Footloose nature of EU poultry meat exports to Africa highlighted by AI restrictions

Summary
While AI outbreaks are expected to reduce EU poultry exports in 2017, there is no evidence of this in the first two months of 2017, with strong growth in EU exports to sub-Saharan African markets north of South Africa. Recent corporate takeovers in the poultry sector could lead to a strengthening of the focus on sub-Saharan African markets. Recent trends highlight the ‘footloose’ nature of EU poultry meat exports, with markets being sought where minimal import controls are applied. Read more “Footloose nature of EU poultry meat exports to Africa highlighted by AI restrictions”

Sustainability: Choosing between beet sugar and cane sugar

Summary
While sustainability considerations are not yet a major concern in sugar sourcing, developments in the cocoa and palm oil sectors suggest it will be only a matter of time before sustainability certification is increasingly demanded by food and beverage manufacturers in the EU.  the Bonsucro initiative is an attempt to get ahead of the curve on sustainability certification in the sugar sector. To date however there has been little engagement by ACP sugar exporters in the Bonsucro initiative. Given smallholder sugar producers struggle to obtain sustainability certification there appears to be a case for EU supported ‘aid for sustainability’ programmes to ensure smallholder sugar producers are not systematically discriminated against. Read more “Sustainability: Choosing between beet sugar and cane sugar”

USDA foresees greater price instability as EU sugar production quotas end

Summary
USDA confirms a projected 2.1 million tonnes expansion in EU sugar production, which will transform the EU’s sugar trade position. While this is likely to create far from promising prospects for ACP sugar exporters, capacity utilisation maximisation considerations of individual beet processors could create new opportunities for ACP raw cane sugar exporters. USDA also see’s potential opportunities for raw cane sugar exports to the Southern and eastern periphery of the EU. This will require ACP sugar exporters to get much closer to individual dedicated EU raw cane sugar refiners in the Southern and Eastern periphery of the EU and individual sugar beet co-refiners in core EU sugar beet producing regions. Read more “USDA foresees greater price instability as EU sugar production quotas end”

Gambia Withdraws Import Ban on Onions and Potatoes

 

Summary
The government of Gambia has lifted a ban on imports of onions and potatoes, with female onion producers criticising the move and calling for seasonal restrictions and greater support for local producers. Experience in Senegal suggests there may be a role for seasonal restrictions in stimulating investment in local production. Experience in Namibia meanwhile highlights how successful the use of trade policy measures can be in stimulating local production, if the necessary infrastructure, organisational and administrative capacities are already in place. Read more “Gambia Withdraws Import Ban on Onions and Potatoes”

Nigerian government adopts trade measures against tomato imports

Summary
The Nigerian government has announced new trade measures in support of the local tomato sector. However such measures would be likely to fall foul of the provisions of the EU-West Africa economic partnership agreement related to tariff standstill commitments and the ‘prohibition of quantitative restrictions’. Beyond these EPA related policy complications, trade policy tools can only be effective in supporting agricultural development if they are deployed as an integral part of wider government programmes aimed at comprehensively addressing infrastructural, policy and logistical constraints on the efficient functioning of local agri-food sector supply chains.
Read more “Nigerian government adopts trade measures against tomato imports”

EU dairy companies commit to help building milk-to dairy supply chains in Nigeria

Summary
There is a need for greater coordination between EU dairy cooperatives in their efforts to promote the development of milk-to-dairy supply chains in Nigeria. This includes in regard to the establishment of code of conduct on responsible trade and investment engagement in the Nigerian dairy sector. However the Nigerian government will also need to make sustained efforts to address infrastructural and logistical constraints on the development of competitive milk supply chains. Arla continues to grapple with the challenge of reconciling its commitment to not undermining the position of local farmers and its commercial interests linked to its core profit maximisation obligations to its farmer owners. Read more “EU dairy companies commit to help building milk-to dairy supply chains in Nigeria”

Record EU agri food surplus highlights success of EU CAP reforms

Summary
EU agro-food exports continue to grow to new record levels driven by successful agricultural reforms and an increasingly ‘offensive’ trade policy. For certain EU products sub-Saharan African markets have become increasingly important. In the coming years ACP  governments will come under increased pressure to systematically remove all non-tariff barriers to EU agri-food exports. The EU largely imports unprocessed agricultural products from ACP countries, adds value meets domestic demand and re-exports higher value products to global markets. There is a fundamental in fundamental contradiction between the aspirations of ACP governments to structurally transform their agri-food sectors and EU objectives for expanding exports of value added food products.
Read more “Record EU agri food surplus highlights success of EU CAP reforms”

Multiple challenges pending for ACP sugar exporters

Summary
The production and trade consequences of the abolition of EU sugar and isoglucose quotas are just the tip of an iceberg of challenges facing ACP cane sugar exporters. These developments will be compounded by the uncertain prospects for global sugar markets and the UK’s pending departure from the EU. The overall situation is further complicated by sustained regulatory pressure to reduce the sugar content of processed food and drink products, both in Europe and beyond, and the growing availability of alternative sweeteners. This will create a context where only the most efficient ACP sugar cane industries are likely to be able to compete on the EU27 and the UK markets.  Read more “Multiple challenges pending for ACP sugar exporters”

Need to restore differentiation in trade rules in support of structural transformation in Africa

Summary
Trade Minister Davies reflections on South Africa’s experience of trade liberalisation, which, with hindsight it is held, moved too rapidly for the countries capacity to adjust, potentially holds important lessons for ACP countries as they move towards the implementation of the EPAs concluded with the EU. It suggests ACP governments need to work together to ensure EPAs are interpreted and applied in a flexible and differentiated fashion, which places centre stage the structural economic transformation needs of ACP countries. This will need to be a central component of the forthcoming ACP-EU post-Cotonou negotiations, as well as on-going ACP Ministerial discussion on EPA implementation. Read more “Need to restore differentiation in trade rules in support of structural transformation in Africa”

Africa continues to grow as export destination EU poultry meat despite AI outbreaks

Summary
EU poultry meat exports to South Africa and Ghana rose 23.7% and 13.3% respectively in 2016, while exports to Benin fell 16%. Beyond these three main destinations EU exports of poultry meat to African ACP countries increased 4.9% in 2016. The debate continues in South Africa over the use of trade policy measures which it is alleged harm poor consumers, while enabling poultry companies to avoid addressing structural challenges. The South African government is looking at a combination of trade policy measures and support in addressing underlying competitiveness issues. However the issue of the structural surplus of ‘brown meat’ will need to be addressed, potentially through a structured ACP-EU dialogue aimed at promoting responsible patterns of trade in ‘brown meat’ which avoids undermining local ACP poultry production

The latest EC statistics on EU poultry exports in 2016 shows total EU poultry meat exports increased 8.3% compared to 2015. Once again the largest increase in extra-EU poultry meat exports in volume terms was to South Africa (+49,839 tonnes), an increase of 23.7%.

South Africa now takes 18.0% of total extra-EU poultry meat exports, almost 1 in every 5.5 tonnes of EU poultry meat exported beyond the EU’s borders. This is up from a mere 0.6% of extra EU poultry meat exports in 2009.(1) Despite outbreaks of Avian Influenza in EU member states which saw the introduction of import restrictions on some EU member states, 46,397 tonnes of EU poultry meat were still exported to South Africa between October and December 2016.

Exports to Benin, the EU’s second most important ACP destination were down 16% compared to 2016, (2) with this largely being attributable to depressed ‘import’ demand for poultry meat in neighbouring Nigeria and stricter Nigeria customs controls, implemented in an effort to curb the smuggling of rice, frozen poultry meat and second hand cars from Benin into Nigeria.

EU poultry meat exports to Ghana in contrast, were up 13.3% compared to 2016, (1) after short lived efforts to control poultry meat imports in 2014.(2)  This took EU export volumes to levels above the earlier high attained in 2013. However, it was reported in February 2016 that the government of Ghana was once again looking at adopting ‘a policy aiming to reduce poultry imports and improve local production’. This needs to be seen in a context where imports, mainly from the EU and the US now account for 58% of local poultry meat consumption and local producers only 42%. (3)

Overall in 2016 EU poultry meat exports to the 3 main ACP markets rose 8.9% compared to an overall increase in extra-EU poultry meat exports of 8.3%. These 3 main ACP destinations took 31.3% of total extra-EU poultry meat exports, up marginally from 31.2% in 2015. (1)  EU poultry meat exports to all other ACP African countries meanwhile increased 4.9% in 2016 compared to 2015.

The share of Sub-Saharan Africa in total EU poultry meat exports appears to be stabilising at around 47%, up from a share of 20.3% in 2009. Sub-Saharan African markets have thus more than doubled in importance as a destination for extra-EU poultry meat exports in the past 7 years, while total overall export volumes have more than tripled (up from 204,844 tonnes to 674,931 tonnes).

EU Poultry Meat Exports (0207): Top Destination 2015/2106 (tonnes)

2015 2016 % change
Total extra EU 1,331,506 1,442,683 +8.3%
South Africa 209,971 259,810 +23.7%
Benin 137,650 115,608 -16.0%
Ghana 67,154 76,126 +13.3%
Other ACP African countries 212,816 223,333 +4.9%
Main Non-ACP Main Destinations
Philippines 72,712 93,434 +28.4%
Hong Kong 99,851 121,770 +22.0%
Ukraine 66,151 82,644 +24.9%

Source: EC, Market Access Data Base, http://madb.europa.eu/madb/statistical_form.htm

Meanwhile the debate continues in South Africa on how best to respond to ever increasing imports of poultry meat, which are leading to retrenchments in the local poultry sector (see companion articles ‘Will South Africa’s introduction of poultry safeguard duties by challenged by the EC?’, 14 February 2017 and ‘EU frozen poultry meat exports to South Africa begin to bite’, 23 January 2017).

In a presentation to the South African Parliament the South African Department of Trade and Industry set out:

  • the importance of the poultry sector (48,000 ,direct jobs and 63,000 indirect jobs);
  • the growing consumer demand for poultry meat up to 2010 and the subsequent slow-down in demand growth;
  • the structural investment challenges faced, particularly in order to make full use of the chicken carcass;
  • the challenges arising from the drought and associated increases in feed costs;
  • an analysis of the competitive challenges faced, linked to rising domestic costs (up from R15/kg to R20/kg), the low cost of imported bone-in quarters (R15/kg from EU and US) and mechanically de-boned meat (R4.10/kg from Brazil) and trade distorting agricultural support and trade policies in OECD countries (notably the EU, where policy support is estimated as equivalent to 18% of poultry production costs);
  • the limited export opportunities for South African poultry meat arising from strict SPS measures in many potential markets;
  • the scale of the phenomenal increase in imports of poultry meat from the EU in recent years;
  • the potential respite for hard pressed South African poultry producers arising from the Avian Influenza outbreak in Europe.
  • the global structural surplus of ‘brown meat’ arising from different consumption patterns in developed countries compared to South Africa and the bad news this represents for developing country poultry producers. (4)

In a radio interview in January 2017, South Africa’s Trade and Industry Minister had earlier called for an international initiative to address the structural surplus of ‘brown meat’. (5)

The South African governments’ use of trade policy measures has faced criticism in a paper commissioned by the retailer Shoprite. The analysis by the Econex consultancy, focused on the negative effects on consumer welfare of the South African governments’ use of safeguard duties in the poultry sector, with some of the poorest households in South Africa carrying the costs of government safeguard duties which target low cost poultry meat imports.

It argues that at root, the current South African poultry industry crisis is not a product of unfair trade practices (the normal cause for invoking safeguard measures), but rather a failure to address underlying competitiveness issue, which the long history of protectionist measures have simply enabled the local poultry industry to avoid addressing.  It argues there is no causal connection between the increased imports and the serious injury requirements for the invocation of safeguard measures. The Econex analysis therefore concludes the current crisis would be better address ‘through targeted industrial policy’ measures.

To a certain extent the South African government would appear to concur with the need for an industrial policy response as part of a multi-pronged strategy in the poultry sector.  While the areas for policy intervention are still under elaboration the South African government is exploring 6 inter-related areas of intervention:

  • addressing competitiveness issues by lowering input costs, upgrading technologies and improving the functioning of supply chains;
  • the provision of concessional finance for competitiveness related investments;
  • addressing the demand situation through preferential state procurement and dietary based promotion of poultry meat consumption;
  • providing support for export market development, in a context where only 1.4% of South Africa’s poultry meat production is exported;
  • supporting industry transformation via the creation of new opportunities for value creation and value addition across the supply chain for previously disadvantaged groups;
  • the use of trade policy measures, including tariff, non-tariff measures and SPS measures aimed at establishing equality of treatment between South African imports and exports of poultry meat.

Source:
(1) EC, Market Access Data Base
http://madb.europa.eu/madb/statistical_form.htm
(2) Agritrade, ‘Review of Ghana’s poultry sector trade policy under way’, 22 June 2014
http://agritrade.cta.int/Agriculture/Commodities/Poultry/Review-of-Ghana-s-poultry-sector-trade-policy-under-way
(3) wattagnet.com, ‘Ghana restricts poultry meat imports’, 22 February 2016
http://www.wattagnet.com/articles/26000-ghana-restricts-poultry-meat-imports
(4) DTI, ‘Summary challenges facing the SA poultry sector’,  Presentation to the Select Committee on Trade and International Relations , 1 February 2017
http://www.dti.gov.za/parliament/2017/Status_SA_Poultry_Sector.pdf
(5) 702.co.za, ‘Minister Rob Davies in the UK to discuss Brexit and trade with SA’, 25 January 2017 9:36 AM
http://www.702.co.za/articles/240372/minister-rob-davies-in-the-uk-to-discuss-brexit-and-trade-with-sa
(6) Econex, ‘‘Safeguards in the South African poultry sector: an economic perspective’, Research Note 43, January 2017
http://econex.co.za/wp-content/uploads/2017/02/ECONEX_researchnote_43.pdf

Comments and Analysis

The suggestion that EU exports of poultry meat have no causal connection to the current crisis in the South African poultry sector (as implied in the econex analysis) is counter-intuitive.

The underlying reality is that, despite the slow-down in growth in South African poultry meat demand since 2010, imports of poultry meat from the EU have soared. Imports increased from a mere 5,138 tonnes in 2009 to a massive 259,810 tonnes in 2016.

This represented a shift in EU exports away from the Russian market (which was taking around 20% of total EU exports) towards South Africa. This was driven by two processes:

· the progressive introduction of Russian import restrictions which culminated in the closure of the Russian market to EU poultry meat; and

· the final removal of all tariff and non-tariff restraints on EU exports of poultry meat to South Africa, as a result of the implementation of measures negotiated as part of the EU-South African Trade Development and Cooperation Agreement.

The surge in EU poultry meat exports to South Africa which began in 2010 and continued in subsequent years, clearly had market effects which became progressively more pronounced over time.

EU Poultry Meat Exports to South Africa – heading 0207, tonnes (2009-2015)

2009 2010 2011 2012 2013 2014 2015  2016
South Africa 5,138 22,007 94,084 131,832 158,481 203,414 209,971 259,810
annual change +10.5% +328.3% +327.5% +40.1% +20.2% +28.4% +5% +45%
% total extra EU 0.6% 1.7% 6.7% 9.2% 11.1% 13.5% 15.8% 18.0%
Total EU Exports 885,289 1,124,301 1,265,872 1,274,794 1,268,956 1,330,487 1,331,506 1,442,683

The debate in South Africa highlights some of the contradictions and challenges other ACP governments face in formulating poultry sector trade policies. As with many ACP governments, the South African government finds itself on the horns of a dilemma. Chicken meat is a low priced source of protein increasingly in demand by urban consumers, who have an interest in securing cheap, safe poultry meat. Yet the structural surplus of low cost ‘brown meat’ means imports are available at such low prices they threaten to undermine domestic poultry production. Such a development gives rise to serious long term costs in terms of lost local employment opportunities in both the poultry sector and beyond.

This is a particularly serious issue in South Africa, where the poultry value chain is well developed and any poultry sector crisis would trigger ‘further de-industrialisation across the economy’ and generate serious employment losses in the maize and soya sectors. Yet this basic dilemma of balancing consumer and producer interests replicates itself across the ACP.

Getting to grips with the structural problems of the surplus of ‘brown meat’ at an international level as suggested by South Africa’s Trade and Industry Minister, Rob Davies, potentially offers a way forward.  An ACP-EU dialogue on the responsible conduct of trade in residual ‘brown meat’ poultry cuts, could potentially offer a way forward which allows ACP governments to better balance consumer and producer interests.

Potentially this could pick up on the suggestion by the pan-European dairy company Arla, which has proposed the establishment of a stakeholder generated Code of Conduct to guide and promote responsible EU trade practices, which try to minimise adverse effects on local African/ACP producers (see companion article, ‘Arla’s Senegalese milk powder repackaging plant begins operations’, 23 January 2017).

 

Key Words: Poultry, EU South Africa, Benin, Nigeria, Ghana
Area for Posting: Poultry, Southern Africa, West Africa