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Sectors Urge Government to Allow Higher Prices

by 5m Editor
19 November 2008, at 7:58a.m.

UNITED ARAB EMIRATES - Poultry producers have requested the government to allow price rises for poultry products to help cover their recently elevated costs.

The head of the country's largest producer has warned that more poultry farms in the UAE will be forced to close if the government does not take action to support the industry, according to Emirates Business 24-7.

The sector is under pressure because the Ministry of Economy's Consumer Protection Department opposes any price increases for poultry and eggs even though production costs have risen.

In addition, there is tough competition from products imported from the European Union and other Gulf countries, where producers are subsidised.

"The government should support poultry farms, as the EU and some Gulf countries do, by subsidising farm feed imports," Mohammad Al Noosh, Director-General of the Ras Al Khaimah Poultry and Feeding Company, told Emirates Business. "These subsidies enable rivals abroad to sell their output more cheaply here and put UAE producers in a difficult competitive position. The government should give subsidies to national poultry farms. If the situation continues as it is more small farms will have to close."

Al Noosh said the ministry, which was keen to keep prices at a certain level, had turned down a request by producers to increase their prices.

"We have supplied the Consumer Protection Department with all the documents related to the cost of raw materials."

He said the UAE had the potential to achieve self-sufficiency in poultry and eggs – but only if farms received government subsidies similar to those given in countries such as Holland, Belgium and Saudi Arabia, according to the report.

"All those countries extend subsidies of up to 50 per cent of the cost of raw materials such as feed, electricity and other production requirements. This leads to reduced production costs and consequently lower prices for poultry and eggs coming from those countries to the UAE.

"EU governments are keen to subsidise producers to safeguard jobs and avoid having to pay unemployment benefits. Also subsidies help to boost exports. Elsewhere, Brazil has an agricultural production surplus which in turn contributes to cuts in production costs as well as the price of animal products.

"In the light such competition, it is difficult for our companies and farms to compete with imports into the UAE."

He said subsidies had enabled Saudi Arabia to not only achieve self-sufficiency but to export 50 per cent of its annual production. "Our national farms, meanwhile, have since November 2007 suffered increased production costs. The prices of electricity and manpower rose by 50 per cent and a kilo of plastic used for packaging went up to 12 dirham (AED) from AED 5 – that's 140 per cent. Diesel prices soared as well.

"My company has heavy financial burdens – costs at the slaughterhouse have reached AED 12 million a year. Under such circumstances, our national farms are suffering from unfair competition since the consumer prefers the cheaper product."

However Mr Al Noosh said the drop in the price of oil might result in cheaper poultry and eggs. The price of feed – which represents 70 per cent of the raw materials needed by the country's poultry farms – could go down if the price of crude settled at $60 a barrel.

"There could be a 10 to 15 per cent reduction in poultry and egg prices. Over the past few years, which have seen substantial rises in oil prices, many countries such as the US, the UK and China turned to corn to produce fuel, which in turn led to a rise in the production costs for poultry farms.

"But with the fall of the price of oil to between $60 and $70 per barrel, we expect the world to go back to oil to produce fuel, which will cause a drop in the price of feed and consequently poultry."

Mr Al Noosh's company produces five million broiler chickens and 16 million eggs a year and is one of the country's five largest producers. The others are the Arab Company for Poultry Production in Fujairah, the Emirates Modern Poultry Company in Dubai, Al Ain Poultry Farm and Al Khaznah Poultry Farm in Abu Dhabi.

Between them, the companies employ 2,000 people and have invested AED 1 billion in their businesses. In addition, there are many small farms.

The companies and farms produce meet only 25 per cent of local market demand for broiler chickens and 60 per cent of eggs, with the remainder coming from overseas.

"The top five firms are the only ones which have managed to withstand the unfair competitive situation while a lot of small farms had closed," added Mr Al Noosh.

Saeed Abdullah Alroken, Director of Industrial Development at the Ministry of Economy, said the ministry had responded to three requests for permission to raise poultry and egg prices since 2007.

"The ministry received a complaint about the presence of Indian eggs in the market imported via Oman," he added. "Meetings had been held with the Omani side with regard to this issue. We were then surprised that none of the poultry farms owners visited the ministry again and the issue of the Indian eggs disappeared.

"Regarding the demands from farm owners for government support similar to what European countries and some GCC countries are giving, we support out national industries through the exemption of production components from customs duties.

"We advise poultry producers to take advantage of the GCC Unified Anti-Dumping Law by lodging complaints if any dumping occurs. Complaints should be made to the GCC Anti-Dumping Office or the Anti-Dumping Department that will soon be set up by the ministry," said Mr Alroken.

Consumption in UAE

Consumption of chicken in the UAE is estimated at 170,000 tonnes per year. Local farms produce 42,500 tonnes annually, equal to 25 per cent of the needs of the local market.

The local consumption of eggs is estimated at 1,100 billion a year. Local farms produce 660 million, which cover 60 per cent of market needs.

Rax Al Khaimah Poultry and Feeding Company

The Ras Al Khaimah Poultry and Feeding Company was established in 1976 with capital of AED 40 million.

Production started in 1980 with a capacity of two million chickens and 15 million eggs a year. Current annual production is five million chickens and 15 million eggs. The company says its policies have helped to stabilise the prices of chickens and eggs in the local market.

The UAE owns 70 per cent of the company, Arab states own 20 per cent and the Ras Al Khaimah Government owns the remaining 10 per cent. The company has assets worth AED 500 million.

5m Editor