December 12, 2003
Global 2003 Poultry and Pigmeat Review and 2004 Outlook
Growth in the poultry sector stalls; Prices stumble
Poultry markets in 2003 are characterized by the slowest output growth in over 30 years because of low prices, disease and weather problems, increased non-tariff trade barriers among importing countries and heightened competition among exporting countries.
Lower poultry meat prices going into 2003 have translated into world production of 75.2 million tons in 2003 with output gains of less than 2 percent, only one-half the level during the period from 1995 to 2002. While poultry output in the U.S., the largest poultry exporter, is up marginally, adverse weather in the EU combined with disease-related losses in the Netherlands are estimated to have led to a decline in EU production of nearly 4 percent.
Meanwhile, developing country output gains, at 3 percent, are expanding by less than one-half the level in 2002. Factors affecting this slower growth include reduced profitability in South America, where feed costs increased in the first half of the year, and the impact of SARS in Asia, which had a dampening effect on poultry consumption and prices.
However, a recovery in Asian poultry consumption and prices has been prompting late-year output gains in Thailand and China, the region's largest producers and exporters. In India, which is now exporting frozen whole birds to the Middle East, higher product prices and continued investment in industry capacity and productivity are expected to support output gains of 14 percent.
The imposition of country-specific quotas in the Russian Federation, the outbreak of SARS and subsequent economic impact in Asia, and market closures due to the outbreak of Avian Flu in numerous countries are leading to the second year of sluggish growth in the global poultry market.
Poultry trade has been estimated at 7.9 million tons for 2003, which means that the level has remained unchanged since 2002, a considerable reversal from the past five years when 7 percent annual poultry gains considerably surpassed those of other meats.
Sluggish consumer demand is lowering imports by China, Japan and the Republic of Korea; market access to China has further been complicated by administrative problems in obtaining import permits.
The imposition of poultry quotas in the Russian Federation, the world's largest poultry importer (nearly 60 percent of consumption is import-derived), is leading to an estimated 20 percent drop in imports and reports of domestic prices rising by 28-90 percent, depending on the cut, during the April-September period.
In Europe, where prices are rising in the context of decreasing supplies, imports are expected to be up despite the closure of a tariff loophole in August which should slow the pace of year-end imports.
Limited export supply availability in developed countries, particularly in the United States and Europe, is eroding their already declining share of global exports, estimated at 47 percent in 2003, down from 64 percent in 1999.
Meanwhile, relatively low production costs in Brazil and a favorable currency are prompting 8 percent trade gains there, while their Asian rival, Thailand, continues to expand exports of processed poultry products to Japan and the EU.
Meat Prospects in 2004
Continued short-term price recovery will likely prompt a slight rebound in production in 2004, with global meat output anticipated to increase 2 percent to 253.1 million tonnes.
The low supply growth that characterized the poultry and pigmeat markets in 2003 is projected to abate as stronger economic prospects in both developed and developing countries strengthen demand for meat.
However, the anticipated growth in pigmeat and poultry output will not be matched in the beef sector as herd rebuilding starts in the United States and Oceania. The tighter supplies typically associated with herd rebuilding are anticipated to limit their export potential; growth in beef supply availabilities is expected to come from developing countries.
The influence of trade-restricting measures in Japan and Russia, two of the major meat importing countries, will persist in 2004 because it is anticipated that both countries will maintain restrictive tariffs and TRQs.
However, overall meat trade is expected to grow 3 percent, supported by strong import demand from the U.S. as its meat supplies decline and a rising Asian demand for pigmeat and poultry, particularly in China.
Continued tightened supplies of beef, combined with a recovery in trade, are likely to maintain upward pressure on beef prices in 2004. Some stabilization is expected for pigmeat and poultry meat in the context of higher production.