September 6, 2004

Venezuelan Poultry Production Seen Higher In 2004, 2005

Venezuelan poultry production is expected to increase in 2004 and 2005 after three years of steep declines due to political turmoil, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site.
 
SITUATION AND OUTLOOK
 
Poultry production is expected to improve somewhat in 2004 and 2005, finally improving after a steep decline in production since 2000 due to political problems. Demand for poultry is expected to grow due to better disposable incomes of consumers and cheaper prices relatively to beef and pork.
 
The Government of Venezuela's policy of foreign exchange controls and price controls for poultry remain in place, the report said. Access to imported feed ingredients (yellow corn, soybean meal and yellow grease) continues to be heavily controlled by the Ministry of Agriculture and Lands.
 
Government controlled poultry imports are forecast to increase as the Government of Venezuela (GOV) continues to expand its food distribution programs. Imports are forecast to grow from 7,000 tons in 2004 to 20,000 tons in 2005. The GOV has only imported whole poultry from Brazil, although it has begun consultations with Argentina and Colombia for poultry meat imports. Over the long run, poultry imports are expected to take on added importance as the GOV purchasing and distribution system expands.
 
PRODUCTION
 
Poultry production is forecast to recover somewhat in 2005 due to higher demand, as the country begins to recover from recession and disposable incomes of consumers improve due to high oil prices. Reliable official production estimates are not available, so the production figures used here are Post estimates based on feed imports and use.
 
Poultry production is heavily dependant in imported animal feed ingredients such as yellow corn, soybean meal and yellow grease. The Government of Venezuela continues to exercise a tight control on import licenses for feed products (licenses are tied to the domestic purchase of sorghum and white corn). In addition, the access of importers to dollars is restricted due to foreign exchange controls.
 
The increase in poultry production (a slight 2% as compared to 2004) is far behind levels recorded in 2001. The well developed and vertically integrated poultry sector has had to overcome foreign exchange restrictions, food price controls, restricted import licenses for feed ingredients and falling consumer demand. Today, two companies represent about 44% of the poultry sector, followed by several small to medium sized companies. The general market operation is for larger operations to contract with smaller producers to supply all inputs and to buy all production.
 
No significant change in economic policies, including the current food price controls and foreign exchange controls are expected, since higher oil prices have lessened the need of the Government to change its policies. Venezuela's economy depends on oil and is the world's fifth largest oil exporter.
 
CONSUMPTION
 
Poultry meat consumption for 2005 is forecast to increase by 3%, mainly because poultry meat is reasonably priced as compared to other meats (beef and pork.) Despite GOV food price controls in place since February 2003, increasing prices of red meat continue to drive many consumers towards poultry and poultry products.
 
PRICES
 
The GOV adjusted its price ceiling for whole chickens in April 2004, when the price was set at Bolivars 3,130 per kilo ($.074 per pound.) Actual market prices are generally above the official price.
 
TRADE
 
The first imports of poultry since 1993 took place in the middle of 2003 and imports are expected to continue growing to reach 20,000 tons in 2005. The GOV lifted the previous import ban to allow imports for distribution by the government. All recorded imports have been carried by the government through two state-trading enterprises: CASA and CVA (Corporacion de Abastecimiento y Servicios Agropecuarios and Corporacion Venezolana Agraria), whic h have purchased from Brazil for political reasons.
 
The GOV maintains tight controls on imports through the issuance of sanitary import permits. Imports were banned between 1993 and 2003 through denial of sanitary permits. The ban was first maintained by a prohibition on imports from countries with any form of Avian Influenza (AI) existed. This was later amended in 1997 to allow imports from these countries, but the Venezuelan Animal and Plant Health Service (SASA) continued to restrict imports by not issuing the import permit. The GOV continues to deny import permits to the private sector.
 
The Government announced that poultry imports would be approximately 17,000 tons in 2003, but official trade numbers only show imports of 6,000 tons. FAS/Caracas estimates that actual imports were 7,000 ton in 2003. Imports could reach 15,000 MT in 2004, although verification of these imports through official numbers will be difficult since imports are currently being carried out directly by the government and do not pass through regular custom channels.
 
The imports are coming from Brazil largely due to government policies to favor imports from there. Imported frozen Brazilian poultry is sold by the government in low-income neighborhoods of the country, primarily in Mercal stores, were logistical or spatial distribution problems make sales of fresh poultry difficult. The product is sold in these markets below the controlled price, which is below the price of domestic product.
 
TARIFF
 
As a member of the Andean Community, poultry and poultry product imports from non-Andean countries are in theory subject to the Andean Community Price Band System (the Andean price band duty for the first two weeks of September 2004 is 104%). The GOV stopped applying this duty, however, when it exempted basic food products from tariffs and taxes in July 2003.
 
Source: USDA