Deacmber 22, 2017 

Thailand, Argentina & Turkey: A tale of three tier 2 broiler suppliers
For niche suppliers, an abundance of raw inputs does not always translate into a competitive advantage. Marketing, value-added processing and just plain luck play important roles.
By Eric J. Brooks
An eFeedLink Hot Topic
For second-tier chicken exporters, the 2010s have been a decade when the wheel of fortune turned strongly, both for and against various producers.

After enduring bird flu and a nearly eight years of world-spanning export bans, the 2010s saw Thailand solidly retake its third-ranked exporter position. 2012's re-opening of European, Japanese and Middle Eastern markets was leveraged by timely capacity expansion, low labor costs and accumulated expertise in food processing and marketing. Thus, Thailand's 2010-17 annual broiler production growth of 5.8% and 8.6% yearly export expansion exceeds that of any other major poultry producing nation.
In 2017, output rose a steep 6.7%, to a USDA estimated 1.90 million tonnes. Consumption's 2.9% increase was only slightly above expectations but trade greatly exceeded expectations. Powered by rising demand from Southeast Asia and the Middle East, Thailand also clawed back significant market share from Brazilian chicken in Japan's market. Exports increased 11.6% from 2016's 690,000 tonnes to 770,000 tonnes in 2017.
When America's bird flu outbreak forced it to ban breeders from that country, Thailand successfully switched to alternative French, Dutch and New Zealand grandparent stock. US grandparent imports are scheduled to be allowed in before Q4 2018. For now, the Thai Broiler Association estimates that chick production capacity will rise 6% into the 35 to 36 million head range in 2018, from 33 to 34 million in 2017.
Unfortunately, after years of booming growth, output overtook domestic consumption just as the price of pork (-22%) and eggs (-12%) fell sharply in the second half of 2017. This caused Thai broiler prices to drop 15% in H2 2017.
Fortunately, this slow down's impact will be minimal. Citing exceptionally strong demand from Japan, Southeast Asia and the Middle East, Rabobank's Q1 Poultry Quarterly projects a 10.4%, 80,000 tonne export growth, to 850,000 tonnes in 2018. With exports on track to total 50,000 tonnes above USDA estimates, they will make up for consumption growth coming in some 30,000 to 40,000 tonnes below initial expectations.
That will make 2018's production expand 4.7%, to 1.99 million tonnes -but many see this growth slowdown in a positive light. Rabobank's report opined that long-run "Growth in the range of 4% to 5% will be healthier [more sustainable] than the current 7%." With exports totaling 43% of production, Thailand's broilers are more trade-driven today than prior to 2003's bird flu crisis, when it shipped out 37% of output.
While Thailand fully recovered from its woes, the same cannot be said for Argentina. After a meteoric rise from 305,000 tonnes in 1990 to 870,000 tonnes in 2000 and 2 million tonnes in 2012, output is no higher today than it was five years ago.
Traditionally, Argentina supplied chicken to neighboring South American countries while Brazil exported to the rest of the world. That arrangement broke down after 2013 when Brazil's currency plunged 50% versus Argentina's peso. Even as Brazilian chicken pushed Argentina off supermarket shelves in Chile and Bolivia, a greater disaster loomed: After defaulting on its international loans, Venezuela went from buying 140,000 tonnes of Argentine chicken annually to zero.
Exports fell 53% in two years, from 334,000 tonnes in 2013 to 158,000 tonnes by 2016. 2018's estimated 200,000 export volume makes for yet another disappointing year.
Moreover, after rising from 22kg in 2000 to 42kg by 2012, 2018's domestic consumption will remain stagnant near 1.9 million tonnes for a fourth consecutive year. A 180,000 tonne increase in domestic consumption that occurred from 2013 through 2017 inclusive barely made up for the 149,000 tonne drop in export volumes that occurred over this time.
The good news is that China and Hong Kong (a combined 30% share), South Africa (14%), Russia (10%) and the United Arab Emirates (6%) now buy 60% of chicken exports. Argentina is not as dependent on South American importers as it once was.
Unfortunately, Argentine chicken, while high quality, lacks the value-added processing of its Thai rivals but when sold on a commodity basis, is undercut by cheaper Brazilian supplies. Cornered by flat domestic consumption and a 200,000 tonne export volume 40% below its 2013 peak, Argentine chicken meat production will fluctuate in the 2.0 to 2.1 million tonne range for a sixth consecutive year.
Turkey found itself in a similar bind but is striving for a happier ending: Much like Argentina, Turkish broiler production tripled, from 662,000 tonnes in 2000 to 1.9 million tonnes in 2013 -and has stagnated in the 1.9 to 2.0 million tonne range ever since. Moreover, an Argentine-style economic crisis means that after rising from 660,000 tonnes in 2000 to 1.7 million tonnes in 2013, domestic consumption has flattened out around 1.8 million tonnes ever since.
--But there, the differences end. The civil war in northern Iraq, ISIS terror attacks and a temporary export ban by leading buyer Iraq all threatened to tank Turkish chicken meat exports. After peaking at 378,000 tonnes in 2014, it was thought they would plunge but the worst never happened -they bottomed out at 296,000 tonnes in 2016. Iraq lifted its ban on Turkish broiler meat and the terror attacks stopped when ISIS was defeated.
So while Turkey still faces Argentine like problems in boosting domestic poultry consumption, export volumes have fully recovered. They totaled 360,000 tonnes in 2017 and will to rise to 375,000 tonnes in 2018, practically matching their pre-crisis volume level.
What is interesting is that what works for first tier broiler exporters does not hold true for their second-tier rivals: America and Brazil use their plentiful feed inputs to supply 80% of world broiler exports. Even so, a comparative advantage in feed supplies does not make for success among tier 2 exporters. Argentina is the most feed rich tier 2 supplier and finds itself falling behind Thailand, which is net feed crop importer.  In niche markets, luck and marketing savvy sometimes can matter more than an abundance of raw inputs.

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