December 18, 2015
A bad year for second tier poultry exporters
By Eric J. BROOKS
An eFeedLink Hot Topic
- Trade barriers, bird flu, terror attacks devastate Turkish poultry exports
- Collapse of Russian and Venezuelan economies leaves Argentine exports with no place to go
- A 76,000 tonne, post-2013 Thai export surge is counterweighted by a near 250,000 tonne fall in Turkish and Argentine shipments
While the last two years have been kind to Thai chicken meat exports, the same cannot be said for its broiler market rivals, Turkey and Argentina. In 2015, combined Turkish and Argentine chicken meat exports are approximately 250,000 tonnes lower than in 2013. This swamps a 74,000 tonne export gain made by Thailand over the last two years. Hence, even with America's own poultry exports falling due to bird flu, it leaves second tier poultry exporters in their weakest market position in years.
Separated by geography, culture and catering to entirely different export clients, the Argentine and Turkish poultry sectors are victims of circumstances beyond their control.
Argentine export markets implode
In Argentina's case, to say that broiler sector optimism was disappointed is an understatement. With per capita chicken consumption having doubled from under 20kg in 2000 to 41 in 2015, its saturated, slow growing domestic market has just seen its export prospects dashed. It was not supposed to be this way.
From a mere 11,000 tonnes in 2000, exports multiplied 20 times, reaching 214,000 tonnes by 2010. They then jumped another 56% in three years, peaking at 334,000 tonnes in 2013. Blessed with cheap plentiful feed, many thought Argentina could eventually overtake Thailand in exports. After Russia's boycott of EU and US chicken created a supply vacuum, the USDA revised its 2015 export forecast to 375,000 tonnes.
As things turned out, the oil price crash imploded not only Russia's economy but that of Venezuela, which imported 175,000 tonnes of Argentine chicken meat or nearly half that year's export volume in 2013. Instead of growing by another 15%, Argentina would be lucky to export 100,000 tonnes of chicken to Venezuela in 2015.
In Russia, fast rising domestic broiler production coincided with a huge drop in meat consumption, upending the forecast for higher shipments to that country. Instead of an export bonanza, the USDA reported that, "Higher Argentine shipments to Russia only lasted a few months and ended with the devaluation of the ruble."
With its main export customer and fastest growing market both collapsing, the USDA now expects Argentine poultry meat exports to total 200,000 tonnes. This is a stunning 47% or 175,000 tonnes less than was forecast, and 40% below its 2013 all-time high. Argentina has not exported so little chicken meat since 2009.
The good news is that 2016 promises to be a better year. After three flat years, domestic poultry demand will rise 1.9% or 40,000 tonnes, to 2.1 million tonnes. Exports are also rebounding by an impressive sounding (but not too impressive) 12.5%. The bad news is that with exports nearly 110,000 tonnes below their 2013 secular peak, with per capita consumption at a very high level domestic demand cannot make up for a world poultry market.Over the longer term however, the first pro-free market government in decades has taken power. Should it liberalize Argentina's agribusiness sector as is hoped, the country could finally leverage its natural feed cost advantages and integrated, high-tech poultry processing facilities to expand aggressively once the world poultry market rebalances itself later this decade.
Turkey's Middle Eastern misfortunes
While Argentina struggled with international forces beyond its control, so did Turkey, though in an entirely different way. Last year began badly when Iraqi, which buys about of half of Turkish broiler exports, hiked its import tax on Turkish poultry meat from US$39/tonne to US$290/tonne for several of months before it was rescinded.
With its early year trade crisis over, the second quarter saw Turkish broiler farms endure a succession of bird flu outbreaks. Now that it had a new excuse to do so, Iraq promptly jumped at the opportunity created by bird flu to ban all Turkish chicken imports, instead of just those from affected regions (as was done during America's bird flu epidemic).
The industry was just starting to get back on its feet and begin exporting to Iraq again when it was hurt by another deflating event: In August, just as the outbreaks ended, a succession of terror attacks on vehicles transporting Turkish chicken to Iraq caused many truck drivers to resign, leaving chicken meat shipments stuck in Turkey.
Abdurrahman Çakar, the Sakarya province Chamber of Commerce regulatory chairman stated, "We saw dramatic decreases in Turkish poultry exports for several months due to several problems. Most of these problems were fortunately overcome, but now we sector faces difficulty in finding trucks to transport their chicken to Turkey's eastern neighbors due to the rise in terror attacks."
As a result, by early October, Turkey's government reported that poultry exports had fallen by 50% from a year earlier. At this point, the USDA forecast of 380,000 tonnes of exports appears to be fictional at best: By early in the fourth quarter, Turkey's government said that broiler meat exports had fallen 50% in the first nine months of 2015 compared to year earlier.
Turkish Poultry Products Promotion Group head Müjdat Sezer noted that Turkish broiler exports earned US$203 million in 2010 and US$608 million in 2013. Unfortunately, "Our exports were around $1 billion last year, but [this year] they may not be $700 million in our most optimistic expectations." At this point, many believe that they will fall to 250,000 tonnes or less.
Moreover, as was the case in Argentina, the Turkish broiler sector's trade setback occurred just as its domestic market growth is starting to decelerate. After taking off in the mid-1990s, Turkish broiler meat production doubled, from 660 tonnes in 2000 to 1.3 million tonnes in 2010.
However, the past five years has seen domestic consumption growth decelerate from its 2000 to 2009 pace of 7.2% to a still healthy (but much slower) 4.1% rate since 2010. With per capita consumption now at 21.5kg, the domestic market has much more room to grow than in Argentina. Based on Turkey's income and population growth rates, through to the year 2030, per capita consumption can rise up to 2% annually and domestic consumption by 3.3%.
However, with consumption only rising half as quickly as before, exports have become essential to maintaining the industry's rapid growth rate. From under 2% of output in 2004, exports accounted for 7.7% of production by 2010 and 22% by 2014 -and just when the industry got 'hooked' on export-led growth, major importers shut their doors while bird flu and terrorists disrupted shipments.
Consequently, instead of leading growth, shriveling export volumes are dragging the industry down, but domestic consumption is rising by only anemic 2%. Going forward, the ongoing world economic slowdown is impacting Turkey's economy. That will probably limit domestic consumption to a 2% rise in 2016, for a second year in a row, though consumption growth should recover to 3% or higher later this decade.
However, with the situation in nearby countries like Syria and northern Iraq rapidly deteriorating, the real question is if Turkey's geopolitical circumstances will allow it to resume export driven growth later this decade.
Thus, Argentina has plentiful feed resources and is looking forward to its first pro-agriculture government in decades, Turkey's situation is much more problematic. When the world broiler market recovers, we may Argentina surprise everyone by overtaking Thailand in broiler exports, and Turkey could be left the weakest of these three second tier exporters.
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