TRANSFORMATION IN AGRICULTURE THE POULTRY INDUSTRY Developing Poultry
- Slides: 19
TRANSFORMATION IN AGRICULTURE THE POULTRY INDUSTRY Developing Poultry Farmers’ Association (SAPA) Presented by Mr Moses Modise On 17 September 2010
Agricultural policy and the Poultry Industry • Fairly limited tariff protection leads to rising imports • Bound Rate for poultry is 80%, Applied Rate is 27% • Eggs essentially not protected
Agricultural policy and the Poultry Industry The fruits of democracy…
Agricultural policy and the Poultry Industry • Global industry , global standards • Local industry mostly to global standards
Market dynamics Local consumption • Local consumption: – 1960: 2 kg pppa – 1975: 13 kg pppa – 2009: 31 kg pppa – Mostly because the real price of chicken has reduced by 15% over the period 1975 to 2009
Market dynamics Local consumption: § Poultry continues to display a positive growth trend 31, 5 31, 8 31, 0 27, 9 30, 7 21, 0 20, 3 19, 9 20, 8 21, 0 20, 7 22, 0 22, 9 23, 6 Poultry 13, 0 2, 2 60 …. . 75 …. . 90 … 96 97 98 99 00 01 02 03 04 05 Estimated per capita consumption of poultry meat kg person per annum 06 07 08 09
Market dynamics Local producer prices
Market dynamics Local consumption • Chicken is a logistics business • Efficiency from scale • South Africa is ⅔ urbanised and the majority need to be fed, not to feed themselves • Money transfer market in most rural areas – remittances – Various social grants • LSM split biased towards lower LSM’s in rural areas • Lower LSM’s spend up to 70% of income on food
Market dynamics Local consumption • • Retail driven Frozen product dominates IQF approximately 50% of all chicken sold in SA Single site farm with one batch per farm, i. e. 7, 5 batches per year • Retail want (52 to 104) deliveries per week from few suppliers. – Up to 21 deliveries per week per supplier for fresh product and – Up to 3 deliveries per week per supplier for frozen product – And large deliveries to central warehousing • Small farmers excluded by retail model • Live sales not as financially sustainable
Market dynamics Eggs • • More than 50% sold informally No complex cold chain requirements Variable pack- or selling sizes Better suited to income dynamics of our developmental state • Lack of strong egg eating habit restricts growth of sector
Poultry Industry And Transformation – Large scale (what is large? ) • Ownership of capital • Contract production of basic product – Small scale (what is small? ) • • • Access to resources Price Availability Technical skills Lack of ready market
Land reform And the Poultry Industry • Industry mantra “Small footprint, big impact” • Land not usually a limiting factor • Demand for contract growers often available even without title (economic value is the contract, not the asset) • Finance for small producers difficult, because of poor financial performance of small businesses • Small producers need long term support
Economic Model • SA structured as an industrialised nation • SA NOT an agrarian society, just one with many dispossessed people • Long term intervention designed for economic inclusion in the industrial model • Short term poverty alleviation can be assisted with poultry and other agricultural interventions • Poverty alleviation is NOT agriculture - agriculture is a business
Role of the State in Market Creation • State supply contracts to - Hospitals - Prisons - Police - SANDF - etc • Small quantities to central warehouses • Bulk supply to caterers at state institutions • Will cost more that imported product currently mostly used for the market segment
Role of the State in Market Creation • Will ALWAYS cost more i. e. permanent price support intervention required from state • Top-up payments to small producers (SAPA can assist with top-up formula calculation) will be required • A more progressive intervention than grants as it will help lead to social inclusion • Model can apply to any commodity whose perishable nature can be managed
Agricultural Support • Green box measures can be 10% of agricultural GDP – we use very little of this • Land has biological potential which is the key restrictor • SA will never be optimal for most agricultural production because of - biological potential limitations - climate - logistical density (4 times larger that our GDP on a weighted basis)
Agricultural Support • The rural economy can come from three things: - manufacturing (limited) - mining (site specific) - AGRICULTURE • Without agriculture there would be almost no rural economy • Supporting agriculture will slow urban migration • Housing pressure would be reduced (poor people may only claim 1 RDP house yet have 2 houses – town and rural)
Agricultural Support • Former homelands can NEVER be agriculturally sustainable - biological potential restriction - population density • Former homelands CAN use limited agricultural production for poverty alleviation purposes • Poultry imports at local producers price equivalent would be approximately R 2, 5 billion per annum • Could create at least 7 000 additional jobs if imports severely curtailed • Therefore a viable community of approximately 35 000 South Africans could be formed
Developing Poultry Farmers’ Association Moses Modise 011 795 2051 076 482 0819 modise@sapoultry. co. za Thank you
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