September 17, 2007

 

USDA: Thailand broiler industry set to rebound

 

 

Since April 2007, Thailand's broiler industry has successfully addressed many issues plaguing them in the past year. The factors driving this turnaround include increased productivity, reduced pressures from high stocks, and increased prices in both domestic and overseas markets, according to a US Department of Agriculture attache report posted Friday (September 14) on the Foreign Agricultural Services Web site.

 

The country's broiler meat production is expected to increase at least eight percent in 2008 on improved market conditions and increased productivity. Trade sources expect export demand for Thai cooked poultry meat to also increase in 2008. Domestic consumption should rebound to some degree, as the economy is expected to pick-up after a new general election. On the supply side, trade sources report that the average feed conversion ratio (FCR) in integrated broiler farms has increased as nearly all of commercial broiler producers continue to seek improved genetics, and are utilizing evaporative cooling systems in their broiler facilities which effectively prevents disease. The feed conversion ratio (FCR) has reportedly improved from 2.0 to 2.1 from the current 1.7 to 1.8. The average weight of an individual live broiler has also increased from 2.0 kilograms per bird to currently 2.4 to 2.5 kilograms per bird.

 

Despite the increased average weight of a live broiler, estimated broiler production for 2007 has been revised downward as broiler processors reduced their chick production, from 18 to 19 million birds per week in late 2006 to currently 14-15 million birds per week. The move was driven by business losses the Thai broiler industry faced in 2006 and the first quarter of 2007. Huge stocks of poultry meat in early 2007 compelled the industry to scale down broiler production.

 

However, decreased supplies of broiler and chicken meat production are better shaping up the Thai broiler industry since May 2007, and should continue until the end of 2007. Domestic prices for all broiler products have risen across the board, from broiler chicks to chicken meat. Stocks of chicken meat dropped sharply in the last few months. Export prices (in net Thai bath term) also increased due to strong demand from major buyer countries.

 

Live broiler production costs next year are forecast to be around 28 to 29 baht/kg (38-39 cents/pound), which are close to the 2007 level.

 

Although feed costs continued to increase sharply 2007, its effect on average live broiler production costs has been partly offset by increased productivity. As a result, average live broiler production costs in the first seven months of 2007 (Jan to July) rose by 3 to 4 percent from the same period of 2006 to about 29.00 baht/kg (39 cents/pound). Current average production costs are 29.50 baht/kg (40 cents/pound), which is derived from day-old chicks (7.00 baht), feed (18.00 baht), vaccination and drugs (1.00 baht), and labor and other costs (3.50 baht), respectively.

 

As H5N1 bird flu hit Thailand periodically since January 2004, fortunately there are no current outbreaks reported of HPAI-related deaths or culls in broiler farms since the reoccurrence of the disease in July 2006. Both relevant government agencies and integrated broiler processors claimed that broiler farms, especially broiler farms belonging to integrated producers, have never been infected by the HPAI. They believed that the prevailing stringent biosafety surveillance and controls have effectively prevented their farms from coming in contact with HPAI. The last incidence of bird flu case was confirmed on March 28, 2007. 

 

The Department of Livestock Development (DLD) maintains the same disease surveillance and control measures as in past years, including poultry depopulation, disinfection of affected premises, cloacal swab screening in a 5-kilometers radius of the infected farm, control of movement in a 10-kilometers radius of the infected farm, and extended intensive screening and control (called X-ray campaign).

 

Though avian influenza (AI) vaccination is prohibited in Thailand, the Thai agriculture ministry said the Royal Thai Government might apply bird flu vaccinations as a backup measure to control AI outbreaks in the near future. The DLD recently conducted a joint meeting with the Bureau of Budget, Ministry of Finance, and agreed to set aside a budget of 68 million baht (US$ 2 million) per annum as a part of HPAI preparedness programs.

 

According to the DLD's classification system for avian influenza, a level 1 designation refers to outbreaks reported in one sub-district, occurring sporadically in different plots of the area; level 2 refers to outbreaks reported in no more than three sub-districts with the ability to be contained within one week; level 3 refers to outbreaks reported in 3-8 sub-districts and remain more than two weeks; and level 4 to outbreaks reported in more than eight sub-districts and remain more than two weeks. The DLD plans to produce bird flu vaccines in its existing vaccine plant in Pakchong District, Nakhon Ratchasima, about 170 kilometres northeast of Bangkok.

 

On the other hand, domestic chicken meat consumption is forecast to increase by four percent next year on elections in early 2008. In addition, anticipated high prices for other protein sources, especially pork and beef, should benefit chicken consumption.

 

Broiler meat consumption this year is seen to up slightly from the 2006 level due mainly to unfavourable economic situation associated with a military coup in late 2006 and political uncertainty, and increasing chicken meat prices.

 

Average domestic prices for live broilers in the first half of 2007 (Jan-Jun) increased by five percent over the same period of 2006 to 30.17 baht/kg (approx. 40 cents/pound) due mainly to curtailed supplies of live broiler. However, average retail prices for chicken boneless breast meat in Bangkok in 2007 (Jan-Jun) dropped by 14 percent to 69.43 baht/kg (84 cents/pound) over the 2006 level as high chicken meat stocks plagued early 2007.

 

On the export scenario, the sector anticipates that cooked chicken meat shipments will continue to grow at least 10 percent in 2008 with EU and Japan as the biggest buyers. Trade sources believe that the EU's quota administration, which began in 2007, turned out to benefit Thai exports with higher than average quota allocations. In addition, China, a major competitor in Japanese market, is likely to lose its competitiveness with Thailand due to growing domestic consumption and increasing global concerns on food safety.

 

Thailand's chicken meat exports in 2007 should reach 290,000 tonnes based on export figures from Jan-Jun 2007 and reports from trade sources. In the first half of 2007, the EU and Japan remained major markets for Thai chicken meat exports (all cooked products), accounting for 49 and 40 percent, respectively.