[fullwidth background_color=”” background_image=”” background_parallax=”none” enable_mobile=”no” parallax_speed=”0.3″ background_repeat=”no-repeat” background_position=”left top” video_url=”” video_aspect_ratio=”16:9″ video_webm=”” video_mp4=”” video_ogv=”” video_preview_image=”” overlay_color=”” overlay_opacity=”0.5″ video_mute=”yes” video_loop=”yes” fade=”no” border_size=”0px” border_color=”” border_style=”” padding_top=”20″ padding_bottom=”20″ padding_left=”” padding_right=”” hundred_percent=”no” equal_height_columns=”no” hide_on_mobile=”no” menu_anchor=”” class=”” id=””][fusion_text] The first chicken has arrived in SA, to much fanfare by the Americans and probably some consternation by the local producers. The arrival of the American chicken happens to coincide with the trade agreement safeguard action against the EU, which appears to be an attempt to at least mute, if not completely offset, the impact of the 65 000 tons of chicken from the USA. The EU action is laden with political consequences, much like the AGOA interactions, and it will be interesting to see how those interactions unfold. I would be suprised if the EU responded with the same fire that the US did, but they may take a page out of the American’s book and remind South Africa that they are actually our largest trading partner. The EU action is fraught with risks, particularly because the South African Poultry Association (SAPA) is looking for a price increase of R7 per kg on a 2kg IQF bag (the most consumed version of bone-in chicken). This amounts to roughly at 17% price increase at retail level, significantly above inflation. But being above inflation is less of a concern if the item becoming more expensive it a television or a car. Being this far above inflation for the most consumed protein in the country is a big problem. Quite simply what will people eat? My guess is there will be a move towards cheaper, more processed products rather than stumping up the extra 17%, which I suspect many families simply may not have. And these processed products, like vienna sausages and polonies are often made using mechanically deboned meat, a product not manufactured in South Africa and so will not result in volume moving through domestic producers. SAPA’s reaction to the drought and the American imports appears to be to take a swing at the only open market left and hope somehow that applying the duties on the EU will make everything right, but of course that’s not likely. The fundamentals of the SA business model remains questionable. We still sell all parts of the chicken at the same price in a mixed IQF bag. We still inject to such levels that many markets will not allows our products in (to be fair, this is not the only reason, but it is certainly one of them). This is being addressed very firmly by DAFF, who appears hellbent on dropping the maximum brining level to 15%, from the typical current level of 30%. I have no doubt that this eventuality must weigh heavily on the minds of at least some of the domestic producers (ironically Rainbow, a large producer, but not a member of SAPA, is fully behind the drop in brining levels). So how much of what we are dealing with now in the form of the safeguard, actually relates to European exports and how much relates to everything else going on in the market? Want to know more? Mail me at info@xa.co.za[/fusion_text][/fullwidth]