July 23, 2020
World chicken exports: Thailand to snatch market share from Brazil
By Eric J. Brooks
An eFeedLink Hot Topic
In China, Japan and Europe, Thailand is making a concerted effort to take back some of Brazil's large market share.
With Q1 Thai chicken consumption down by 50% on-year and prices down 25%, the resulting 60%+ drop in domestic revenues makes jacking up exports a matter of economic survival. For 2020, the USDA sees a 12.2% drop in Thai consumption (from 3.3 to 2.9 million tonnes) being outpaced by an 18.7% production drop, from 2.459 to 2.00 million tonnes.
All this is forcing more Thai chicken into the world market, where its prospects look much brighter than a few months ago. Thailand has its COVID-19 epidemic reasonably well controlled while Brazil's outbreak is one of the worst in the world.
The epidemic is reducing Brazil's capacity for processing chicken meat and fulfil its export commitments –just like it did America earlier. Instead of the previously forecasted 4 million tonnes, the USDA expects Brazil to export 3.88 million tonnes, which is almost unchanged from last year.
By coincidence, Brazilian chicken is also Thailand's main competitor in the large EU, Japanese, and South Korean markets, which buy 85% of Thai poultry exports. European, Japanese and Korean importers that import chicken from both Brazil and Thailand have shifted some of their purchases towards the latter.
Japan buys approximately 38% of Thai raw chicken exports and 49% of cooked chicken exports. The EU buys 40% of its cooked chicken shipments and 2% of its raw chicken, with China (25%) and Southeast Asia (22%) absorbing large portions of its raw chicken exports. With cooked chicken making up 67% of the 934,000 tonnes of broiler meat it exported, the replacement of frozen Brazilian exports in the EU, China or Japan with Thai chicken will boost its raw, frozen broiler meat revenues.
This gives a 2020 recession year boost to Thailand's decade long export boom. Based on UN ComTrade data, Thai 2019 poultry export volumes expanded 7% to 934,000 metric tonnes –more than double the 379,000 tonnes shipped ten years earlier. Shipments to the EU expanded 4% 237,700 metric tons. Exports to China (including Hong Kong) (91,500 tonnes) and South Korea (41,200 tonnes) jumped 147% and 35% respectively. All this was immaterially offset by a 0.4% fall in exports to Japan, to 441,400 metric tons.
Moreover, with CP as the first foreign company ever allowed into China, Thai exporters enjoy deep, longstanding business ties with importers in the world's fastest-growing poultry market. In April, Beijing increased the number of Thai chicken processing plants it approved for exporting to China from 15 to 22 –and by late this year, it is expected that 28 plants will have been approved. Thai policymakers hope this will boost the quantity of chicken it exports to China to possibly 200,000 tonnes this year.
This will help diversify Thai exports in two ways. One by lessening its overdependence on Japan and the EU, which buy 85% of its chicken imports. Second, just like Southeast Asia did earlier, China is becoming a new, important customer of raw frozen chicken, as Thailand currently exports twice as much cooked chicken.
Consequently, while some forecast a decline in Thai exports, it is now poised to become the first tier 2 poultry meat supplier to reach the one million tonne export level this year. The ascendancy of Thailand in recessionary conditions is made possible by the way COVID-19 knocked exportable American, Brazilian, and European supplies out of contention.
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