MLBA6: December / January 2009
Looking towards an uncertain 2009
Asia's livestock industry performance in 2008 leaves many questions unanswered for 2009. A year that began with record-high livestock feed prices and the spectre of shortages ended with crashing livestock rearing costs and the prospect of an equally large fall in prices in 2009.
Macroeconcomically, the trend was more in favor of liberalizing imports than exports. Countries ranging from Korea to China, Philippines to Thailand liberalized imports of everything from livestock feed to beef and pork. This helped bring down costs in the inflationary first half of 2008. However, last year's food safety scares are still fresh in western minds. Amid new concerns about melamine in Chinese dairy products, parasites in Thai shrimp, antibiotics in Vietnamese seafood, rising Asian currencies and the prospect of a severe recession in the west, Asian meat exports face a challenging 2009.
Despite all these challenges relating to the cost of creating meat and the later challenges of keeping consumer demand growing, Asia's meat industry made inroads with respect to its own supply and productivity. The question going into 2009 is whether that really is enough.
Supply has become less problematic as the prices for feed grains, shipping and farm machinery fuel are all falling. However, export markets have already contracted and the recession is expected to impact domestic Asian meat demand soon. In addition, while feed grain prices are low, they may lead to underplanting and another subsequent explosion in feed grain costs in the latter half of 2009.
We examine how Asia's most advanced meat exporter met this year's challenges.
China: Pork takes center stage
For the first half of 2008, China produced 31.92 million tonnes of meat, an increase of 4.8 percent over the first half of 2007. Pork production was 21.19 million tonnes, beef production 2.5 million tonnes, mutton production 1.22 million tonnes, poultry production 6.96 million tonnes. For these sectors, the increases in comparison to 2007 are 4.3 percent, 4.4 percent, 4.2 percent and 6.9 percent respectively.
In the first half of 2007, poultry production was 11.8 million tonnes, a surge of 6.1 percent compared to last year, milk production was 11.3 million tonnes, a jump of 11.3 percent from the first half of 2006. However, after years of double-digit growth, aquaculture is now on the way to becoming another meat line with single digit growth rates. Aquaculture production for January to June was 21.82 million tonnes. While this is a respectable increase of 4.6 percent, it is much lower than the annual double digit rises in farmed seafood output common prior to 2006.
Refrigerated meats represent the fastest growing market segment. Indeed, thanks to China's country-wide cold chains and relatively ubiquitous availability of electric power, the market for processed, refrigerated meats has been able to expand much more quickly than in India. These processes are now prevalent as industry players are taking a keen interest in setting small-scale farms.
Along with a nationwide infrastructure capable of supporting meat processing, transport and cold storage, rising living standards and urbanization are fueling rapid growth in China's per-capita meat demand. While the growth of refrigerated meats indicates a diversity of meat formats, prosperity has also diversified the types of meat that Chinese eat.
Thailand: Can pork become an export machine?
Meanwhile, Thailand, in many respects, is where large, lucrative but underdeveloped meat sectors in countries like China or India would like to be.
With respect to land animals, Thai broilers lead by market value and exports followed distantly by hogs and pork. Indeed, aquaculture, not pork, is the second largest Thai meat export line and shrimp has always been its major output, though this is starting to change. Broiler and shrimp are top exports while pork enjoys a good market in Japan, Malaysia and Hong Kong and is making inroads in Singapore, the EU and other countries.
Chief among Thai livestock lines is its export-led broiler sector. Broiler production was 787 million birds in 2005, 850 million in 2006 and 880 million in 2007, according to the Department of Livestock Development. Growth this year was initially estimated to be 10 percent over last year's and amount to approximately 970 million birds. But on account of the current global economic slowdown, food exports are projected to fall by 10-15 percent during the second half of the year. According to eFeedLink, a more realistic estimate would be about 920 to 940 million birds for this year.
After giants like CP and Betagro introduced the contract farming model, the past two decades have witnessed a tremendous expansion of Thailand's commercial broiler industry. Between 1974 and 1981, the annual growth rates of the number of broilers and in the quantity of poultry feed produced were 30 and 24 percent, respectively. Thailand is now the world's fourth largest chicken-producing countries and one of the largest exporters to Japan and the EU.
The economies of scale associated with large-scale production, marketing and processing motivated major feed mill companies to introduce vertical integration into the Thai poultry industry. Just when everything looked perfect however, bird flu cratered exports for several years. Yet, exports recovered in the form of cooked poultry and even here, Thailand became a leader in controlling livestock disease epidemics.
In this way and many others, the Thai poultry industry represents a classic rags-to-riches, export driven success.
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