Thursday, February 16, 2017

209 CHICKEN IS NOT CHICKEN (or a flower is not its stem)

CHICKEN IS NOT CHICKEN (or a flower is not its stem)

FairTrade said:

“This is simply not true. South African producers are highly efficient. Imported thigh and leg portions arrive in SA at below their cost of production. This is DUMPING - the export of a product at a price lower than the price charged in its home market, or below its cost of production.

According to international trade rules it is ILLEGAL. The chart shows that the production price for EU chicken in 2013 was about 1.75 Euros per kilogram. It equates to roughly R25 per kg after adding in a 10% cut up factor for chicken pieces.

The average import price for EU chicken into South Africa in 2016 was roughly R15.

That means that, EU producers have been selling chicken pieces at a price in SA roughly 60% lower than their cost of production. This is DUMPING!

Francois Baird does not seem to understand economics and product costing.

Let me put it into simple terms – in the form of a story for kids.

Eloise studied science and biology at school and developed a new flower that she called Dahlilies She started farming these beautiful flowers – the business grew and thousands and thousands were sold on the local and international markets. Then an interesting thing happened – in Atlasia, a neigbouring country, there was a huge industry – they planted and harvested onions that were used in all the dishesand food products in the country as well as soup.

However, some shrewd entrepreneurs in Atlasia realized that the stems of the Dahlily were a perfect replacement for onions…!!!

The entrepreneurs contacted Eloise and Eloise started exporting Dahlily stems to Atlasia – essentially for the cost of transport plus a little bit. She already made superprofits from selling the flower – the stems were essentially waste!.

The onion producers (and unions) in Atlasia were not happy at all.

The consumers in Atlasia were happy – they now were able to afford all their meals at half price! - their cost of living went down dramatically! They were able to afford to buy clothes and send their children to private schools without even asking for a salary increase. In fact some were able to live so cheaply now that they did not ask for an increase when the time came - This made the bosses and factory owners happy – because the things that they produced could now be exported competitively to other countries. Employees in these factories could also now be paid more because of the newfound prosperity.

The onion producers and the few union employees were not happy and lobbied government to introduce and import tax so that they could compete against what they called the “unfair” competition. The government however were a liberal government that understood that they should not intervene to favour the interests of one group over the interests on another group. In any event the benefits to the country was huge.


The cost of production the chicken legs (brown meat) is close to nil and should not be allocated the way that Francois Baird does in the graph. It may achieve his purpose, but is not correct. Just as the flower and stem is not the same product so is white and brown meat not the same product. In this case it seems to be a pure business reality and therefore no government involvement should be sought.

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