By Joanie Bergh en Carien Kruger
The poultry industry says the Competition Commission made a few small calculation errors that resulted in big consequences following the Commission’s accusations of “opportunistic” price increases, and labels the Commission’s conclusions both “bewildering and surprising”.
The Commission dedicates an entire section of its report to the poultry value chain but the industry says the Commission is mistaken in certain aspects and can thus foster mistrust among consumers.
Izaak Breitenbach, General Manager of the Broiler Organisation at the South African Poultry Association (SAPA), says the study confirms the association’s information regarding feed and material costs being the most important drivers of chicken meat prices.
“Feed costs represent more than 65% of the total production cost of a broiler chicken.” However, fuel and electricity costs, inflation, water scarcity and failing infrastructure also play a role.
“One cannot simply highlight one factor and then portray an entire industry as opportunistic when the industry is doing its best to feed the nation.” The Commission found that the prices of raw materials (maize and soya) increased at a higher rate than feed prices.
Izaak says it could indicate that the feed sector cannot give rise to the increase in raw materials. The Commission also found that feed prices increased more than chicken meat prices did. According to Izaak, this can indicate that producers are subsidising their own production.
Incorrect calculation
Izaak says the Commission’s conclusion regarding the influence of imported chicken meat on retail prices appears to be grounded on the total retail price instead of the part after the effect of feed has been removed.
The report also does not consider the damage done by predatory trading practices in its calculations despite it being one of the biggest reasons why the poultry industry shrunk before the master plan was undersigned in 2019.
Integrated businesses
The Commission also criticises vertically integrated poultry firms that produce feed as well as broiler chickens. According to the report, the poultry sector is “highly concentrated and dominated by vertically integrated firms”, which “raises concerns that these firms could use their market power to achieve anti-competitive prices”.
Izaak says these firms are essential for growth within the industry and smaller producers additionally rely on them for a continuous supply of day-old chicks, chickens and feed.
South Africa is viewed in the report as one of the top five industries in the world and Izaak says it is thanks to bigger vertically integrated firms. The reasons why smaller, up-and-coming producers are shutting down, according to Izaak, are rather due to loadshedding, fuel costs, feed costs and predatory trading practices.
