September 19, 2003
Outlook For Romanian Poultry Production 2003
Romanian domestic poultry production is expected to increase by 12% in 2003 and 10% in 2004, due largely to increased demand and subsidies, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site released Thursday.
Production grew by 15% in 2002, and is expected to continue to increase at an impressive rate: by 12% in 2003 and 10% in 2004, reaching 225,000 metric tons. This indicates that the sector recovery is underway. About 110 million of live birds were slaughtered in 2002 at an average weight of 1,8 kg. This number is expected to slightly increase, along with an average weight.
These figures only include the production obtained from commercial farms, large and small. Household production for self-consumption, was excluded since it does not reach the market.
Subsidies and productivity improvements have mainly driven the production increase. Weight gains per day varied depending on farm performances between 36-41 grams/day in 2002 compared to 27-34 grams/day in 2000. Feed conversion ratios decreased from 2.27 kg feed/kg meat in 2000 to 2 kg feed/kg meat in 2002, which indicates that the sector used its inputs more efficiently.
Nevertheless, increasing feed costs, past debts and declining profits create worries for domestic producers. Feed costs were up by 10 percent in the first half of 2003 compared to 2002, owing to less corn and corn and wheat available in the market. Feed costs are the major source of uncertainty in the market for 2003, as corn and feed wheat prices are expected to be significantly higher than in 2002, which will put pressure on inefficient producers.
Also noteworthy is the level of industry concentration: 6 large farms account for almost 50% of Romania's commercial production. The remaining 50% is divided equally between farms producing 1,500-6,000 MT/year and less than 1,500MT/year. The level of integration varies with farm size and degree of investment. Large farms have fully integrated reproduction, slaughter and processing. Smaller producers are not integrated and deliver their production to local slaughterhouses.
Middle Eastern and E.U. private investors who have acquired formerly state- owned farms are to be the main foreign investors in the poultry industry, the press release said.
Direct payments, for both domestic and export, and input support (vouchers for fuel) were the main types of financial support granted in 2003 to poultry producers.
$818,000 as direct support was given to breeding livestock, in the maintenance of existing flocks rather than in research and development. Such subsidies keep the upward trend of the poultry industry since 2002. Commercial farms were eligible for direct payments worth of U.S. $90/MT live weight, with approximately $11.7 million allocated for 130,000 tons live weight. In April 2003 higher feed prices led to an increase in subsidy to U.S.$120 a ton. The same level of support is expected in 2004.
Export subsidies for 5,000 MT, valued at $650,000, have been recently approved for poultry meat for any destination, except the European Union. Reduce diesel prices also contributed to overall support for poultry farmers.
Currently chilled poultry meat make up 25%-30% of the domestic production, compared to only 10% in 2002. Nonetheless the percentage is quite low compared to other neighbouring countries, like Poland and Hungary, where 90% is sold chilled. Lack of funds prevents investment in new equipment for supplying the market with fresh poultry. The whole birds are sold at an average weight of about 1.3-1.5 kg. Product packaging and design have improved as some companies even developed brand names.
Romanian consumers prefer eating chicken leg and there is no significant price difference between chicken legs and breast.
The total value of imports was the same in 2002 as in 2001 ($57 million) with U.S. exports more than double, from $8 million to $17 million. U.S. exporters accounted for 50% of total imports in the first half of in 2003, followed by Brazil (23%) and European Union (19%).
Total imports of broiler meat slightly decreased over the first semester in 2003 by 5% compared to the same period in 2002 (41,136 MT compared to 38,709 MT). Based on this figure, imports are expected to increase by no more than 5% by the end of 2003 and 3% in 2004. Customs duties for live chicken was reduced in 2003 from 16% to 9%. Nonetheless the support has not been transposed into higher imports of live chicken.
Based on the trade negotiations with European Union, Romania accepted a zero tariff-quota of about 3,000 MT poultry meat to EU with 10% year rate increase. In 2003, Romania accepted 3,750 MT duty free from European Union. Although Romania receives the same tariff preference quota for shipment to the EU, it has not taken full advantage of the agreement. It is expected that only half of the quota will be fulfilled in 2003, partially because of high domestic prices and inadequate standards for quality and packaging. The main poultry product exported by Romania to EU is chicken breast.
Central European Free Trade Agreement (CEFTA) member countries continue to enjoy a preferential duty level of 28% for meat and 10% for frozen chicken liver. As a result of FAS efforts to promote the Export Credit programs, some long-established importers have been using in 2003 Supplier Credit Guarantee Program for poultry meat imports, with a total value exceeding $700,000.
There are currently 6 slaughterhouses approved for EU exports and 4 more are under the approval process. However, the exports have not increased spectacularly, remaining at a level of less than 1% of total production. The export subsidies might result in higher exports if the poultry producers succeed to identify markets with less competition and fewer marketing requirements. For now, the main export markets are the European Union (Germany and France). Following current trends, exports are expected to reach 3,000 MT in 2003 and 5,000 MT in 2004.
Private households account for about 300,000 turkey birds, with commercial famrs holding less than 20,000. Romanian Customs Office reported imports of 13,000 MT in 2002 mostly turkey cuts, 40% higher on year. Romanian's main turkey exporters are U.S., Italy, Germany, France and Hungary. Consumption of turkey meat seasonally, mostly in spring and winter for holidays.
There are good expectations regarding poultry consumption in Romania. Romanian consumers prefer poultry meat for it is perceived to be healthier than red meat.
Over the first six-month period of 2003, prices at farm - gate increased by 10-15%. This is due to both feed cost and demand increase. Prices are expected to stay within range, given grains availability and meat supply.