September 22, 2017
New World broiler meat exporters: Steady America and a Latin bird shuffle
America maintains its poultry production dominance as one South American exporter knocks off another.
By Eric J. BROOKS
An eFeedLink Hot Topic
North and South America dominate the world poultry meat market. 46 million tonnes of the world's 89.5 million tonnes of 2017 chicken meat output will be produced in the Americas. The US (18.6 million tonnes), Brazil (13.4 million), Mexico (3.9 million) Argentina (2.2 million) and Canada collectively produce 44% of all the world's chicken meat.
The industry is structured such that Canady imports and exports an equal amount of chicken meat from its NAFTA trade partners while America and Brazil export to the world. Until recently, Argentina supplied a lion's share of South American chicken meat imports. Rocked by everything from poultry diseases to currency shifts and Venezuela's economic collapse, this once stable arrangement is now changing.
America's chicken meat exports gave Brazil competition for the world lead until 2014, when bird flu hit the industry. To America's credit, the nasty avian influenza outbreak was brought under control without badly impacting domestic chicken consumption. While the epidemic cost US$1.3 billion in direct losses and US$1.9 billion in lower prices and lost exports, chicken meat production was barely impacted.
Even in 2015 when the outbreak peaked, US chicken meat output still rose a heady 3.8%, to a record 17.97 million tonnes. It subsequently rose 1.8% to 18.26 million tonnes in 2016. For 2017, it is increasing a USDA estimated 2.0%, to 18.64 million tonnes. With per capita consumption rising from 42.5kg in 2012 to 47kg this year, chicken that was banned from exporting found a ready market in America itself.
Exports took the brunt of bird flu's damage but even here, losses were limited: Fearful of America's economic power, most importing nations banned chicken from bird-flu affected US states for up to 90 days. -No one dared to ban US frozen chicken exports for eight years the way Thailand's was in 2004.
Hence, from 3.31 million tonnes in 2014, US chicken fell 13.4% in 2015. At a USDA estimated 3.14 million tonnes this year, exports have not yet recovered to pre-bird flu crisis levels but are expected to exceed them in 2018. All this is relatively minor compared to the 40% drop in broiler meat exports and eight year recovery time Thailand went through.
Unfortunately, US broiler shipments sagged just as world broiler export demand jumped, resulting in a world market share loss. Burdened by an expensive US dollar, America's share of world chicken exports had already fallen from 40% in 2007 to 30% by 2012. In 2015, bird flu made America's world chicken market share drop to 27.9%.
2017's USDA estimated chicken export volume of 3.14 million tonnes will be 9.5% above its post-bird flu low. Even so, Thai and Brazilian exports grew much more quickly, giving America with a 28.1% share of the world chicken market.
Burdened by a high US dollar, exported US chicken has increasingly stayed within NAFTA or free-trade sheltered markets within the Americas themselves. Popular US chicken export destinations include Mexico (784,000 tonnes, 26% of 2016 exports) and Chile (50,000-tonne tonnes or 2%), with another 5% going to NAFTA partner Canada.
Since bird flu hit the US, Brazil has seen chicken exports skyrocket: From 3.428 million tonnes (to America's 3.335 million) in 2013, its shipments will have risen 23% in four years to a USDA estimated 4.28 million tonnes this year. -But American bird flu woes are not responsible for Brazil's poultry's resurgent performance.
From 2013 through 2016, the Brazilian real depreciated by 50% against both the US dollar and Argentina's peso -but it was Argentina, not America, that bore the brunt of Brazil's price competitiveness. At a USDA projected 158,000 tonnes, Argentina's 2017 chicken exports have fallen 53% below the 334,000-tonne record set in 2013.
Venezuela's oil-price induced bankruptcy slashed Argentine chicken exports by 125,000 tonnes. Because of Brazil's simultaneous currency depreciation, Argentina, which formerly dominated South American chicken imports, was squeezed out by cheaper Brazilian supplies (see MARKETS article on Argentine chicken).
Bird flu notwithstanding, US and Brazilian chicken rarely go head-to-head in world markets: Brazil exports to countries like Japan which prefer boneless chicken. America supplies bony, dark meat cuts such as wings, thighs or drumsticks, which are popular in Latin America and the Middle East. America's world poultry market losses were due more to a bird-flu afflicted industry's inability to export than Brazilian competition.
Blessed by the world's largest domestic market, America's poultry trade is damaged but its broiler output has fully recovered from bird flu. It actually widened the output gap between its own broiler meat output and Brazil's. This means that while it trails Brazil in chicken exports by more than before, the impact on US poultry's bottom line is minimal.
On the other hand, back in 2013 (before bird flu struck America), most observers expected Argentina's 2017 broiler export volume to be approximately 300,000 tonnes higher than it is today -and that coincidentally, is how much higher-than-expected Brazil's chicken export volume is. Thailand expanded chicken exports at the expense of Brazil in Japan and of America in other markets, causing minimal damage to both. By comparison, Brazil literally ate Argentina's lunch in Latin America.
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