February 4, 2017
Third time lucky for Turkey's broiler sector: Will its once booming fortunes rebound after two unlucky years?
An eFeedLink Hot Topic
  • Prior to 2015, exponential expansion made Turkey into a leading emerging broiler exporter
  • A succession of trade sanctions, terror attacks, bird flu outbreaks, currency-inflated feed costs and attempted government overthrow gave the industry two terrible years
  • Revenues fell more than production and export volumes, just in time for production costs to inflate
  • Iraq's banning of chicken from rival exporters, new export frontiers in Russia, Saudi Arabia, a rebounding economy should make 2017 a good year
Whether measured in supply, demand or world trade terms, Turkey's broiler sector was one of the world's fastest growing agribusiness meat line in the fifteen years after the 2000. This unfortunately, is no longer true.
For the past two years, terrorism, import tariffs, bird-flu, currency fluctuations and domestic political woes have caused the Turkish broiler sector's once exponential export growth to stall and sharply retreat.
From a mere 2,000 tonnes in 2000, exports skyrocketed to 110,000 tonnes by 2010. Then they more than tripled in four years. By 2014, they had grown to 379,000 tonnes.
From 2000 through 2014, exports jumped 18,850% over 14 years, from 2,000 tonnes in 2000 to 379,000 tonnes in 2014. Turkey's domestic market also did much to stimulate the industry. Per capita consumption jumped from 10.5kg in 2000 to 21.0kg in 2014. A 140% rise in consumption over 14 years (from 0.66 to 1.578 million tonnes) complimented the export boom.
By 2013, Turkey overtook China and looked like it could overtake Thailand as the world's number three exporter. Stimulated by strong export and domestic demand fundamentals, production rose nearly 200% in 14 years, from 0.662 million tonnes in 2000 to a peak of 1.96 million tonnes by 2014 –but the news has been all bad since then.
In early 2015, Iraq (which absorbed 55% of exports) jacked up its tariff on Turkish chicken meat a whopping 644%. This caused Q1 2015 exports to fall off a cliff until the tariff increase was rescinded in mid-year. Bird flu outbreaks in the first half of that year also rocked the industry and reduced the supply available for export.
No sooner was Iraq's tariff barrier removed than a series of terror attacks made truckers reluctant to make the journey from Turkey to Iraq, again nosediving shipments. By the time it became safer to transport broiler meat to Iraq, bird flu outbreaks had begun undermining the supply of broiler meat available for export, with neighbouring countries banning exports from afflicted parts of Turkey.
On one hand, 2015 exports fell 15.3% to 321,000 tonnes by volume. The 58,000 tonne fall in shipments was entirely caused by Iraq, where volumes fell from 215,000 tonnes in 2014 to 166,000 tonnes in 2015.
Despite falling off sharply, exports still did far better than the 250,000 tonnes initially feared when Iraq first slapped tariffs that turned out to be temporary. On the other hand, export interruptions caused by terror attacks, bird flu and tariffs resulted in a loss of market confidence. Relative to the 15% fall in export volumes, their value fell a steeper 35.4%, from US$620 million to US$400 million. 
The impact of falling export revenues was made worse by rising costs. Iraq's trade barriers and terror attacks made it impossible to take advantage of a 21% fall in the Turkish lira's value. At the same time, this currency devaluation sent the cost of imported feed inputs like soymeal skyrocketing, inducing exceptionally steep losses.
It was hoped 2016 would be a year of recovery but four factors worked against the industry. First bird flu outbreaks from late 2015 through Q1 2016 held back production. Second, a new round of terror attacks in late 2015 and early 2016 again made it difficult to find drivers willing to ship Turkish chicken to Iraq and Syria in Q1 2016.
Third, Turkey's shooting down of a Russian military plane in late 2015 caused the latter to ban Turkish broiler meat exports until late 2016. This was unfortunate. From almost nothing five years ago, Turkish broiler meat exports had grown to 18,000 tonnes in 2014. By mid Q4 2015 when Russia banned Turkish chicken meat, 21,168 tonnes had been shipped to that country.
Russia's ban reduced Turkey's 2016 export volume by approximately 30,000 tonnes. It played a big role in keeping broiler last year's exports below their 2014 record volume.
Finally, 2016's attempted (but failed) military coup caused an economic contraction and subsequent sharp fall in meat consumption. Instead of rising 7.7% from 1.588 million ton 1.710 million tonnes as initially anticipated, chicken consumption slumped back 1.8% to 1.56 million tonnes.
With both exports, domestic consumption and profit margins all slumping over the past two years, production came in below what was forecasted. Instead of originally USDA forecasted 1.95 million tonnes, 2015's output amounted to 1.910 million tonnes –down 2.9% from 2014's peak output of 1.956 million tonnes. Last year, a combination of bird flu outbreak-driven export restrictions made
2016 was supposed to be a year of recovery. On the bright side, bird flu and the terror attacks abated after the first quarter. This allowed export to stage a partial 5.9% recovery, from 321,000 tonnes to 340,000 tonnes, though this is still well below the 379,000 tonne peak set in 2014.
On the other hand, with the economy slowing down and a violent, failed military coup shaking consumer confidence, the resulting slack consumer demand destroyed early expectations. Instead of totaling a USDA estimated 2.05 million tonnes and rising 5%, production fell back 0.5%, to 1.9 million tonnes.
The resulting oversupply crashed prices even below the low levels seen in early 2015, when Q1 exports to Iraq fell by nearly 80% on-year. All the above woes caused the average value of exported Turkish broiler meat to fall 33% in two years; from US$1,692/tonne in 2014 to US$1,382/tonne in 2015 and US$1,140/tonne in 2016.
The good news is that after two dreadful years, things are finally looking up for Turkey's broiler sector. Iraq is now the world's fourth largest broiler meat importer (after Japan, Mexico and Saudi Arabia). Bird flu outbreaks made Iraq ban chicken from nearly two dozen European and Asian countries including China, South Korea, Britain, France, Finland and South Africa. This means that after watching its exports to Iraq fall by 30% in two years, the latter has no choice but to resume buying chicken from Turkey.
At the same time, Russia has restored full diplomatic relations with Turkey and recently approved sixteen poultry processing plants for export. From nearly zero exports in 2016, this expected to enable chicken exports to Russia to break their old 2015 peak and total 25,000 to 30,000 tonnes. Going forward, provided relations with Russia continue to improve, broiler meat shipments to that country could total 70,000 tonnes or more by 2020.
Turkey is also in the process of concluding negotiations with Saudi Arabia, the world's number three chicken meat importer. Should negotiations conclude before the end of H1 2017, shipments to that country could multiply far above the 3,000 tonnes exported in 2016 and rival the potential of Russia's market.
Hence, after falling 15% in 2015 and recovering 5.9% in 2016, eFeedLink believes that 2017 exports will exceed the current USDA forecast of 360,000 tonnes, rising a stronger 11.8% to 380,000 tonnes, approximately equaling or breaking their 2014 record.
With Turkey's economy recovering and political stability returning, domestic consumption should break out of the 1.55 to 1.58 million tonne range it has been stuck in since 2014. The USDA forecasts it to increase 5% to a record 1.64 million tonnes in 2017. Powered by healthy rises in both domestic demand and exports, production should rise 5.3% and exceed 2 million tonnes for the very first time.
Going forward, Turkey's broiler sector is far more mature than it was during the rapid growth years spanning 2000 through 2014. While its domestic market could still double per capita consumption before reaching US levels, from here on in, neither consumption nor exports can grow at the 10%+ rates taken for granted for most of the past fifteen years.
Even so, its proximity to large buyers like Iraq, Saudi Arabia and Russia gives it much longterm promise. Turkey will take its place alongside Thailand and Argentina as one of the world's top second tier chicken meat exporters.

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