To what extent will avian influenza affect South Africa’s poultry exports?

The recent past has seen a heightened prevalence of disease outbreaks in poultry – most notably, strains of Highly Pathogenic Avian Influenza (HPAI). Some 18 months ago, the United States had 233 outbreaks of HPAI, while over 2600 outbreaks were reported 8 months ago in several parts of Europe, including Austria, Croatia, Denmark, Germany, Hungary, Poland and Switzerland and Netherlands. Outside of Europe, India and Israel reported outbreaks late 2016, after South Korea, Taiwan and the Russian Federation had reported outbreaks earlier in 2016.

Africa had been relatively quiet in terms of HPAI prevalence, until Zimbabwe confirmed an outbreak early June 2017. In late June 2017, South Africa confirmed its own outbreak – the first time the country had HPAI in chickens, with previous outbreaks having only been restricted to ostrich.

Since countries reserve the right to implement trade measures that ensure human and animal health, HPAI outbreaks are customarily met with bans. And as expected, Zimbabwe and South Africa have implemented mutual bans, with Botswana, Namibia and Mozambique also following suit.

To what extent do HPAI-induced bans impact on trade? Import bans on South Africa’s poultry imports from the EU – combined with anti-dumping duties and safeguards – led to a drop in the country’s poultry imports from the EU by as much as a 70% month-on-month basis between December 2016 – January 2017. The drop was particularly severe because a substantial portion of South Africa’s poultry imports – over 75% of overall total volumes – come from Europe, more notably the Netherlands and Belgium, among others.

There are, however, various arrangements that have been made to allow trade to take place despite outbreaks of HPAI. For instance, the UK and the US have continued to export to South Africa on the basis of compartmentalization and regionalization programmes that allow for poultry imports to be facilitated in those regions that are certified as disease-free.

In the same vein, South Africa can still export its poultry on the same basis, if such arrangements can satisfy the requirements of its foreign markets. So the impacts of the local HPAI outbreaks on South Africa’s poultry exports might not be as bad as potentially envisaged.

With one percent of local production reportedly affected by HPAI, effective disease control measures which prevent the spread of the disease can ensure that local production will not be adversely affected. Since most of South Africa’s poultry imports are already high, the supply side will not undergo a structural change significant enough to cause substantial movements in the local consumer price

Meanwhile, the structure of South Africa’s imports over the past six months seems to have shifted to a new equilibrium, with a readjustment that has seen some degree of substitution between competing suppliers of the country’s imports. The US seems to have replaced some of South Africa’s poultry imports from Argentina, Brazil and other HPAI-affected key supplier markets in the EU.

With this evolving structure in South Africa’s poultry imports, the flow of imports will expectedly remain stable, without any drastic shifts in import volumes – assuming that safeguards extended beyond their six-month lifespan, which was supposed to have lapsed early July 2017.

The bans that have been effected on South Africa by other regional markets will not affect the country’s poultry imports, not least because imports from African markets are virtually null. Therefore, bans from countries like Zimbabwe, Botswana and Mozambique will have no bearing over South Africa’s import volumes. With a dose of optimism, one can safely assume that South Africa’s poultry production and imports will remain relatively stable – assuming no further shocks happen in the immediate to medium term.

But the story is somewhat different when it comes to poultry exports. South Africa exports an average of around 70,000 tons of poultry per annum, 98% of which go to the very African markets that have implemented bans. In essence, the African market is worth one billion Rand per annum to the poultry sector.

Just how much of this revenue the industry will lose out will largely depend on the willingness of export markets to accept regionalization arrangements, the capacity of which South Africa is able to implement effectively. The emerging concern, in the immediate term, is how further HPAI outbreaks can be contained to prevent further spread to disease-free areas – a situation that will have a direct implication on production and export revenues.

*A version of this article was published in the Farmer’s Weekly Edition of 4 August