China broiler output to rise three percent in 2010

The US Food and Agricultural Service in Beijing (FAS) projects a modest increase in China's 2010 broiler meat production, rising three percent to 12.5 million tonnes (MT), following an estimated two percent increase in 2009. Domestic demand continues to rise steadily fuelled by rising sales through fast food chains and other foodservice channels.

 

Post forecasts China's total broiler imports in 2010 to decrease three percent to 360,000 MT, following an estimated 7 percent decline in 2009. While overall imports continue to slide, demand for imports from the United States has risen, up 10 percent so far in 2009 on top of record sales in 2008. The recent opening of China to direct sales from Brazil may challenge continued steady gains in US sales.

 

Post forecasts China's broiler meat exports in 2010 to increase three percent to 287,000 tonnes as the global economy begins to rebound. This follows an estimated two percent decline in 2009 as slow sales to Japan are partially offset by higher exports to Hong Kong.

 

FAS Beijing forecasts China's broiler production in 2010 to increase three percent to 12.5 million tonnes (MT) from an estimated 12.1 MT in 2009. Sluggish sales in early 2009 are being offset by rising demand in the second half of this year fuelled by the rising Chinese economy and a steady rise in pork prices (up 15 percent since June). Traders report the large volume of frozen stocks at the beginning of the year has been mostly depleted, further improving incentives for Chinese producers.

 

Producers are also benefiting from a general decline in feed prices, down nearly 10 percent from mid-2008. Ministry of Agriculture is projecting modest growth in corn production in 2009, which should create additional downward pressure on feed prices into 2010.

 

Rising foreign investment through joint ventures (JV) in raising, slaughter and processing is improving production efficiency at large-scale operations in China, which account for an increasing share of Chinese broiler production. In May 2009, US Tyson Foods Co., Ltd. set up a fourth JV with Xinchang Group, Shandong Province. Meanwhile, Japanese investors recently agreed to a JV with Shuanghui Group with a total capacity to hatch, raise, slaughter, and process 50 million birds a year. Post expects the latter is being geared to meet the specific requirements of Japan, China's most important export market.

 

Post forecasts China's broiler consumption in 2010 to increase three percent to 12.6 MT following a two percent increase in 2009. Modest demand growth is being fuelled by lower prices and rising foodservice demand, especially at foreign fast food chains. Kentucky Fried Chicken (KFC), the largest foreign fast-food chain in China, is now operating over 2,400 outlets, up from 1,206 in 2004. ATO Guangzhou notes KFC mainly procures its broiler supplies locally through opening bidding based on price and KFC internal food standards, which require no higher than -12°C air conditioned container at the time of delivery, and specified weight of pieces, i.e., believed to be 1.06-1.41 oz (30-40 grams) for drumsticks and 2.82 - 3.50 oz. (80-100 grams) for boneless chicken legs used as fillets. McDonalds is also relying on chicken items to pursue growth in the Chinese market. Recent promotions include chicken leg-quarter burger and three-piece chicken wings, value-priced at RMB9 ($1.25). Foreign fast food chain restaurants in China will play an increasingly important role in Chinese broiler consumption.

 

Post forecasts China's total broiler imports in 2010 to decrease three percent to 360,000 tonnes, following an estimated 7 percent decline in 2009 due to increased domestic production. While total broiler meat imports are lower, demand for imports from the United States continues to rise in 2009. In the first six months in 2009, total Chinese imports of US broiler meat (including trans-shipments through Hong Kong and chicken claws) reached 391,723 tonnes, up almost 10 percent from the previous year. The strong performance in the first half of 2009 follows record sales in 2008 that totalled 641,000 tonnes, up 19 percent from the previous year. Traders report the strong demand is due mainly to competitive pricing and reliable supplies from the United States.

 

 

Direct imports from Brazil are expected to rise in the near term as the number of facilities approved by China for export expands. In May 2009, China announced it had resumed trade by provisionally lifting its suspension on 24 Brazilian plants. However, traders report that only five of these facilities are currently approved to ship. Historically, Brazilian broiler products mainly entered China via Hong Kong or Vietnam through gray channels. The first direct shipments from the recent plant approvals are reported to arrive in late summer. Traders predict Brazilian broiler meat may become a greater threat to US sales gains as Brazilian chicken claws and whole wings are competitive based on quality, and prices will be lower compared to Brazilian chicken marketed through gray channels.

 

Lower US turkey production and a double-digit price increase in 2009 have dampened Chinese demand for US turkey meat. Sales through June are down 55 percent to just over 16,000 metric tonnes compared to the same period in 2008. Since broiler meat is a close substitute for turkey meat, turkey meat demand will likely continue weak into 2010, unless prices fall vis-a-vis chicken. Imports account for the great majority of the Chinese turkey meat market. Total turkey meat sales were estimated at 50,000 - 60,000 tonnes in 2008, with local production accounting for just 5,000 tonnes of total volume.

 

On the other hand, China's broiler meat exports in 2010 will increase two percent to 287,000 following an estimated two percent decrease in the previous year. Japan remains China's largest export destination accounting for almost half of total shipments. Sales to Japan continue to be sluggish due to the weak Japanese economy and rising competition from Brazil. Overall, traders report stocks in Japan are high and do not see potential for growth until the Japanese economy improves in 2010. Meanwhile, exports to Hong Kong are expected to rise in the near term due to Hong Kong's declining chicken production capacity.

 

In the first six months in 2009, egg prices decreased four percent on average compared with the same period in the previous year. Low prices have been fuelled primarily by over supply.

 

According to the Chinese egg layer industry, in the first 21 weeks in 2009, the weekly inventory of grand-parent (GP) generation breeding stocks was 627,700 sets, a 27 percent increase from the same period in the previous year. The inventory of parent-generation breeding stocks from 31 commercialized farms across China increased 24 percent to nearly 4.7 million sets from the same period in 2009. From January to June 2009, although China's imports of GP-generation breeding stock decreased 40 percent to 73,900 sets, domestic developed new GP-generation breeding stocks - Jing Red 1, and Jing Pink 1 - produced by Yukou Poultry Company are expected to fill up the gap.

 

China's egg exports have fallen 8 percent so far this year, after rising 37 percent in 2008 to US$105 million. Hong Kong and Macau continue to account for over 80 percent of China's exports.