Required Report - public distribution

Date: 8/26/2005

GAIN Report Number: SF5032

SF5033

South Africa, Republic of

Poultry and Products

Annual

2005

Approved by:

![](media/image1.wmf)Rachel Bickford

#### **U.S. Embassy, South Africa**

Prepared by:

Herman Germishuis

Report Highlights:

South Africa produced 808,000 tons of broiler meat in 2004, marginally
more than in 2003. The industry is expected to show stronger growth in
2005 and 2006 mainly due to the buoyant economy bolstering demand.
Imports continued to increase in 2004, reaching 69,000 tons of whole
birds and cuts. Seventy six percent of the imports were supplied by
Brazil. The anti-dumping duty on US leg quarters is due to be lifted in
December, opening the market to US products again.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Pretoria \[SF1\]

\[SF\]

Summary

South Africa's 2004 broiler production is estimated at 808,000 tons, a
little more than the revised figure of 804,000 tons for 2003. A further
increase in production is expected for 2005 as a result of the buoyant
South African economy increasing disposable income and thus demand.
Total broiler meat imports (whole birds and cuts) reached about 69,000
tons in 2004 compared to about 50,000 tons in 2003. MRM (Mechanically
Removed Meat) and offal are not classified as poultry meat. Nonetheless
imports of these products amounted to about 85,000 tons for total
poultry product imports of 154,000 tons. In contrast total imports
amounted to about 125,000 tons in 2003 and 80,000 tons in 2002. Imports
are, however, expected to increase again in 2005 as a result of the
strong SA Rand. The following table contains the imports by type of
product:

  ----------- ----------- ----------- ----------- ----------- -----------
  Metric tons 2001        2002        2003        2004        2005
                                                              Forecast

  Whole birds 2615        6953        8104        21,696      25,000

  Boneless    8473        5098        11489       13,621      15,000
  cuts                                                        

  Bone in     6003        11737       30544       34,099      40,000
  cuts                                                        

  TOTAL MEAT  17091       23788       50137       69,416      80,000

  MRM         33079       37130       47086       50,287      55,000

  Meat + MRM  50170       60918       97223       119,703     135,000

  Offal       13387       19516       28204       34,366      40,000

  GRAND TOTAL 63557       80434       125427      154,063     175,000
  ----------- ----------- ----------- ----------- ----------- -----------

Imports are currently still increasing but the anti-dumping duty on US
bone in cuts is only due to be lifted in December 2005 when the US will
again be able to compete. Brazil, (76%) and Canada are currently the
main suppliers.

US Dollar 1 = SA Rand 6.68 (08/23/05)

Poultry meat, broiler

  -------------------- --------- --------- --------- ---------- --------- ----------
  Commodity            Poultry   Meat,     Broiler                        

  1000 MT              2004      Revised   2005      Estimate   2006      Forecast

  Million Head         USDA      Post      USDA      Post       USDA      Post
                       \[Old\]   \[New\]   \[Old\]   \[New\]    \[Old\]   \[New\]

  Market Year Begin              01/2004             01/2005              01/2006

  Inventory            0         0         0         0          0         0
  (Reference)                                                             

  Slaughter            0         0         0         0          0         0
  (Reference)                                                             

  Beginning Stocks     0         0         0         0          0         0

  Production           805       808       810       825        0         840

  Whole, Imports       55        22        10        25         0         27

  Parts, Imports       45        48        45        55         0         60

  Intra EC Imports     0         0         0         0          0         0

  Other Imports        0         0         0         0          0         0

  TOTAL Imports        100       70        55        80         0         87

  TOTAL SUPPLY         905       878       865       905        0         927

  Whole, Exports       2         1         2         1          0         2

  Parts, Exports       3         2         3         2          0         2

  Intra EC Exports     0         0         0         0          0         0

  Other Exports        0         0         0         0          0         0

  TOTAL Exports        5         3         5         3          0         4

  Human Consumption    900       875       860       902        0         923

  Other Use, Losses    0         0         0         0          0         0

  Total Dom.           900       875       860       902        0         923
  Consumption                                                             

  TOTAL Use            905       878       865       905        0         927

  Ending Stocks        0         0         0         0          0         0

  TOTAL DISTRIBUTION   905       878       865       905        0         927

  Calendar Yr. Imp.    1         0         5         1          0         5
  from U.S.                                                               
  -------------------- --------- --------- --------- ---------- --------- ----------

Production

Broiler meat production in 2004 is estimated at 808,000 tons. This
amounts to 612 million birds, or 11.8 million per week. Unit weight is
taken at 1.32 kg. (excluding giblets). This is still 0.5% more than the
estimated 804,000 tons, or 11.7 million per week produced in 2003. It
may be useful to look at carcass harvest again:

  ----------------------- ----------------------- -----------------------
  Cut                     Percent of carcass      Weight, gram

  2 Wings                 8                       153

  2 Thighs                11                      210

  2 Breasts               29                      554

  2 Drumsticks            10                      191

  Back bone               11                      210

  Total Chicken Meat      69%                     1,318 gram

  1 Gizzard               2.5                     48

  1 Liver & heart         1.5                     29

  1 Neck                  3.0                     57

  2 Feet                  3.0                     57

  Total offal             10%                     191 gram

  Feathers, entrails and  21%                     401
  blood                                           

  Total live weight       100%                    1,910 gram
  ----------------------- ----------------------- -----------------------

Annual slaughter for 2004 is estimated at 612 million birds at 1.91 kg.
live weight and 1.32 kg. carcass weight. That means,

Total live weight production was 1,169,000 tons,

Young chicken meat production amounted to 808,000 tons,

Offal production amounted to 117,000 tons,

And feathers, entrails and blood amounted to 245,000 tons.

Offal production included:

Gizzards 29,400 tons,

Livers and hearts 17,750 tons,

Necks 34,900 tons,

Feet 34,900 tons,

Total offal 116,950 tons.

While offal is obviously consumed in some way or another, we are more
interested in young chicken meat production and consumption. The import
controversy then surfaces; the following table compares the type of
product imported;

  ----------- ----------- ----------- ----------- ----------- -----------
  Metric tons 2001        2002        2003        2004        2005
                                                              Forecast

  Whole birds 2,615       6,953       8,104       21,696      25,000

  Boneless    8,473       5,098       11,489      13,621      15,000
  cuts                                                        

  Bone in     6,003       11,737      30,544      34,099      40,000
  cuts                                                        

  TOTAL MEAT  17,091      23,788      50,137      69,416      80,000

  MRM         33,079      37,130      47,086      50,287      55,000

  Offal       13,387      19,516      28,204      34,366      40,000

  GRAND TOTAL 63,557      80,434      125,427     154,063     175,000
  ----------- ----------- ----------- ----------- ----------- -----------

Forty five percent of the 2004 imports were chicken meat and 55% chicken
products. Whole birds and discernable cuts are the result of a conscious
effort to produce young chicken meat, and the other products are mainly
by-products. The total meat shown in the table above, 69,416 tons for
2004, should thus be taken as chicken meat imports.

The poultry and egg industry annually produces in excess of 800,000 tons
of poultry meat and well on 300,000 tons of eggs. In a normal year the
industry consumes nearly 70% of the feed industry's production and 15 to
25% of the total corn crop. Production is efficient, a 1.2 kg. carcass
weight can be reached in 38 days at a feed conversion rate of 1.8, but
production costs are high. Production at high altitudes leads to higher,
5 to 6%, fatalities.

The latest SA Poultry Association cost analysis suggests that the
production cost of broiler meat decreased by 6.4% from R10.88/kg. in
2003 to R10.20/kg. in 2004 mainly due to lower corn prices.

#  **Consumption**

When the poultry meat imports are added to production, and the small
exports subtracted, domestic consumption amounted to about 875,000 tons
in 2004 and is likely to exceed 900,000 tons in 2005.

To put the industry in perspective we can compare per capita consumption
of the different meats as supplied by the Department of Agriculture.

  ----------- ---------- ---------- --------- --------- ---------- ----------
  Kg. per     Beef       Lamb       Pork      Red meat  Poultry    Subtotal
  capita                                                           

  2000/01     12.0       3.6        2.5       18.1      20.3       38.4

  2001/02     13.1       3.1        2.6       18.8      20.2       39.0

  2002/03     14.0       3.3        3.0       20.3      22.0       42.3

  2003/04     13.7       3.3        3.3       20.3      22.9       43.2
  ----------- ---------- ---------- --------- --------- ---------- ----------

Per capita poultry consumption first passed red meat consumption in
1998/99 and has since increased the gap every year. Lamb and pork per
capita consumption is small, pork consumption is limited by religious
custom while mutton production has decreased as a result of excessive
stock theft.

The main reason for chicken meat's success is price, with whole broiler
retail prices little more than half the price charged for beef as shown
in the following table.

  ------------- --------- ------- ------- ------- -------- ------- ------- ------- -------
  Rand/kg.      Sept.04   Oct.    Nov.    Dec.    Jan.05   Feb.    March   April   May

  Topside\*     31.45     32.56   32.80   33.46   34.13    34.51   34.27   33.96   33.75

  Chicken\*\*   17.79     18.13   18.27   18.09   18.16    18.08   18.18   17.62   17.84
  ------------- --------- ------- ------- ------- -------- ------- ------- ------- -------

\* Topside, boneless beef

\*\* Chicken, whole, dressed

Tariffs and trade

Imports, total poultry meat, products and offal, tariff #0207 (including
turkey)

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2002           2003           2004           Jan-May 2005

  Brazil         50,607         80,764         137,916        66,194

  Canada         15,145         24,394         5,852          12,426

  Argentina      4,678          3,987          7,416          3,412

  Australia      8,535          8,744          6,854          3,171

  UK             6,566          12,403         11,667         2,488

  France         387            485            5,183          931

  Belgium        99             1,250          1,412          566

  US             3,793          8,470          1,458          0

  Others         4,091          12,510         4,239          1,373

  Total          93,901         153,007        181,997        90,561
  -------------- -------------- -------------- -------------- --------------

The total 2004 imports were nearly 19% higher than the 2003 figure, but
The Jan.-May 2005 imports are 40% higher than in the corresponding
period in 2004, which illustrates the increasing trend.

The first category of imports is whole birds, which constituted 31% of
chicken meat imports in 2004. Average Customs reported landed price in
2004 was R4.50/kg. compared to R4.83 in 2003 and R5.71 in 2002, the
decrease mainly due to the strong exchange rate. The US\$

price was 58c/kg. in 2002, 67 c/kg. in 2003 and 71 c/kg. in 2004.

Fresh and chilled whole birds are allowed in free of duty while the
general tariff on frozen whole birds is 27% ad valorem, 23.76% on
product from the EU and free from the SADC neighbors.

Imports, whole broilers, #020712

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2002           2003           2004           Jan--May 2005

  Brazil         5,264          6,188          16,915         4,788

  Argentina      960            1,675          2,080          592

  France         240            0              1,514          800

  Belgium        0              0              1,136          540

  Canada         50             54             26             0

  Other          439            187            25             0

  TOTAL          6,953          8,104          21,696         6,720
  -------------- -------------- -------------- -------------- --------------

Boneless cuts (mainly chicken breasts) are a high quality product also
used in the food service industry. It formed about 20% of chicken meat
imports in 2004 with a much higher landed price, R9.52/kg. in 2004
compared to R8.18 in 2003 and R12.47 in 2002. The corresponding US\$
prices were 1.49/kg. in 2004, 1.11 in 2003 and 1.20 in 2002. The general
rate of duty is 5%, 4.4% from the EU and free from the SADC countries.

Imports, boneless cuts, #02071410

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2002           2003           2004           Jan-May 2005

  Brazil         2,450          1,061          11,376         5,245

  China          1,053          9,813          1,641          0

  Canada         0              50             75             0

  Thailand       1,461          51             75             0

  Israel         8              15             40             27

  U.S.           0              0              25             0

  Other          126            499            389            47

  Total          5,098          11,489         13,621         5,319
  -------------- -------------- -------------- -------------- --------------

The following category, bone in cuts, include the chicken leg quarters
which was the cause of the anti dumping duty against the US product
instituted in 2000. It formed 49% of the 2004 meat imports, the US being
replaced as a supplier by Brazil and Canada. The quoted 2004 landed
price was R5.04/kg. compared to R4.45 in 2003 and R4.88 in 2002. The
US\$ price was 80 c/kg. in 2004, 61c/kg. in 2003 and 50c/kg. in 2002.

The 2004 quantity involved is 34,000 tons of which Brazil supplied
26,000 tons. The US supplied 47,200 tons in 1997/98, 28,600 tons in
1998/99 and 30,900 in 1999/00 but only 25 tons in 2004/05.

The previous Board on Tariffs and Trade brought out an initial report
#4065 in June 2000 that recommended the anti-dumping duty. The final
report \# 4088 was published in December 2000. Provisional payments were
introduced on July 5, 2000 and finalized on December 27, 2000, with
retrospective effect to 5 July 2000.

On May 28, 2004 the International Trade Administration (ITAC) notified
all parties that the anti-dumping duty would expire in 2005 if there
were no requests to continue with the duty. The date of the imposition
of the duty was given as 12/27/2000 and the date of expiry as
12/27/2005*.* Interested parties were given time till 06/27/05 (before
07/05/05) to request a continuation of the duty. The SA Poultry
Association has submitted a continuation request and ITAC is currently
looking at it. It is claimed that the South African law considers the
final date of the imposition of the duty (12/27/2000) as the date when
the duty commenced, and not the retrospective date.

The general rate of duty on this category is 220 c/kg. from the EU the
rate is 193.6 c/kg. and the SADC free. The anti-dumping duty on product
from Tyson Foods is 224c/kg. from Gold Kist Inc. 245c/kg. and 725 c/kg.
from other US producers.

Imports, Bone-in cuts; rear quarters; dark meat, #02071490, the
anti-dumping category.

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2002           2003           2004           Jan-May 2005

  Brazil         2,198          15,324         25,901         5,248

  Canada         5,615          12,353         2,998          0

  Australia      2,172          1,875          2,464          0

  Argentina      1,566          730            2,371          44

  UK             75             78             163            0

  US             74             26             74             0

  Others         37             158            128            27

  Total          11,737         30,544         34,099         5,319
  -------------- -------------- -------------- -------------- --------------

The next category is Mechanically Recovered Meat (MRM) used in the
processing and canning industry. This is not a direct consumption
product but a cheap meat substitute. The average import price was
R2.08/kg. in 2004 compared to R2.44 in 2003 and R2.06 in 2002. The US\$
price was 32c/kg. in 2004 and 2003 and 23c in 2002, lower than the
average offal price. The quantity involved is substantial with sales in
the first five months of 2005 up 63% on the corresponding months in
2004. This product is allowed in free of duty.

Boneless, excluding cuts, MRM #02071405

  ------------- -------------- -------------- -------------- --------------
  Metric tons   2002           2003           2004           Jan-May 2005

  Brazil        18,990         25,563         37,634         30,688

  UK            5,617          10,625         5,928          1,468

  Argentina     1,621          551            1,701          1,331

  Australia     2,589          2,099          1,402          732

  France        51             290            1,189          130

  US            910            1,326          990            77

  Others        7,352          6,632          1,443          3,325

  Total         37,130         47,086         50,287         37,751
  ------------- -------------- -------------- -------------- --------------

Chicken offal is also a big category, consisting of feet or claws,
skins, liver, neck, hearts and stomach (heads not allowed). Apparently
the bulk of the trade is feet or claws. The average import price was
R2.61/kg. in 2004 compared to R2.41/kg. in 2003 and R2.47/kg. in 2002.
The US\$ prices were 40c, 32c and 24c respectively. The general rate of
duty on offal is 27% but product from the EU and SADC is free.

Offal, #02071420

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2002           2003           2004           Jan-May 2005

  Brazil         16,369         22,738         31,408         9,782

  Canada         110            354            59             0

  Argentina      456            953            1,238          367

  Australia      1,337          1,663          655            0

  US             1,048          1,774          152            0

  Others         196            722            1,854          406

  Total          19,516         28,204         34,366         10,555
  -------------- -------------- -------------- -------------- --------------

  ----------------------- ----------------- ----------------- ------------
  Import Trade Matrix                                         

  Country                 South Africa,                       

  Commodity               Meat, Broiler                       

  Time Period             Jan-Dec           Units:            MT

  Imports for:            2003                                2004

  U.S.                    26                U.S.              99

  Others                                    Others            

  Brazil                  22,573            Brazil            54,192

  Canada                  12457             Canada            3099

  Argentina               2405              Argentina         4451

  Australia               1575              Australia         2464

  Total for Others        39010                               64206

  Others not Listed       11101                               5111

  Grand Total             50137                               69416
  ----------------------- ----------------- ----------------- ------------

###### Exports

Consisting of whole birds and cuts, no MRM or offal included.

  ----------------------- ----------------- ----------------- ------------
  Export Trade Matrix                                         

  Country                 South Africa                        

  Commodity               Meat, Broiler                       

  Time Period             Jan-Dec           Units:            MT

  Exports for:            2003                                2004

  U.S.                    0                 U.S.              0

  Others                                    Others            

  Mozambique              2352              Mozambique        1131

  UAE                     610               UAE               573

  China                   0                 China             273

  Zimbabwe                11                Zimbabwe          466

  Total for Others        2973                                2443

  Others not Listed       826                                 602

  Grand Total             3799                                3045
  ----------------------- ----------------- ----------------- ------------

Turkey meat

  -------------------- --------- --------- --------- ---------- --------- ----------
  Commodity            Meat,                                              
                       Turkey                                             

  1000 MT              2004      Revised   2005      Estimate   2006      Forecast

  1000 Head            USDA      Post      USDA      Post       USDA      Post
                       \[Old\]   \[New\]   \[Old\]   \[New\]    \[Old\]   \[New\]

  Market Year Begin              01/2004             01/2005              01/2006

  Inventory            0         0         0         0          0         0
  (Reference)                                                             

  Slaughter            0         0         0         0          0         0
  (Reference)                                                             

  Beginning Stocks     0         0         0         0          0         0

  Production           5         5         5         5          0         5

  Whole, Imports       2         2         0         2          0         2

  Parts, Imports       23        26        22        22         0         23

  Intra EC Imports     0         0         0         0          0         0

  Other Imports        0         0         0         0          0         0

  TOTAL Imports        25        28        22        24         0         25

  TOTAL SUPPLY         30        33        27        29         0         30

  Whole, Exports       0         0         0         0          0         0

  Parts, Exports       0         0         0         0          0         0

  Intra EC Exports     0         0         0         0          0         0

  Other Exports        0         0         0         0          0         0

  TOTAL Exports        0         0         0         0          0         0

  Human Consumption    30        33        27        29         0         30

  Other Use, Losses    0         0         0         0          0         0

  Total Dom.           30        33        27        29         0         30
  Consumption                                                             

  TOTAL Use            30        33        27        29         0         30

  Ending Stocks        0         0         0         0          0         0

  TOTAL DISTRIBUTION   30        33        27        29         0         30

  Calendar Yr. Imp.    5         1         5         1          0         1
  from U.S.                                                               
  -------------------- --------- --------- --------- ---------- --------- ----------

Domestic turkey production is still very small although a producer has
surfaced promising year round supplies. The market is, however, mainly
based on the duty free imports. Whole bird imports dropped by a third in
2004, as turkey is just not a big item in the local shopping basket. The
US supplied 429 tons in 2003 but dropped to zero in 2004, as shown in
the following table.

Imports, Turkeys, whole birds, fresh and frozen

  ------------ ------------ ----------- ----------- ----------- -----------
  Tariff \#    Metric tons  2001        2002        2003        2004
  0207.2                                                        

  Incl.        Brazil       785         920         1335        1083
  0207.24                                                       

  0207.25      United       277         17          429         0
               States                                           

  Duty free    France       90          0           194         547

               Canada       86          93          73          0

               Israel       13          9           15          20

               Others       7           0           0           18

               Total        1258        1039        2046        1668
  ------------ ------------ ----------- ----------- ----------- -----------

Domestic turkey production is still very small although a producer has
surfaced promising year round supplies. The market is, however, mainly
based on the duty free imports. Whole bird imports dropped by a third in
2004, as turkey is just not a big item in the local shopping basket. The
US supplied 429 tons in 2003 but dropped to zero in 2004, as shown in
the following table.

Imports, Turkeys, whole birds, fresh and frozen

  ------------ ------------ ----------- ----------- ----------- -----------
  Tariff \#    Metric tons  2001        2002        2003        2004
  0207.2                                                        

  Incl.        Brazil       785         920         1335        1083
  0207.24                                                       

  0207.25      United       277         17          429         0
               States                                           

  Duty free    France       90          0           194         547

               Canada       86          93          73          0

               Israel       13          9           15          20

               Others       7           0           0           18

               Total        1258        1039        2046        1668
  ------------ ------------ ----------- ----------- ----------- -----------

  ----------------------- ----------------- ----------------- ------------
  Import Trade Matrix                                         

  Country                 South Africa,                       

  Commodity               Meat, Turkey                        

  Time Period             Jan-Dec           Units:            MT

  Imports for:            2003                                2004

  U.S.                    5244              U.S.              218

  Others                                    Others            

  Brazil                  9879              Brazil            14526

  UK                      1700              UK                5555

  Australia               2973              Australia         2315

  France                  194               France            2330

  Canada                  6648              Canada            1730

  Israel                  403               Israel            857

  Total for Others        21797                               27313

  Others not Listed       404                                 200

  Grand Total             27445                               27731
  ----------------------- ----------------- ----------------- ------------