February 5, 2008

 

US poultry industry to face both opportunities and challenges ahead

 

press release

 

 

Global trends indicate continuing growth in demand worldwide for poultry products, yet the industry also faces strong challenges domestically related to the cost of feed ingredients, environmental issues, and consumer demands, according to a research analyst who specializes in agribusiness.

 

''We (chicken producers) are an industry that is in demand. We've got a product that people want and continue to consume. We've got efficiencies of scale, and we make tremendous genetic changes and production changes year in and year out that other industries can't do,'' said Mike Donohue, vice president of Agri Stats, a management reporting and benchmarking firm based in Fort Wayne, Indiana.

 

Chicken, beef, and pork production worldwide have all risen over the past five years, although pork production appears to have peaked and dropped slightly. Despite a subtle shift in the countries where broilers are produced, the US remains the largest producer followed by China, Brazil, and the EU, Donohue said.

 

These four producers account for about 73 percent of the world's broilers, indicating ongoing consolidation and concentration.

 

The US also one of the top four exporters but is not heavily dependent on any single market, which is an advantage that gives the country more stability in its export business, Donohue said in an address at the International Poultry Expo, sponsored by the US Poultry & Egg Association.

 

On the import side, Russia ranks number one despite an increase in its domestic production. Japan is the second leading importer, and China is third.

 

''Per capita consumption shows that there's still the opportunity for tremendous growth in demand for chicken products,'' Donohue said.

 

The US leads all countries in consumption at about 45 kilograms per capita, followed by Brazil at about 40 kg, Mexico 25 to 30 kg, Russia 15 to 20 kg, Thailand 10 to 12, and China 7 to 8 kg.

 

The market in China has substantial potential for growth in consumption as consumers increasingly buy leg quarters and other products as well as more traditional commodities such as wing tips and claws, Donohue said. Turkey producers also have an opportunity to increase exports and consumption of their products.

 

However, the forecast is not completely sunny, Donohue cautioned. The US poultry industry also faces enormous and complex challenges, including the rising cost of feed ingredients, environmental issues, bird health and pandemic diseases, and sometimes unpredictable preferences and demands of consumers.

 

Feed costs have always been a significant issue in the poultry industry, and that has especially been the case over the past year, Donohue said. Costs have been rising steadily, and he predicted that the cost per bushel of corn could reach US$5.65 to US$5.75 by May. ''This is a new paradigm we're looking at because of the nation's energy policy,'' he added.

 

The cost of soymeal is also on the upswing, and the price per tonne could soon approach US$400. The average live production cost of broilers recently surpassed 35 cents and could easily reach 38 to 40 cents in the next few months with little prospect of relief.

 

The renewable fuels mandate within the federal government's energy policy will have an impact on the poultry industry for years to come, Donohue predicted. By the year 2015, about 36 percent of the nation's corn production could be earmarked for ethanol production, even with an anticipated increase in volume tied to the demand for biofuels. The percentage of corn used for ethanol has tripled in the past few years and will continue to increase. This surge in demand also means that millions more acres will be needed to produce additional corn. It is unclear, though, where this land will come from or whether production of other crops will be affected.

 

Consumer preferences also will continue to impact the industry, and one uncertainty involves chicken raised without antibiotics. Demand is growing in some sectors, but it is unclear how this trend will evolve or how growers should respond to the challenge, Donohue said. 

 

Consumers are also concerned about stunning methods and humane conditions on poultry farms, and the industry may need to do a better job of conveying the message to the public that it is responsive and shares their concerns, he added.