exports to the total Gauteng provincial broiler meat exports (%) Years District Sedibeng Metsweding West Rand Ekurhuleni City of Johannesburg City of Tshwane Total Source: Calculated from Quantec EasyData. 25

26 In Gauteng Province, City of Tshwane districts district municipality commanded the greatest share of broiler meat exports followed by City of Johannesburg and Ekurhuleni district municipalities. Intermittent exports of broiler meat were recorded in Sedibeng, Metsweding and West Rand district municipalities. Table 10: Share of district broiler meat exports to the total Mpumalanga provincial broiler meat exports (%) Years District Gert Sibande Ehlanzeni Total Source: Calculated from Quantec EasyData. Ehlanzeni district in Mpumalanga Province commanded 100% share of all broiler meat exports from 2000 to Gert Sibande district municipality experienced some exports only in Table 11: Share of district broiler meat exports to the total Limpopo provincial broiler meat exports (%) Years District Mopani Vhembe Capricorn Total Source: Calculated from Quantec EasyData. From Limpopo Province, exports of broiler meat occurred in 2002 and 2008 from the Vhembe district municipality and in 2007 and 2008 from Mopani and Vhembe district municipalities respectively Imports. South Africa imported approximately 225 million kilograms of broiler meat in 2009 at an estimated value of R million. The import value showed a significant decline of 3.9% compared to 2007 but increased by 407% compared to The decline in 2008 might have been caused by global economic meltdown that occurred from August Figure 21 below show the imports of broiler meat from 2000 to

27 Figure 21: Broiler meat imports Quantity (Kg) Value (Rands) Period (Years) Quantity Value Source: Quantec EasyData. Broiler meat imports are exchange rate driven, when the Rand appreciates against US$, imports of broiler meat increases and when the Rand depreciates against US$ imports of broiler meat decreases. The import of broiler meat quantities increased significantly from 2003 and reached the highest level in 2006 before decreasing from 2007 to The Rand appreciated (average of R7.66/US$) from the last six months of 2009 and led the broiler meat imports to accelerate. During 2006 to 2009, it was more expensive to import broiler meat as less quantity was imported at a higher value. This may be due to the depreciation of South African Rand against US$. Figure 22 below show the main suppliers of broiler meat to South Africa during the period 2000 to

28 Quantity (Kg) 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, Figure 22: Quantity of broiler meat imported from European Union Period (Years) Belgium Germany Denmark France United Kingdom Ireland Netherlands 2009 Source: Quantec EasyData. Figure 22 clearly indicates that the highest quantity of broiler meat imports from 2000 to 2006 originated from United Kingdom followed by France and Belgium. Belgium experienced greatest share of broiler meat import from 2007 to There were some fluctuations among Belgium, France, Netherlands, Denmark and Ireland throughout the period under analysis. 28

29 Figure 23: Quantity of broiler meat imported from America 250,000, ,000,000 Quantity (Kg) 150,000, ,000,000 50,000, Years Source: Quantec EasyData. Argentina Brazil Canada Cayman Islands United States During the past decade Brazil commanded the highest South Africa s import market of broiler meat. Its quantity increased drastically throughout the decade and dropped significantly from 2007 to The decrease was due to the world economic recession which led to a slow down of consumer demand. Canada was the second largest importer of broiler meat to South Africa followed by Argentina and United States. Generally, Brazil is the net exporter of South African broiler meat imports. 29

30 14,000,000 Figure 24: Quantity of broiler meat imported from Oceania 12,000,000 10,000,000 Quantity (Kg) 8,000,000 6,000,000 4,000,000 2,000, Period (Years) Australia New Zealand Source: Quantec EasyData. It is clearly indicated from figure 24 above that from Oceania, Australia is the main importer of broiler meat to South Africa. There are some increases throughout the decade with some little fluctuations. Oceania reached the highest levels in 2001 and 2007, which might be due to decreased imports from other countries. 30

31 Figure 25: Quantity of broiler meat imported from Asia 12,000,000 10,000,000 Quantity (Kg) 8,000,000 6,000,000 4,000,000 2,000, Period (Years) China Israel Thailand Source: Quantec EasyData. Figure 25 shows that China was the main supplier from 2000 to 2003 and diminished from 2005 to Israel has been South Africa s regular importer of broiler meat over the past decade and it obtained the highest market share from 2005 to Thailand recorded intermittent supply of broiler meat to South Africa. 31

32 Figure 26: Countries of origin for broiler meat imports in 2009 Canada 5% United States 3% Argentina 14% Australia 4% Brazil 74% Source: Quantec EasyData. Figure 26 above shows the share of various suppliers to South Africa s broiler meat in Brazil commanded the highest market share of broiler meat in South Africa with 74% share followed by Argentina with 14% then Canada with 5%. 32

33 3. BROILER MEAT MARKET VALUE CHAIN Figure 24: Structure of the broiler meat industry million Consumers (Estimate for 2009) Per Capita Consumption = kg / year 17 % of Agricultural Production Abattoirs A: 0 B: 29 C: 102 D: 60 E: 68 Total: 265 Retail Abattoirs Import Import: Kg Commercial Production: 72% or 18.6 million broiler meats sold per week Contract growers Breeders Feed companies Farms Domestic Production 207 Broiler meat contract growers: Early Bird 82 Country Bird 56 Rainbow Breeders: 3 primary: Cobb Ross and Hybro Multipliers: 34 Export 27 Feed companies: Meadow Epol 75% of industry Afgri 24 remaining mills: 25% of industry Export: kg SMMEs: 28% or broiler meats sold per week. Total Production: National DoA Sector for Agriculture/ Livestock 32% of the National flock is contributed by SMME`s Indigenous fowls sustenance farming. - SAPA Stats (Commercial only) 8 producers handle 72% of total Broiler meatsupply to RSA SMMEs (< broiler meats slaughtered or sold per week) handle 28% Source: Adapted from NAMC. 33

34 South African broiler meat value chain consists of broiler meat farms and contract growers, Feed Companies and other input suppliers and breeders. In the secondary sector we have abattoirs, importers, exporters and retailers. There are around 48.6 million consumers with a per capita consumption of 31.83%. Production in kilograms is around million, Consumption around million, Imports 225 million and Export 18.7 million. 34

35 4. MARKETING CHANNELS FOR BROILER MEAT. Figure 25: Marketing Channels. Export Further Processors. Commercial Production. Abattoirs Processors and Packers Retailers Consumers Import Small Scale Production Live Broiler meatmarket Hawkers & Retailers. From Figure 25, broiler meat production is by two sectors; viz, commercial and small scale. Live broiler meat is marketed mainly through two channels, live broiler meat market and abattoirs. Majority of broiler meat from commercial is sold through abattoirs while small scale through live broiler meat market. Live broiler meat market depends on hawkers and small retailers for distribution to customers. 35

36 Abattoirs slaughters broiler meat and sell it as carcass to processors and packers, who in turn may export, sell to retailers or further processors. Processors and packers and further processors also rely on imports for their supplies. Further processors sell to retailers for final distribution to the consumer. 36

37 5. EMPOWERMENT STRATEGIES BY THE INDUSTRY AND GOVERNMENT. o The Land Bank sponsors the distribution of broiler meat bulletin to developing farmers. o Sector for Education and Training (SetaSA) sponsors training under the National Skills Broiler Project Fund. o Rocklands broiler meat has entered into a R20-million joint venture with BEE company Kamnandi Trading to produce live birds every eight weeks in the Eastern Cape town of Loerie over 20 years. o Vukanathi Broiler Project in North West is presently an out grower for Country Bird. Country Bird provides the day old chicks, medicine, feed and the market to the project. In 2005 the venture was transformed into black employment equity (BEE) entity that required Thembani s assistance as guarantor to secure a working capital and growth line of credit. The Vukanathi project will own 72% of the equity of the business and effectively transform the venture into a BEE entity, with a strategic partner owning 28% of this venture. o The South African Broiler Association (SAPA) was the catalyst in the formation of the Developing Broiler Farmers Organization (DPFO). The main objective of the DPFO is to serve as a conduit to the developing broiler farmers for information dissemination and to co-ordinate and address collective issues in the industry. Possible market entry for SMME. Contract growing. Empowerment purchases of existing operation s farms by workers. Strategic partnerships not for beginner farmers. Resource centres in the form of central distribution points that will allow farmers to organize into buyer groups or small cooperatives. 6. BARRIERS TO PARTICIPATION BY THE EMERGING SECTOR. The transaction costs of the emerging farmers are much higher than those of their large developed counterparts in the commercial sector. 37

38 The availability of day-old chicks is a problem because the big producers are given preference. The long distances from the suppliers to the farms could result in high fatalities. The lack of abattoirs/slaughter houses to market/sell dressed chickens in the formal markets. The lack of bar coding facilities and proper freezers to store dressed birds. Most retail companies look for bar coded products for traceability. The volumes produced and their location places them at a disadvantage to supply to the retail sector. Hence many farmers sell live birds to the informal sector. Other constraints that affect the industry Low priced imports. Sanitary and Phytosanitary Standards. Exchange rate fluctuations. Chick Costs are high. Feed Costs are high. Lack of Finance as small scale farmers do not meet the requirements set by the commercial banks. Lack of Health Control as state veterinarians are not trained in broiler or available when needed. Lack of Marketing Skills. Lack of Technical Training. Lack of strong Farmer Organization, support structures and mentorship. 38

39 7. OPPORTUNITIES AND WEAKNESSES. The per capita consumption increased from 19.7 kilograms in 2000 to 30.8 kilograms in If this trend continues this is an opportunity for new entrants and the growth of existing broiler farmers in the industry. The per capita broiler meat consumption is set to increase further with the redistribution of wealth, recovery of the economy and the increase in the level of disposable income. With the redistribution of wealth the per capita income of the nation has resulted in an upward movement of individuals in the pyramid of purchasing power. This thus results in the demands changing hence individuals would include more broiler meat in their regular meals. There are 35 producers who provide 61% of the total broiler meat market. Imports control 27% of the market. The balance 12% is being supplied by hundreds of small/emerging farmers. New entrants are free to enter but are limited in terms of capital, expertise and the availability of day-old chicks. Another inhibiting factor to the growth of the emerging sector is the lack of abattoirs to slaughter and sell their products to the retail sector. Their volumes are too small to warrant the capital outlay for the establishment of an abattoir. Thus many emerging farmers sell their products in the informal sector as live birds. The quality standards and bar coding are pre-requisites by most retail companies. This is thus an area that can be jointly addressed by government and the industry. This intervention could assist with the growth of the domestic supply and could ultimately reduce imports. Some farmers lack the knowledge/expertise on handling diseases on their farms. 39

40 8. MARKET INTELLIGENCE 8.1. Export tariffs for broiler meat. Tariffs that different importing countries applied to broiler meat originating from South Africa in 2009 are shown in Table 12. Table 12: Broiler meat export tariffs. Country Product Code Trade Regime Description Angola (Fresh or chilled Broiler chicken) (Frozen Broiler chicken) Democratic Republic of Congo (Fresh or chilled Broiler chicken) (Frozen Broiler chicken) Ghana (Fresh or chilled cuts and edible offal of fowls of the species Gallus domesticus) (Frozen cuts edible offal of fowls of the species Gallus domesticus) Mozambique (Fresh or chilled cuts and edible offal of fowls of the species Gallus domesticus) (Frozen cuts edible offal of fowls of the species Gallus domesticus) Nigeria (Fresh or chilled MFN Applied MFN Applied MFN Applied MFN Applied MFN Applied MFN Applied Preferential tariff for South Africa Preferential tariff for South Africa Applied Tariffs % 10.00% 10.00% 10.00% 20.00% 20.00% 15.00% 15.00% 2009 Total Ad Valorem Equivalent Tariff (estimated) 10.00% 10.00% 10.00% 10.00% 20.00% 20.00% 15.00% 15.00% MFN Applied 20.00% 20.00% 40

41 Country Product Code Trade Regime 2009 Description Applied Total Ad Tariffs. Valorem Equivalent Tariff (estimated) cuts and edible offal of fowls of the species Gallus domesticus) MFN Applied 20.00% 20.00% (Frozen cuts edible offal of fowls of the species Gallus domesticus) Zimbabwe (Fresh or chilled cuts and edible offal of fowls of the species Gallus domesticus) MFN Applied MFN Applied 40.00% 40.00% 40.00% 40.00% (Frozen cuts edible offal of fowls of the species Gallus domesticus) Source: MacMap. Table 12 indicates that exports tariff of broiler meat exports from South Africa receives the highest tariff rate of 40% from Zimbabwe, Ghana and Nigeria apply a tariff of 20% and the lowest rate of 10% is applied by Angola and Democratic Republic of Congo. South Africa receives a preferential tariff rate of 15% when exporting to Mozambique Import tariffs for broiler meat. Tariffs that South Africa applied to imports of broiler meat originating from all possible countries in 2009 are shown in Table 13. Table 13: Broiler meat import tariffs Country Product Code Trade Regime 2009 Description Applied Tariffs Total Ad Valorem Equivalent Tariff (estimated) Argentina Australia Belgium (fresh or chilled fowls of species Gallus domesticus, not MFN Applied 0.00% 0.00% 41

42 Country Product Code Trade Regime Description Brazil Canada United Sates of America cut in pieces) (frozen fowls of species Gallus domesticus, not cut in pieces: Other) MFN Applied Applied Tariffs 27.00% 2009 Total Ad Valorem Equivalent Tariff (estimated) 27.00% (Fresh or chilled cuts and edible offal of fowls of the species Gallus domesticus) (Frozen cuts edible offal of fowls of the species Gallus domesticus: Boneless cuts) MFN Applied MFN Applied 0.00% 5.00% 0.00% 5.00% Source: MacMap. During 2009 South Africa applied different tariff rates to different products of broiler meat. It applied a tariff rate of 0% on HS and HS from Argentina, Australia, Belgium, Brazil, Canada and United States of America. The same countries receive the tariff rate of 5% on HS and 27% on HS

43 9. PERFORMANCE ANALYSIS OF SOUTH AFRICAN POULTRY INDUSTRY IN Table 14: List of importing markets for the Meat & edible offal of broiler exported by South Africa in South Africa s exports represent 0.15% of world exports for Meat & edible offal of broiler, its ranking in world s exports is 32. Importers Trade Indicators Exported Exported Exported Exported Trade Share in Ranking of Exported growth in growth in growth in value 2009, balance South Quantity Unit value, partner quantity value between quantity value between USD 2009 in USD Africa's unit (USD/unit) countries in , between , thousand thousand exports, % world imports %, p.a. 2009, %, p.a. %, p.a. Share of partner countries in world imports, % Total import growth in value of partner countries between , %, p.a. 'World Tons Tariff (estimated) faced by South Africa 'Zimbabwe Tons '40 'Mozambique Tons '15 'Ship stores and bunkers Tons 'Democratic Republic of the Congo Tons '10 'Angola Tons '10 'Ghana Tons '20 'Nigeria Tons '20 'Zambia Tons '12.9 'Saint Helena Tons 'United Arab Emirates Tons '5 'Mauritius Tons '0 'Madagascar Tons '20 'Seychelles Tons '0 'Uganda Tons '25 43

44 Importers Exported value 2009, USD thousand Trade balance 2009 in USD thousand Share in South Africa's exports, % Exported quantity 2009 Trade Indicators Exported Exported Exported Share of Ranking of growth in growth in growth in partner Quantity Unit value, partner value between quantity value between countries in unit (USD/unit) countries in , between , world world imports %, p.a. 2009, %, p.a. %, p.a. imports, % Total import growth in value of partner countries between , %, p.a. Tariff (estimated) faced by South Africa 'Congo Tons '5 'Gabon Tons '5 'Malawi Tons '10 'Burundi Tons '5 Source: ITC calculations based on COMTRADE statistics. 44

45 Table 14 shows that during 2009 South Africa exported a total of tons of meat & edible offal of broiler at an average value of US$ 1 515/unit. The major export destinations for meat & edible offal of broiler originating from South Africa during 2009 were Zimbabwe, Mozambique, Democratic Republic of Congo, and Angola. The greatest share of South Africa s meat & edible offal of broiler exports were exported to Zimbabwe which commanded a share of 75.2% during the year 2009 followed by Mozambique which commanded 12%. South Africa s meat & edible offal of broiler exports increased by 58% in value and 59% in quantity between the periods 2005 and During the same period, exports for meat & edible offal of broiler to Zimbabwe remained increased by 168% in value while in quantity it increased by 111%; and exports to Mozambique increased by 23% in value while quantity increased by 26%. Between the periods 2008 and 2009, South Africa s exports value of meat & edible offal of broiler increased by 300%. During the same period, exports value of meat & edible offal of broiler to Zimbabwe increased by 1 471% and Zambia experience the highest growth of 3 180%. This shows that Zimbabwe is the net importer of South African meat & edible offal of broiler. 45

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47 The chart illustrates that between 2005 and 2009 South Africa s meat & edible offal of broiler exports to Ethiopia, Congo, Angola, Ghana, Seychelles and Zimbabwe were growing at a rate that is less than their import growth from the rest of the world. Further analysis shows that Ethiopia, Malawi, Chad and Angola represent losses in the dynamic markets while Zimbabwe, Congo, Ghana and Seychelles represent gains in the dynamic markets of South African export for meat & edible offal of poultry. During the same period, South Africa s meat & edible offal of broiler exports to United Arab Emirates, Democratic Republic of Congo, Zambia, Mozambique, Mauritius and Saint Helena were growing at a rate that is greater than their imports from the rest of the world. Further analysis shows that United Arab Emirates and Zambia represents gains in the dynamic markets while Mozambique, Mauritius and Saint Helena represent gains in the declining markets of South African export for meat & edible offal of poultry. Generally the country which has the most growth in demand of South African meat & edible offal poultry is Zimbabwe with annual import growth of 383%, followed by Malawi with187% 47

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49 The chart above shows the prospects for market diversification for meat & edible offal of broiler exports by South Africa in The analysis of the results as shown on the figure above shows that Zimbabwe commanded the greatest shares (75.17%) of South Africa s meat & edible offal of broiler exports during the year 2009, but the figure still shows that Zimbabwe s imports growth from the world is greater than South Africa exports to Zimbabwe. If South Africa is to diversify its meat & edible offal of broiler exports, the most attractive market for South Africa to penetrate in is Malawi. It gas a market share of 0.01% of South Africa s meat & edible offal of broiler meat and its imports growth is 187%. Another attractive market, although small is Uganda due to its import growth of 89% per annum. 49

50 Table 14: List of supplying markets for Meat & edible offal of broiler imported by South Africa in South Africa s imports represent 0.98% of world s imports of Meat & edible offal of broiler, its ranking in world s imports is 23. Exporters Imported value 2009, USD thousand Trade balance 2009 in USD thousand Share in South Africa's imports, % Imported quantity 2009 Trade Indicators Imported Imported Imported Share of Total export Ranking of growth in growth in growth in partner growth in value of Quantity Unit value, partner value between quantity value between countries in partner countries unit (USD/unit) countries in , %, between , %, world exports, between world exports p.a. 2009, %, p.a. p.a. % 2009, %, p.a. 'World Tons Tariff (estimated) applied by South Africa 'Brazil Tons '7.9 'Argentina Tons '7.9 'Canada Tons '7.6 'Australia Tons '7.6 'USA Tons '7.6 'Belgium Tons '1.7 'United Kingdom Tons '1.7 'Israel Tons '7.6 'Chile Tons '7.6 'France Tons '1.7 'Ireland Tons '1.7 'New Zealand Tons '7.9 'Iran (Islamic Republic of) Tons '7.6 'Singapore Tons '9.6 'Netherlands Tons '1.7 'Denmark Tons '1.7 'Cayman Islands Tons '9 Sources: ITC calculations based on COMTRADE statistics. 50