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Feed Bussiness Worldwide: January / February 2015
A new pecking order for the world broiler market
by Eric J. BROOKS
Despite a spate of bird flu outbreaks and Russia's boycott of western meat imports, it has been a good year to raise broilers.
Amid scarce red meat supplies, high broiler prices and falling feed costs, strong gross margins were enjoyed by producers in America, Brazil, Russia, Japan and India.
By the third quarter of 2014, this strong recovery in gross margins had spread to the EU and Thailand. Only in bird flu and food scandal devastated China did broiler rearing margins remain thin. With 2015's slightly lower forecasted broiler prices mostly offset by falling feed costs, the year ahead promises to be just as profitable.
Moreover, the broiler trade will make up for 2015's slightly narrower margins. After Russia limited 2014's world broiler export growth volume to 2.3%, the USDA expects it to rise 4.3% in 2015.
Nevertheless, behind the curtain of sound profit margins, one-off markets and quieter, long term trends are chipping away at the world poultry market's monolithic structure and cherished assumptions.
Russia, bird flu redistribute market spoils
Over the past year and probably well into 2015, resurgent bird flu outbreaks are, to the delight of top exporters, creating havoc in the domestic border supplies of scores of countries, many of them large or emerging importers.
Countries afflicted by bird flu over the past six months include Japan, Vietnam, China, South Korea, India and Mexico, all of which are leading poultry meat producers or importers.
This has already created an export windfall for the United States.
On one hand, provided they stay free of bird flu themselves, these ongoing outbreaks could create similar opportunities for suppliers in Brazil, Thailand and Turkey. On the other hand, should bird flu break out in a top five poultry meat exporter, its export rivals could enjoy a market windfall at the afflicted supplying country's expense.
The above supply-side shock was counterbalanced by Russia's implicit restructuring of world poultry demand.
By blocking America's 160,000 tonnes of broiler imports and a comparable sum of EU chicken from its market, Russia has delighted poultry exporters from China to Latin America. The chief winners of Russia's meat boycott, however, will be Brazil and Argentina.
By helping fill the market void created by Russia's banning of US and EU chicken, Brazil can make up for the export market shares that were lost when Thai frozen chicken was allowed to re-enter the EU and Japan.
Similarly, feed rich Argentina was a world poultry market non-player ten years ago. Now, it could conceivably leverage its new access to Russia's to export its way past Thailand for the number three position in the world broiler meat market.
But Thailand will hardly cede its third place export ranking without a fight. Even before Argentina's fortunes turned upwards, export momentum was building up in response to the unbanning of Thai frozen chicken exports by the EU, Japan and several fast growing Middle Eastern countries.
In fact, when one factors in Thai integrators' market share of chicken domestically raised in overseas operations, its influence over the world chicken market is greater than its number three rank would otherwise suggest.
Emerging exporters
Both Argentina and Thailand are just part of a much wider trend. Along with Turkey, China and Ukraine, there is now a raft of emerging exporters, each of which supplies the world market with anywhere from several hundred thousand to half a million tonnes of chicken meat.
While America and Brazil are poised to see their broiler meat exports rise by slightly over 3% annually, second tier suppliers will see their collective shipments rise 5% or more annually. Although their constrained feed supply base makes it impossible for any of them (except Argentina) to threaten Brazil's and America's leading positions, they are stealing a significant amount of market share from the top two players.
Argentina, for example, only exports a 1/10th as much chicken meat as Brazil. But from 2008 to 2015, Brazil's chicken export volume will have grown 18%, versus Argentina's 128% - and in
South America itself, Argentina now exports more chicken to neighbouring Latin American countries than Brazil does.
Similarly, Turkey and Thailand lack feed resources to rival the export volumes of Brazil and America. But Thailand uses its geographic proximity to East Asia to edge out Brazilian chicken in supermarkets from Singapore to Japan. Similarly, Turkey edged out Brazil and America to supply a third of Iraq's broiler meat, and is penetrating the markets of nearby Middle Eastern countries.
By taking advantage of such niche, second tier broiler meat exporters, the USDA reports, went from a 10% market share and less than 700,000 tonnes of exports to nearly two million tonnes and an 18% market share in 2014 – and their share of the market is destined to rise even further.
Mexico, MENA take over import growth
Political or biological driven calamities aside, there are also powerful market forces reshaping our assumptions about the world broiler market's demand side dynamics.
On one hand, with many of the region's countries approaching the slower paced growth that comes with economic maturity,
East Asia's once rapid growth in broiler meat imports is levelling off.
On the other hand, new countries and geographic zones are taking over from the Far East as drivers of world poultry demand. East Asia is poultry's poster child from yesteryear, and the Middle East North Africa (MENA) region gets most of the attention. But 2014 saw Mexico quietly overtake Japan as the world's top poultry meat importer.
With both Mexico and Saudi Arabia overtaking it, Japan will soon be the number three poultry meat importer.
Although Japan still imports more broiler meat than chicken, Mexico imports more poultry meat across all bird classes when non-mainstream varieties such as Turkey or duck are added in.
However, with Mexican broiler imports growing around 5% annually and Japan's demand for imported poultry staying flat, it seems probable that by 2018 at the latest, Mexico will overtake Japan as the world's top broiler importer.
Hence, with Russia's politics redirecting export trade flows, bird flu eating into importer's domestic production and a new wave of importers and exporters taking centre stage, the world poultry market is at its most turbulent state since the start of the century. With this in mind, we examine the status and prognosis of two leading exporters and two emerging exporters, along with an in-depth examination of the world's largest poultry consumer later in the magazine.
The full article is published on the January / February 2015 issue of FEED Business Worldwide. To read the full report, please email to  inquiry@efeedlink.com to request for a complimentary copy of the magazine, indicating your name, mailing address and title of the report. 
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