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Saudi Arabia raises poultry import tax, local production increses MARKET

(Sao Paulo-NewsHalal, Rabi'II 13, 1438, January 11, 2017) Saudi Arabia, one of the largest poultry importers in the middle east has raised the poultry import tax from 5% to 20%. Several media outlets reported that the Brazilian Animal Protein Association announced this last week. Saudi Arabia is the largest foreign market for Brazilian poultry.

Due to latest tax increase, the tax rate returned to 2008 levels, when it had been reduced to 5%. That year, there was a strong hike in the international prices of food and importing-dependent countries faced times of crisis.

Saudi Arabia imports 57% of the poultry it consumes and Brazil holds an 88% share of these imports. Therefore, Brazilian exporters feel impacts of the tax hike on Brazilian exports to be “marginal”, given the strong presence of the Brazilian product in the market, production size and the great capacity by the country to supply halal meat, which is prepared according to Muslim traditions.

Due to food security reasons and increasing demand of real Halal certified slaughtered meat, poultry producers in Saudi Arabia are focusing to increase local production. Stunning, mechanical slaughtering and electrical waterbath slaughtering of poultry in non Muslim countries including Brazil, France and Australia, serious concern are rapidly growing among Muslim consumers whether the imported poultry meat they are consuming is compatible to Halal standards. Therefore, demands for local poultry, which is free of all kinds of stunning, is on raise in the Muslim countries.

Poultry exports from Brazil to Saudi Arabia totaled USD 1.16 billion last year, a decline of 14.6% in comparison to 2015, according to data from the Brazilian Ministry of Industry, Trade and Services (MDIC). From a legal viewpoint, there’s not much to do, since the 20% rate is the cap for the product set by Saudi Arabia at the World Trade Organization (WTO), that is, the country has the right to raise the import tax up to this level.

Brazil has remained the dominant supplier of broiler meat to Saudi Arabia for over two decades. In 2015, Brazilian chicken exports to the Kingdom reached 789,302 MT, 82 percent of total Saudi broiler meat imports, followed by France with 15 percent market share, U.S. and Argentina each with 1 percent. The small U.S. market share is mostly due to difficulties the U.S. poultry exporters face in meeting the Saudi import requirements, and the import bans imposed on poultry and poultry products from 15 U.S. states which were rescinded on August 22, 2016. Saudi Arabia banned imports from 15 U.S. states due to the detection of Avian Influenza (AI) in poultry farms in September 2014 to May 2015.

Saudi Arabia also banned imports of poultry, eggs and products from some provinces in Hungary, Ukraine, Poland, Holland and France, and from India as a whole. The action was taken due to the emergence of bird flu hotspots in these countries.

The production cost of locally produced broiler meat currently ranges between 6 and 7 Saudi Riyals (SAR) or $1.6-$1.87 per kg of average dressed weight. The Saudi government’s total subsidies account for about $0.50 of the per kg production cost. Often, imported frozen chicken is sold at major retailers outlets for between $1.87 and $2.13 per kg, depending on the products’ brand name.

The GCC imports almost $3 billion of poultry meat annually to satisfy local demand. However, traditional exporters to the region are coming under increasing pressure from rising consumer expectations, expanded local production capacity and new entrants into the market.