June 11, 2019
China revives the world poultry trade - but for how long?
After years of disappointing growth and losing the Russian market, 233,000 tonnes of 2019's 343,000-tonne increase in world chicken imports is due to China's ASF epidemic. This short-term import surge cannot make up for a post-2010 deceleration in emerging African and Middle Eastern markets.
By Eric J. Brooks
An eFeedLink Hot Topic
Having endured a decade of disappointing growth, trade restrictions and disease-related misfortunes, the world poultry trade's 2019 recovery is riding on the disease-plagued swine sector's coattails. It is a wonderful medium-term stimulant but does not address longer-term issues.
On one hand, the early 2000s Russian, Japanese and EU stranglehold over world chicken imports has given way to a diversified group of Middle Eastern and African nations, which collectively now buy twice as much poultry meat as Japan and Europe put together. The chicken import volumes of these nations overtook those of traditional large importers in 2011, but stopped growing rapidly after 2015.
In fact, our world poultry meat import graph shows that the collective poultry meat imports of traditional large importers (Russia, Japan, EU, China) have actually fallen by more than 15% since 2006 –and even the new boom in Chinese chicken import volume doesn't change this: Almost all growth in poultry meat imports is now happening in the Middle East and Africa.
On the other hand, as the cheapest, most feed efficient and supposedly healthy protein line, the world chicken trade was supposed to lead all others in growth –and it did, at least until recently. In the 1990s world chicken meat imports increased a USDA estimated 8.1% annually.
From 2000 through 2009, this fell to a still healthy 6.3% annual rate from 2000 through 2009 inclusive. –But from 2010 through 2018 (before ASF spread to China), world chicken imports only increased 2.7% annually, compared to 3.1% for beef imports and 3.8% for pork imports respectively.
Moreover, the years since 2015 were even worse, with imports rising an average of 2.3% from 2015 through 2018 inclusive. Depending on which estimates you take, 2018 saw world poultry imports rise a nominal USDA estimated 0.5% or fall by a Rabobank 2%. In both cases, they were below their 2016 peak level –but good news has finally come.
For 2019, the USDA expects world poultry imports to increase by 3.7% or 343,000 tonnes to a record 9.698 million tonnes. The real question is whether the rapid trade poultry trade increases once taken for granted can be sustained over the long-term or merely due to exceptional one-off events. On the basis of our analysis, the latter seems more likely –though the long-term forecast is gradually turning upward too.
How much has ASF boosted the world chicken trade? Two-thirds or 233,000 tonnes of 2019's 343,000-tonne increase in world chicken meat imports is due to China's African Swine Fever (ASF) epidemic. It is inducing a massive, 8.1% increase in Chinese chicken production –and even larger 10.4% increase in broiler meat consumption. As a result, Chinese chicken imports are rising a whopping 68%, from 342,000 in 2018 to 575,000 tonnes this year.
On one hand, even after this year's impressive output gain, China's USDA projected 12.65 million tonne chicken output remains 8.8% below the 13.864 million tonne peak set back in 2012. When the proportion of Hong Kong chicken imports smuggled into China are included, real unofficial Chinese import volumes are in the 600,000 to 650,000-tonne range.
This implies that China has overtaken Saudi Arabia (0.60 million tonnes) and is now only behind Japan (1.1 million tonnes), Mexico (840,000 tonnes) and Iraq (0.64 million tonnes) as the world's fourth-largest chicken importing nation. Depending on how bad its ASF epidemic becomes, under a worst-case scenario, China's chicken meat imports could top out into the 700,000 to 800,000-tonne range.
–Even so, China will never become a leading importer of chicken the way it is now the top importer of beef and pork –and Beijing's policymakers could even make China's poultry meat imports top out this year before declining back to previous, lower levels. –Whereas China's red meat imports have grown exponentially, the attached graph shows how over the longer-term, China's 2019 chicken import volume of 575,000 tonnes is actually slightly lower than the 588,000 tonnes record set in the year 2000.
The accompanying graph betrays the following: Unlike red meat, China's chicken import volumes has cyclically fluctuated in the 250,000 to 500,000-tonne range for most of the past 20 years –and often in inverse proportion to its domestic pork supply. China is self-sufficient in poultry meat and has much higher pork consumption.
Consequently, the volume of Chinese chicken meat imports depends on the difference between pork production and demand more than it does on China's actual chicken supply/demand balance!
–In sum, China's longterm chicken import growth in chicken imports since 2000 has been negligible and near zero –and will remain this way.
China only imports chicken when it needs to do so. Its 2019 chicken meat import volume is the highest since 2007 –when a disease-induced pork shortage caused a similar substitution of poultry in place of pork and chicken meat import surge.
A similar Chinese chicken meat import surge also occurred in 2016 when pork demand overtook supply, causing consumers to substitute chicken in place of pork faster than domestic poultry production could increase. Hence, the pattern is clear: If we include its chicken exports, China is normally 98% to 100% self-sufficient in chicken but imports large volumes near the 500,000-tonne range when a temporary, supply-side crisis force it to do so –before imports fall to negligible levels again.
With China unable to provide long-term support to the world chicken trade, the question of longterm growth becomes more problematic. From the late 1990s through late 2000s, Russia was the world's largest chicken importer, buying approximately 1.0 million ton 1.3 million tonnes annually. This was 50% to 100% more than the poultry import volumes of second-ranked Japan or third-ranked EU.
Vladimir Putin's economic nationalist government substituted domestic Russian chicken production in place of imports, such that the latter fell by over a million tonnes in ten years, totaling a mere 100,000 tonnes this year. –World poultry's loss of its leading import market is the reason why import growth decelerated from 73% in the years 2000 through 2009 inclusive to just 29% during 2009 through 2018.
Has any nation stepped up to take Russia's place in the world chicken market? Only Japan and the EU import chicken near the million-tonne volume that Russia once did. On the one hand, Japan imported 45% more chicken (1.01 million tonnes) in 2018 than it did in 2008 (0.74 million tonnes). On the other hand, EU chicken imports have stagnated, amounting to 0.72 million tonnes in 2008 and 0.71 million tonnes ten years later. Collectively, the large EU and Japanese chicken imports are only growing by 2% annually.
Moreover, where there is chicken meat import growth, there is also plenty of problems: The attached graph shows that from 2000 through 2018, South Africa (11.2%), Iraq (10.5%), Angola (10%), Mexico (7.3%), UAE (6.9%) and Saudi Arabia have experienced chicken meat import growth ranging from 4% to 11%. Collectively, these five importing nations contain nearly 300 million people, making them twice the size of the lost Russian market.
The collective chicken meat imports of these nations jumped from 0.75 million tonnes in 2000 to 3.31 million tonnes in 2018 –and that makes them collectively twice as important as the EU and Japanese markets combined.
In practice, for various reasons, most of the above nations' growth in chicken imports came prior to 2010. Only South Africa and the UAE had faster chicken import growth from 2010 through 2015 than for the overall two-decade period. –And except Angola (7.9%) and ASF-afflicted China (8.7%), no nation's imports grew at a rapid 4.5%+ rate since 2015.
Formerly fast growing petro-economy driven markets, the mid-2010's oil price crash made poultry imports to UAE (1.6%) and Mexico (1.5%) and Saudi Arabia (-8.7%) increased at very slow rates. The trade slowdown was further impacted by America's trade war with Mexico and tighter halal slaughtering standards imposed by both Saudi Arabia and the UAE.
Going forward, we see a variety of mixed signals for the world poultry trade. Just as it happened in the past, this year's large increase in Chinese chicken meat import volume will taper off and decline back to near 300,000 tonnes by the early 2020s, as its poultry production starts to overtake demand.
On the other hand, just as the one-time boost from China's ASF-impacted chicken import fades away, there are indications that other buying nations should recover from their post-2015 slowdown in import volumes. Mexico's recently resolved its trade dispute with America. Hence, we can expect a resumption of rapid 6%+ growth in mostly US-sourced Mexican chicken meat imports.
Similarly, Brazilian and European suppliers have adapted themselves to the new, stricter Saudi and UAE halal-slaughter criteria, enabling a recovery in Middle Eastern chicken import volumes and growth. Similarly, crude oil's recovery from its 2016 price lows should boost the incomes of Mexican, African and Middle Eastern consumers, and this should support stronger chicken import growth in these nations.
Post-2020 import growth of 5%+ in these nations will be counterbalanced by declining Chinese chicken import volumes, stagnant EU chicken imports and slower growing Japanese purchases. That should allow world chicken import growth to recover into the 3.0% to 3.5% range. Even so, until the current US-China trade dispute is resolved and oil prices recover further, chicken meat import growth will only keep pace with those of pork, rather than lead the world meat trade.
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