Required Report - public distribution

**Date:** 9/1/2006

**GAIN Report Number:** SF6033

SF6033

**South Africa, Republic of**

Poultry and Products

**Annual Report**

2006

**Approved by:**

![](media/image1.wmf)Scott Reynolds

#### U.S. Embassy

**Prepared by:**

Herman Germishuis

**Report Highlights:**

South Africa produced 825,000 metric tons of broiler meat in 2005, 4.3%
more than in 2004. A further increase in production is expected for
2006. Total poultry meat and product imports amounted to 189,000 tons in
2005 compared to 154,000 tons in 2004. Poultry meat imports reached
81,000 tons compared to 69,000 tons in 2004. All imports are showing
exceptional growth in 2006, but the delay in lifting the anti-dumping
duty on US bone-in cuts limits US exports.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Pretoria \[SF1\]

\[SF\]

## Summary {#summary-1}

South Africa's 2005 broiler production is estimated at 825,000 tons,
4.3% more than the revised figure of 790,000 tons for 2004. A further
increase in production is expected for 2006 as a result of the buoyant
South African economy. Total broiler meat imports (whole birds and cuts)
reached about 81,000 tons in 2005 compared to about 69,000 tons in 2004.
MRM (Mechanically Removed Meat) and offal imports reached about 108,000
tons for total poultry product imports of 189,000 tons. In contrast
total imports amounted to about 154,000 tons in 2004 and 125,000 tons in
2003. Imports are, however, increasing again in 2006 and by mid year
chicken meat imports already exceeded the 2005 total.

Total meat and product imports increased by 24% between 2004 and 2005
and by 300% over the past five years. But the anti-dumping duty on US
bone-in cuts limits the US ability to compete. Brazil, (74%) and Canada
are currently the main suppliers.

US Dollar 1 = SA Rand 7.15 (08/28/06)

###### Poultry meat, broiler

  ------------------ --------- --------- --------- ---------- --------- ----------
  **PSD Table**                                                         

  Country            South                                              
                     Africa                                             

  Commodity          Meat,                                              
                     Broiler                                            

  1000 MT            2005      Revised   2006      Estimate   2007      Forecast

                     USDA      Post      USDA      Post       USDA      Post
                     \[Old\]   \[New\]   \[Old\]   \[New\]    \[Old\]   \[New\]

  Market Year Begin            01/2005             01/2006              01/2007

  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         825       825       840       840        0         855

  Whole, Imports     175       16        190       35         0         55

  Parts, Imports     0         65        0         75         0         95

  Intra EC Imports   0         0         0         0          0         0

  Other Imports      0         0         0         0          0         0

  TOTAL Imports      175       81        190       110        0         150

  TOTAL SUPPLY       1000      906       1030      950        0         1005

  Whole, Exports     1         1         2         1          0         3

  Parts, Exports     2         1         2         1          0         2

  Intra EC Exports   0         0         0         0          0         0

  Other Exports      0         0         0         0          0         0

  TOTAL Exports      3         2         4         2          0         5

  Human Consumption  997       904       1026      948        0         1000

  Other Use, Losses  0         0         0         0          0         0

  Total Dom.         997       904       1026      948        0         1000
  Consumption                                                           

  TOTAL Use          1000      906       1030      950        0         1005

  Ending Stocks      0         0         0         0          0         0

  TOTAL DISTRIBUTION 1000      906       1030      950        0         1005
  ------------------ --------- --------- --------- ---------- --------- ----------

# Production

The SA Poultry Association estimates 2005 broiler meat production at
825,000 tons. This amounts to 624 million birds, or 12 million per week.
Unit weight is taken at 1.32 kg. (excluding giblets). This is still 4.3%
more than the revised 790,000 tons, or 11.5 million per week produced in
2004. 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 etc. 21%                     401

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

Annual slaughter for 2005 is estimated at 624 million broilers at 1.91
kg. live weight and 1.32 kg. carcass weight. That means,

Total live weight production was 1,192,000 tons,

Young chicken meat production amounted to 825,000 tons,

Offal production amounted to 119,000 tons,

And feathers, entrails and blood amounted to 250,000 tons.

The poultry and egg industry annually produces in excess of 800,000 tons
of broilers and 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 1.3 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 price
of feed declined by 11% in 2005 mainly as a result of lower corn prices.

# Consumption

We are interested in young chicken meat production and consumption. The
import controversy then surfaces; the following table compares the type
of product imported;

+---------+---------+---------+---------+---------+---------+---------+
| Metric  | 2001    | 2002    | 2003    | 2004    | 2005    | J       |
| tons    |         |         |         |         |         | an-June |
|         |         |         |         |         |         |         |
|         |         |         |         |         |         | 2006    |
+---------+---------+---------+---------+---------+---------+---------+
| Whole   | 2,615   | 6,953   | 8,104   | 21,442  | 16,242  | 25,566  |
| birds   |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| B       | 8,473   | 5,098   | 11,489  | 13,621  | 12,956  | 12,248  |
| oneless |         |         |         |         |         |         |
| cuts    |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| Bone in | 6,003   | 11,737  | 30,544  | 34,099  | 51,908  | 44,706  |
| cuts    |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| Total   | 17,091  | 23,788  | 50,137  | 69,162  | 81,106  | 82,520  |
| meat    |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| MRM     | 33,079  | 37,130  | 47,086  | 50,287  | 76,436  | 36,788  |
+---------+---------+---------+---------+---------+---------+---------+
| Offal   | 13,387  | 19,516  | 28,204  | 34,366  | 31,757  | 18,724  |
+---------+---------+---------+---------+---------+---------+---------+
| MR      | 46,466  | 56,646  | 75,290  | 84,623  | 108,193 | 55,512  |
| M+offal |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| TOTAL   | 63,557  | 80,434  | 125,427 | 153,785 | 189,299 | 138,032 |
+---------+---------+---------+---------+---------+---------+---------+

Forty three percent of the 2005 imports were chicken meat (81,100 tons)
and 57% chicken products (189,300 tons). 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, 81,106 tons for 2005, thus constitutes chicken meat
imports.

When the poultry meat imports are added to production, and the small
exports subtracted, domestic consumption amounted to about 855,000 tons
in 2004 and exceeded 900,000 tons in 2005.

## Broiler consumption

  ----------------- ----------------- ----------------- -----------------
  Metric tons, rtc  2004              2005              2006

  Production        790,000           825,000           840,000

  +Imports          69,160            81,105            110,000

  -Exports          3,770             2,185             2,000

  =Consumption      855,390           903,920           948,000
  ----------------- ----------------- ----------------- -----------------

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    Total
  capita                                                           

  2001/02     13.3       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     14.5       3.3        3.3       20.3      22.9       43.2

  2004/05     15.0       3.2        3.6       21.8      22.7       44.5
  ----------- ---------- ---------- --------- --------- ---------- ---------

Per capita poultry consumption first passed red meat consumption in
1998/99, but the gap narrowed last 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 pushing up prices. Indicator prices for the different products in
August 2006 follow:

Wholesale feedlot beef carcass R18.69/kg.

Wholesale porker carcass R11.17/kg.

Wholesale lamb carcass R30.15/kg.

Broilers, fresh whole birds R12.16/kg.

Broilers, frozen, whole birds R10.74/kg

Broilers import parity price R8.99/kg.

## Tariffs and trade

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

+----------+---------+----------+----------+----------+-----+--------+
| Metric   | 2002    | 2003     | 2004     | 2005     | \%  | Ja     |
| tons     |         |          |          |          |     | n-June |
|          |         |          |          |          |     |        |
|          |         |          |          |          |     | 2006   |
+----------+---------+----------+----------+----------+-----+--------+
| Brazil   | 50,607  | 80,764   | 137,916  | 159,298  | 7   | 1      |
|          |         |          |          |          | 4.4 | 14,387 |
+----------+---------+----------+----------+----------+-----+--------+
| Canada   | 15,145  | 24,394   | 5,852    | 19,454   | 8.1 | 15,769 |
+----------+---------+----------+----------+----------+-----+--------+
| A        | 4,678   | 3,987    | 7,416    | 12,632   | 5.9 | 7,961  |
| rgentina |         |          |          |          |     |        |
+----------+---------+----------+----------+----------+-----+--------+
| A        | 8,535   | 8,744    | 6,854    | 8,378    | 3.9 | 3,444  |
| ustralia |         |          |          |          |     |        |
+----------+---------+----------+----------+----------+-----+--------+
| UK       | 6,566   | 12,403   | 11,667   | 5,201    | 2.4 | 3,964  |
+----------+---------+----------+----------+----------+-----+--------+
| France   | 387     | 485      | 5,183    | 1,955    | 0.9 | 701    |
+----------+---------+----------+----------+----------+-----+--------+
| Belgium  | 99      | 1,250    | 1,412    | 1,201    | 0.6 | 2,247  |
+----------+---------+----------+----------+----------+-----+--------+
| US       | 3,793   | 8,470    | 1,458    | 2,294    | 1.1 | 2,381  |
+----------+---------+----------+----------+----------+-----+--------+
| Others   | 4,091   | 12,510   | 4,239    | 3,609    | 1.7 | 2,213  |
+----------+---------+----------+----------+----------+-----+--------+
| Total    | 93,901  | 153,007  | 181,997  | 214,022  |     | 1      |
|          |         |          |          |          |     | 53,067 |
+----------+---------+----------+----------+----------+-----+--------+

The total 2005 imports were nearly 18% higher than the 2004 figure, but
The Jan.-June 2006 imports are 35.5% higher than in the corresponding
period in 2005, highlighting the increasing imports.

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

  Country           South Africa                                 

  Commodity         Meat, Broiler                                

  Time Period       Jan-Dec                        Units:        MT

  Imports for:      2004                                         2005

  U.S.              99                             U.S.          191

  Others                                           Others        

  Brazil            54193                          Brazil        57071

  Argentina         4476                           Argentina     6875

  Canada            3099                           Canada        9948

  France            1260                           France        1825

  Belgium           1136                           Belgium       1149

  Total for Others  64164                                        76868

  Others not Listed 4899                                         4047

  Grand Total       69162                                        81106
  ----------------- ------------------------------ ------------- ---------

The trade matrix only includes broiler meat and not MRM and offal.

Anti-dumping category

The category, tariff number 0207 1490, 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 64% of the 2005 meat imports, the
US being replaced as primary supplier by Brazil and Canada. In 2000,
before the duty was levied, 21,000 tons were imported of which the US
supplied 16,500 tons or 79%.

The 2005 quantity involved is 51,908 tons of which Brazil supplied
33,281 tons, or 64%. The US supplied 25 tons. The 52,000 tons imported
constitute 6.3% of domestic production and 5.7% of consumption in 2005.
In the first six months of 2006 imports jumped 71% to 44,700 tons
compared to the same period in 2005.

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 July 5, 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, 5 years after the provisional payments were instituted) to
request a continuation of the duty. The SA Poultry Association submitted
a continuation request and the process is ongoing. 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 expiry has thus been effectively slowed down nine months from
December 2005 and 15 months from July 2005 with no end in sight.

The general rate of duty on this category is 220 c/kg; the EU the rate
is 165 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, Tariff \# 0207 14 90, Bone-in cuts; rear quarters; dark meat,
the anti-dumping category.

  -------------- -------------- -------------- ------------- -------------
  Metric tons    2003           2004           2005          Jan-June 2006

  Brazil         15,324         25,901         33,281        30,093

  Canada         12,353         2,998          9,897         10,208

  Australia      1,875          2,464          3,296         916

  Argentina      730            2,371          4,558         1,614

  UK             78             163            0             331

  US             26             74             25            0

  Others         158            128            851           27

  Total          30,544         34,099         51,908        44,706
  -------------- -------------- -------------- ------------- -------------

The next category is whole birds, which constituted 20% of chicken meat
imports in 2005. This jumped to 31% for the first six months in 2006,
nearly three times the quantity imported during the same period in 2005.
Fresh and chilled whole birds are allowed in free of duty while the
general tariff on frozen whole birds is 27% ad valorem, 20.25% on
product from the EU and free from the SADC neighbors.

Imports, Tariff #0207 12, whole birds

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2003           2004           2005           Jan--June 2006

  Brazil         6,188          16,915         11,324         21,303

  Argentina      1,675          2,080          2,097          2,688

  France         0              1,514          1,825          645

  Belgium        0              1,136          996            887

  Other          241            51             0              43

  TOTAL          8,104          21,696         16,242         25,566
  -------------- -------------- -------------- -------------- --------------

Boneless cuts (mainly chicken breasts) are a high quality product also
used in the food service industry. It formed about 16% of chicken meat
imports in 2005 but at a much higher landed price. In the first six
months of 2006 imports jumped by 75% compared to the previous year. The
general rate of duty is 5%, 3.75% from the EU and free from the SADC
countries.

Imports, Tariff #0207 14 10 Boneless cuts.

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2003           2004           2005           Jan-June 2006

  Brazil         1,061          11,376         12,466         11,936

  China          9,813          1,641          0\*            71

  Canada         50             75             51             50

  Thailand       51             75             0\*            0

  Israel         15             40             53             27

  U.S.           0              25             166            75

  Other          499            389            240            89

  Total          11,489         13,621         12,956         12,248
  -------------- -------------- -------------- -------------- --------------

> \*Imports banned due to avian influenza.

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 quantity involved is
substantial with sales in the first six months of 2006 up 52% on the
corresponding months in 2005. This product is allowed in free of duty.

Imports, Tariff \# 0207 14 05, Boneless, excluding cuts, MRM.

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2003           2004           2005           Jan-June 2006

  Brazil         25,563         37,634         62,335         27,456

  Canada         4,935          964            5,098          1,972

  UK             10,625         5,928          3,750          3,100

  Argentina      551            1,701          3,392          1,674

  Australia      2,099          1,402          1,271          683

  France         290            1,189          130            0

  US             1,326          990            77             373

  Others         1,697          479            383            1,530

  Total          47,086         50,287         76,436         36,788
  -------------- -------------- -------------- -------------- --------------

Chicken offal is also a big category, consisting of feet or claws,
skins, liver, neck, hearts and stomach (heads not allowed). The general
rate of duty on offal is 27% but product from the EU and SADC is duty
free.

Imports, Tariff #0207 14 20, Offal

  -------------- -------------- -------------- -------------- --------------
  Metric tons    2003           2004           2005           Jan-June 2006

  Brazil         22,738         31,408         26,930         15,978

  Canada         354            59             556            419

  Argentina      953            1,238          2,338          1,912

  Australia      1,663          655            421            104

  US             1,774          152            76             167

  Others         722            1,854          1,436          144

  Total          28,204         34,366         31,757         18,724
  -------------- -------------- -------------- -------------- --------------

###### Turkey meat

  ----------------- ---------- --------- --------- ---------- --------- ----------
  PSD Table                                                             

  Country           South                                               
                    Africa                                              

  Commodity         Meat,                                               
                    Turkey                                              

  1000 MT           2005       Revised   2006      Estimate   2007      Forecast

                    USDA       Post      USDA      Post       USDA      Post
                    \[Old\]    \[New\]   \[Old\]   \[New\]    \[Old\]   \[New\]

  Market Year Begin            01/2005             01/2006              01/2007

  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         7

  Whole, Imports    2          2         2         1          0         1

  Parts, Imports    22         24        23        25         0         24

  Intra EC Imports  0          0         0         0          0         0

  Other Imports     0          0         0         0          0         0

  TOTAL Imports     24         26        25        26         0         25

  TOTAL SUPPLY      29         31        30        31         0         32

  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 29         31        30        31         0         32

  Other Use, Losses 0          0         0         0          0         0

  Total Dom.        29         31        30        31         0         32
  Consumption                                                           

  TOTAL Use         29         31        30        31         0         32

  Ending Stocks     0          0         0         0          0         0

  TOTAL             29         31        30        31         0         32
  DISTRIBUTION                                                          
  ----------------- ---------- --------- --------- ---------- --------- ----------

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
2005, 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 and 56 tons in
2005, as shown in the following table.

Imports, Turkeys, whole birds, fresh and frozen

  ------------ ------------ ----------- ----------- ----------- -----------
  Tariff \#    Metric tons  2002        2003        2004        2005
  0207.25                                                       

               Brazil       920         1335        1083        1008

               United       17          429         0           56
               States                                           

               France       0           194         547         0

               Canada       93          73          0           27

               Israel       9           15          20          17

               Others       0           0           18          18

               Total        1039        2046        1668        1126
  ------------ ------------ ----------- ----------- ----------- -----------

The other category imported is Tariff \# 0207 27, Turkey cuts and edible
offal, in this case Mechanically Removed Meat (MRM). This amounted to
23,551 tons in 2005, 10% less than the 26,063 tons imported in 2004.
This product falls outside the description of turkey meat.

  ----------------- ----------------- ----------------- -----------------
  Turkey MRM        2003              2004              2005

  Brazil            8,554             13,443            11,954

  Canada            6,574             1,730             3,824

  Australia         2,973             2,297             3,389

  United States     4,996             218               1,894

  United Kingdom    1,700             5,555             1,414

  Others            602               2,820             1,076

  Total             25,399            26,063            23,551
  ----------------- ----------------- ----------------- -----------------