Feed Bussiness Worldwide: January / February 2016
A decelerating world poultry market
by Eric J. BROOKS
Starting with a succession of bird flu outbreaks and ending with growing surpluses and falling prices, it has been a difficult year for the world broiler market.
At a USDA-estimated 10.23 million tonnes, 2015 world broiler exports fell by 2.3% from the previous year's 10.47 million tonnes. It was the first time world broiler exports had fallen since 2005 and only the second time in 20 years.
Most of the drop was accounted for by America, where bans on chicken from bird flu impacted states resulted in 320,000 tonne drop in volumes, an amount which more than accounted for the 240,000 tonne fall in world exports.
The US, however, was not the only poultry meat producer hit by misfortune. Scores of countries ranging from number five exporter Turkey to India and France saw their poultry sectors impacted and, in some cases, damaged by bird flu.
However, it was more than just disease outbreaks that made it a difficult year for the world broiler meat trade.
A steep 60% fall in oil prices made chicken less affordable to several large importers including Russia, Iraq and Venezuela. This made Argentina and Turkey suffer even larger drops in export volumes than America, such that three of the top five net broiler meat exporters saw their shipments fall.
With a major integrator's production restart flooding the market and allegations of cruel worker treatment receiving wide publicity, Thailand, one of the only two major exporters that saw shipments increase also had a difficult year. All these woes left Brazil as the only major producer capable of filling the supply vacuum created by America's struggle with bird flu.
But while Brazil enjoyed an impressive 10% increase in shipments and saw its share of exports touch 40%, the world market it exported into was facing difficult challenges.
From their early year highs, the price of red meat fell by 30% to 50%, tempting consumers to buy less expensive beef or pork in place of chicken. Thus, consumers around the world were buying cheaper red meat in place of chicken.
This came after years of high returns, causing chicken meat production to overtake demand. With domestic chicken prices sharply retreating everywhere from America to Thailand, falling returns or net losses keynoted the industry situation in most countries during the latter half of 2015.
The good news is that the world poultry market cycle is bottoming out. With petro-economies recovering from last year's income drop and bird flu appearing to be in retreat, demand is rising as producers cut back output, and this should firm up prices from the second quarter onwards. Led by a near 8% rise in US shipments, exports are expected to rise 4.5% in 2016, to a USDA-estimated 10.69 million tonnes.
The bad news is that the world poultry market's growth rate is in decline. On one hand, the long-term picture looks optimistic.
From 4.26 million tonnes in 1995 to 10.23 million tonnes in 2015, world poultry exports jumped 140% in 20 years, averaging a 4.5% annual increase over this time.
On the other hand, from 2010 to 2015, exports only increased at a 2.8% annual rate. The attached graphs show a definite levelling off in world broiler export growth over the last five years, and a gradual, long term fall in the world market's growth rate. However, while shipments by top five exporters rose 14.9% from 2010 to 2015, their combined output increased 22%.
This is more problematic than it sounds. India and China, the world's two largest, fast growing broiler markets are self-contained, neither importing nor exporting much.
Russia, which drove the world poultry market's growth at one time, is in clear decline. It went from 100,000 tonnes of imports in the early 1990s to 1.2 million tonnes during the early to mid-2000s -- to less than 250,000 tonnes this year. Even when the oil price recovers, Russia's self-sufficiency policy means that a large, fast growing export market has been lost.
Thus, until Africa's meat consumption takes off in the next decade, poultry exporters will find themselves locked out of large markets while export demand from established customers is growing more slowly, making for a 2.5% to 3.0% long term expansion rate.
We examine what a slower growing world poultry market means for the top five exporters in the pages that follow.
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