Poultry Analysis

Why Do We Have a Global Food Inflation Crisis?

The big topic in the media this week is, unsurprisingly, the current global food inflation crisis amid ongoing threats to the poultry industry, which is also the topic of our quarterly Fact Sheet.

Global Food Inflation

Avian flu is the top topic worldwide, with more and more countries reporting unprecendented levels of bird flu in their countries. The US and the EU are busy recovering from the worst outbreak of bird flu in their respective histories.

Places where it is endemic, like China and South-East Asia, has regular flare-ups. Japan has a different crisis in that there is nowhere for them to bury their culled chickens. West Africa is reporting avian flu in new areas, and–most ominously – South America is reporting avian flu in previously-immune countries.

Brazil has up till now been proud of the fact that one of the reasons it is the world’s largest poultry exporter has been its clean record on avian flu, but if the virus is detected in that country it would be catastrophic.

According to a Agri-business report from Standard Bank, imports from the EU have been halted due to the flu outbreak. However, if imports from Brazil are halted for the same reason, that would leave a gap in our poultry market of around a quarter of all poultry produced.

According to Standard Bank, this would be a rare opportunity for local producers to ramp up production to fill the gap. But whether there is capacity to do so, remains to be seen. If our local producers cannot meet demand, the net result will be shortages and price increases.

Investigation by Competition Commission

Already our local chicken prices have been under investigation by the Competition Commission, which found that the structure of the poultry industry in South Africa (which is unique) raises the possibility of price fixing. At ChickenFacts, we have long maintained the high import tariffs have allowed local producers to raise their prices unfairly.

This latest report by the Competition Commission appears to bear this out. According to importers, a trade blockade due to avian flu would be extremely pricey. Already they are up in arms over a trade law that bans poultry imports from any country with a history of avian flu, even if the flu has been contained.

Frozen Chicken

In support of this, despite the fact that chicken meat is still cheaper than most other sources of protein (although pork is offering stiff competition), fresh chicken is being regarded as a ‘luxuryand that most consumers are opting for cheaper frozen chicken.

And the potential for prices to come down at all has been negated by our weak exchange rate that is pushing up the costs of production. So, while poultry prices are definitely rising and will definitely rise further, chicken is still the cheapest protein option available in the middle-to-low income food basket.

Reconsidering Nutritional Choices

On a slightly lighter note, however, The Economist acknowledges that people all over the world are re-considering their nutritional choices against the background of food inflation and climate change.

They have come up with a new way to measure the value of food in a changing climate – balancing the nutritional value vs its climate impact. It’s called the ‘Banana Index’ which uses the banana as a base-level metric because the banana has average food value and average climate impact.

The good news is that poultry scores highly on both measures – it is good for you and kind to the environment.

Something that we canny South Africans have always known!

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