W5 Chicken Update: South Africa's Import Rebates and Brazil's Cost Relief

South Africa Balances Poultry Shortage with Import Rebates, But Port Bottlenecks Threaten Affordability

South Africa's Government has implemented temporary import duty rebates on chicken (25 to 30%) to address potential shortages following the devastating outbreak of highly pathogenic avian influenza (HPAI), which is estimated to cause 172 thousand metric tons (mt) of poultry loss. While consumers welcome this potential price reduction, industry stakeholders raise concerns about its impact on local producers struggling to recover.

The South African Poultry Association (SAPA) argues against the rebates, citing no current shortages and potential harm to local recovery efforts. They emphasize the industry's resilience in overcoming HPAI challenges, including replacing lost eggs and importing for the festive season. Even with lower import duties, logistical bottlenecks at ports Richards Bay and Cape Town could hinder timely and cost-effective import delivery, potentially negating the price benefit for consumers.

The Association of Meat Importers and Exporters (AMIE) supports the import duty rebates, highlighting their potential to alleviate pressure on low-income households struggling with rising chicken prices which, 10 kilograms (kg) frozen chicken price increased from USD 17.9 to USD 21.7 (ZAR 336.94 to ZAR 408.68) in four years.

Positive Start in Brazilian Poultry with Cost Relief, But Export Concerns Linger

In Jan-24, the Brazilian poultry sector experienced favorable conditions, primarily attributed to declining soybean meal costs, which counteracted the rise in corn prices, thus maintaining positive margins. Despite concerns over export prices and the competitiveness of chicken meat in the domestic market, the sector navigated these challenges. Wholesale frozen whole chicken prices in São Paulo registered a modest decrease, averaging USD 0.40/kg, 1.1% month-on-month (MoM) lower than Dec-23. However, the increase in corn prices since Dec-23 was contained within the South Region, rising by 1.3% MoM compared to a 2.2% MoM increase in poultry prices. The poultry farming spread, bolstered by a notable drop in soybean meal prices, improved for the fifth consecutive month.

Export figures for Jan-24 showed a 14.4% year-on-year (YoY) decrease, accompanied by a 3% MoM decline in the average price to USD 1,670 per metric ton (mt), marking the lowest level since June-23. Notably, the consultancy observed a diminishing gap between average export prices and the domestic market, now standing at 15%, significantly lower than the 26% recorded in Oct-23 and 68% in July-23.

Looking ahead, the poultry sector faces potential challenges in 2024, including a probable decrease in corn supply, which could impact domestic cereal prices. Nonetheless, the decline in soybean meal prices offers some mitigation, emphasizing the importance of effective risk management strategies. Despite these challenges, global demand for Brazilian chicken meat remains promising, particularly amidst the worldwide spread of avian influenza. The United States Department of Agriculture (USDA) projects a 3.2% increase in Brazilian exports in 2024, reaching 4.9 million metric tons (mmt), against a production estimate of 15 mmt, marking a new record.