Price formation and competitiveness of the South African broiler industry in the global context

Abstract

In light of its recent classification by the Department of Trade and Industry as an industry in distress, this paper undertakes a comprehensive evaluation of the competitiveness of South African broiler production in the global context. A qualitative review of industry structure revealed a great deal of similarity to market leaders globally. Price formation within broiler production contracts in South Africa utilizes the same tournament pricing used successfully in the USA, resulting in high levels of technical efficiency, however economic efficiency is lacking. Univariate time series analysis confirmed that the domestic price of chicken is more elastic to changes in the import parity price than changes in feed costs. Feed remains crucial to economic efficiency and while declining protein meal prices in the future is plausible given recent investment into the industry, marketing strategies that optimize the returns from an entire carcass could aid effective competition with imported products.