September 9, 2010

Soaring grain prices to end EU poultry farms' winning run

Europe's poultry farmers, who dodged the effects of the world financial crisis, will prove unable to escape the impact of high grain prices, bringing to an end a four-year run of solid growth.

EU broiler production had, unexpectedly, grown throughout the world recession, supported by a switch by cost-conscious consumers to chicken from more expensive red meats. Overall expansion had reached 2% in both 2008 and 2009, with growth in the UK, the region's top producer, approaching 7% last year.

However, the rebound in grain prices, whose low prices last year helped producers keep prices low, represented a bigger threat, and would slow production growth to less than 1% in 2011 as farmers' margins shrink.

UK production is set to remain at 1.3 million tonnes, while that in the Benelux countries, together Europe's second biggest producer, and third-ranked Spain will fall, according to reports.

The slowdown will come in the face of the eradication of export growth, which over the last three years has averaged more than 8% a year, helped by the weakening of the euro and the relative resilience of the Middle East, a major buyer of French chicken.

Shipments have also been supported by a jump in purchases to Russia, which for most of this year blocked imports from the US on food safety grounds.

In 2011, EU exports are forecast to stagnate as competitors are expanding production and high feed costs are expected to reduce the competitiveness of the EU poultry sector, the report said.

At least the region's own customers will keep on purchasing more, USDA officials forecast, pegging consumption growth at 100,000 tonnes next year.

France, the third-biggest market, will expand by 3%, amid growing perceptions that chicken is healthier and leaner than red meats, while fourth-ranked Germany will maintain run of growth driven by the success by so-called "D/D/D", or "born/raised/slaughtered" labelling.

This system had proved effective in promoting domestically-reared chickens over those even from neighbouring countries, prompting an expansion drive by German poultry processors.

The report noted that as a result self-sufficiency for broiler meat increased from 92% in 2004 to 99% in 2007 and 105% in 2009.