November 3, 2021

 

Spain's chicken sector hit by increased feed costs

 
 

The cost per tonne of feed for chicken in Spain had already risen by 26.20% from January 2020 to August 2021, according to estimates by the country's Ministry of Agriculture, Fisheries and Food.

 

Data on the evolution of feed raw material prices from the ministry show a critical situation for the poultry sector. From January 2020 to August 2021, the cost of chicken feed — the most common in distribution chains — rose from €297.42 (US$344.36) per tonne to €375.37 (US$434.61) per tonne.

 

Extrapolating the data to the 600 million birds produced each year in Spain, with an average of 3.9 kilos of feed for fattening (in this area alone), an overrun of more than €198 million (US$229.4 million) is estimated. This extra cost means going from €1.13 (US$1.31) per animal feed to €1.46 (US$1.69), or more than €0.33 (US$0.38) per chicken.

 

According to MAPA's own data, average national chicken prices paid to producers have gone from 1.82€/kg to 1.52€/kg (data February 2020 versus September 2021), 16.49% less.

 

Increases in feed costs would in turn be caused by the rise in key raw materials, which, since January 2021 alone, have observed the following trends: corn, up 20.96%; wheat, up 12.16%; and barley, up 17.99%. In the case of soy, it has risen by 33% from 2020 to 2021.

 

In addition, in 2020, the turnover of the poultry meat sector fell to €2,184 million (5% less than in 2019), due to the crisis caused by the fall in demand, which generated even more pressure for producers.

 

In this way, the increase in feed costs for chickens, turkeys and quails alone would represent 10.16% of the business generated (€222 million, or US$257.2 million, out of the €2,184 million mentioned), to which additional costs would have to be added, such as the adaptation of facilities and the logistics chain in view of COVID-19 measures.

 

Added to this is the cost of electricity, which has gone from an annual average in 2020 of €34.0/MWh (US$39.39) to a six- and seven-fold increase in 2021, with an average annual wholesale market price of over €200/MWh (US$231.68). In standard poultry production (poultry farm and processing), this could lead to a cost increase of more than €0.05/kg (US$0.06) poultry, which is equivalent to more than €87 million (US$100.8 million) per year for the whole sector. Finally, there has been a CPI increase of more than 4%, which has a direct impact on labour costs in the sector.

 

The sum total of all these costs puts the Spanish poultry sector on an additional bill of more than €309.7 million (US$359 million).

 

Poultry meat is also one of the sectors most affected by the price war between the main distribution chains and operators in Spain. The entry of low-cost chicken from foreign markets, even from outside the European Union, also represents a grievance and a threat to the competitiveness of the Spanish sector, as in some cases, low-priced poultry meat that does not meet European production standards is being introduced into the Spanish market.

 

The latest factor impacting on production costs has been the approval of the collective agreements for slaughterhouses and production centres.

 

With a conciliatory vision from Avianza and the search for a scenario of stability to avoid supply problems for consumers, an accumulated increase of 2.01% in labour costs is forecast, which will reach 5.17% by the end of 2021, thus providing for labour stability in the sector.

 

- The Poultry Site / Avianza