Transcript Developing Poultry Farmers` Association

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
Local consumption:

Poultry continues to display a positive growth trend
31,5 31,8
31,0
27,9 30,7
22,0
20,8
21,0 20,7
21,0
20,3
22,9 23,6
19,9
19,3
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 per 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
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 R2,5 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
[email protected]