August 19, 2004

 

 

Indonesian 2004 Poultry Production Seen Down 15%

 

Indonesian poultry production in 2004 is forecast to fall about 15% because of the impact of the avian influenza outbreak in early 2004, combined with high feed costs, broiler production, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site, dated Aug. 11 and released Wednesday.

 

Production

 

Due to the impact of the avian influenza outbreak in early 2004, combined with high feed costs, broiler production in 2004 is expected to drop about 15%. For 2005, with expectations that feed input prices will decline, and that the AI problem remains in check, broiler meat output is forecast to rebound about 8%.

 

While the local industry has rebounded somewhat since the height of the AI outbreak in early 2004, when slaughter was off as much as 35% for a period of about two months, obstacles to a complete and full recovery remain. Firstly, the financial impact of the AI outbreak has not yet completely run its course, and it may take at least another two years for the industry to again achieve the double-digit growth rates that it had prior to the disease. Small to medium-sized farms have still not recouped the losses sustained during the outbreak.

 

Second, many fear a resurgence of AI, which would be very costly to the industry and hurt consumer confidence as well. In July, there were scattered reports of new AI cases in East Java, and the threat will remain for at least the rest of the year. While the Ministry of Agriculture is doing its best to prevent further cases, bio-security practices reportedly remain lax, and the quality of the vaccines used remain in question. Finally, while landed prices have weakened in recent months, protein meal prices remain high, lowering profitability. The ban on imports of U.S. meat and bone meal has exacerbated the low to negative margins, the report said.

 

Day-Old-Chick for broiler production in 2004 is estimated at approximately 18 million head/week or about 936 million per year, and forecast at around 20 million in 2005. Lower broiler numbers and feeding has similarly led to lower demand from the feed mill industry. Feed production is expected to reach 5.8 million tons in 2004 (excluding cattle feed, which is approximately 0.6 million tons), a decrease of 15% from the previous year, and well below the industry's estimated 10 million ton capacity. High soy meal and MBM prices have resulted in more use of feather meal and poultry by-products.

 

With a relatively low per capita broiler consumption, an increasing population, and economic growth, prospects for renewed growth remains bright. Nonetheless, the industry has just begun what will probably be a 2 to 3 year recovery period, and processing as well as cold storage deficiencies continue to create bottlenecks in distribution and marketing.

 

Consumption

 

Reports of the AI outbreak, and consumer misunderstanding of the actual risks involved, led to a sharp temporary decline in meat demand in early 2004. As a result, total consumption is forecast to fall in 2004. With a rebound in consumer confidence, consumption is forecast to grow about 8% in 2005. In 2004, broiler consumption is estimated at 627 million tons, or only 2.9 kg/capita/year (215 million population at 2003).

 

Development in the broiler industry has been greatly influenced, not only by the growth in the population and production, but also by the role of downstream industry, which makes broiler products more affordable for consumers. Sales of processed chicken, such as nuggets, are increasing at an average of 10% every year. As part of the distribution chain for frozen food products, the expansion by the retail industry is increasing the distribution flow of nuggets. In addition, 20% of broiler meat production goes to franchise restaurants that serve fried chicken.

 

Trade

 

The ban on imported chicken parts from the U.S. remains in effect, and imports are insignificant. Indonesia was exporting a small quantity of processed broiler meat to Japan, but this trade was discontinued after the AI outbreak