The Argentinian poultry industry has recorded sustained growth over the last decade, underpinned by a solid foundation of strategic planning. In 2010 alone, it registered daily slaughter numbers of 2.5 million birds, consumption on the home market stood at 37 kg per capita per annum, it achieved 320,000 tons of exports to 67 markets, it obtained credits for the sector and started a second strategic plan for the period to 2017. Additionally, the sector entered into something even bigger – a national project.

Ten years ago it was very difficult for the industry to gain access to overseas markets, explains Roberto Domenech, president of the industry association the Centro de Empresas Procesadoras Avícolas.

Economic model changes  

Across all sectors of the economy, the exchange rate resulted in a process of concentration that favoured the strongest. However, at the edge of the economic model, “the poultry industry had, at its very core, two weaknesses that were significant even before the introduction of fixed exchange rates," says Domenech. "The first, and the most important, comprised ongoing economic crises which were strongly linked to the second problem - the sector’s inability to manage its inventory.”

The industry’s capacity altered according to the season, or as a result of advances in genetics, or as a result of feed costs. In simply a matter of days, the volumes supplied were altered. In this context, when there was oversupply with only low or average consumer demand, producers started to lose part of their working capital.

“Automatically, producers would cut back production and lower their prices. This resulted in increasing consumer demand and, when demand grew, producers responded. However, consumers lacked loyalty – they bought when it suited them and went away when prices started to rise again. We were working against the relationship that we wanted to have with consumers.”

Towards the end of 2001, Argentina’s economic model failed resulting in social and economic crises, and it was decided to put a full stop to one of the most damaging economic models ever implemented.

Domenech continues: “With the end of fixed exchange rates, we needed to tackle various difficulties, such as the impossibility of securing maize and soya but, on top of this, there was another problem that needed to be addressed – how were the debts to producers to be paid? Over the last decade, the country has put behind it what it had become - practically bankrupt.” During the second half of 2002, normality began to return, largely due to the adoption of a new exchange rate model and the introduction of the peso.

Despite holding a public position, Domenech still had very close links with the poultry industry, and this is why, during the last quarter of the year, he was able to ask CEPA to draw up a plan.

“When I asked CEPA for a plan, it was done bearing in mind the public role that I had. But how could any policies be implemented if the sector itself did not know what it wanted? What is certain, however, is that in asking for policies, you must first have your own plans. What was happening in the poultry industry was that everyone had their own project.”

Growing up  

Nevertheless, some conclusions were reached from carrying out an analysis of the state of the industry.

“To escape from the recurrent crises, we had to have greater participation in export markets and not limit ourselves to the home market. Moreover, this participation had to be significant as regards our production levels. From the production point of view, we had the potential, but what we did not have was a price that was competitive at an international level.

“We had to fit the poultry industry into the national plan. At this time, another of the factors that explains how the situation was turned around emerged. The poultry industry joined a national project and stopped asking for magic solutions. It put to one side its childish attitude of asking for answers ‘from others,' and decided to take charge of its own future.

“Today, we can see that poultry is part of the plans and projects of our civil servants, they do not simply recognize the importance of the sector, but are actually part of a project to add value to the raw materials that the country produces. Additionally, chicken has stopped being a ‘substitute’ meat, and had become an ‘alternative’ meat, a change that was absolutely essential.”

Domenech decided to dedicate himself to changing the face of the industry, and to do this he returned to the presidency of CEPA. There, he could count on the help of a number of like-minded individuals and started to draw up what would be the cornerstone of change – the first development plan, for 2003-2010.

Taking stock  

“We needed to know where we really were. To this end we completed an inventory – how many birds there were in the country, how much we produced, and so on. The poultry industry had been greatly weakened; fixed exchange rates had decimated it. In 2003, production was estimated at between 720,000 tons and 730,000 tons.

“The second task was to clarify where we wanted to go. We fixed an objective of a growth rate of 10% per annum, that is to say, to grow from 720,000-730,000 tons in 2003 to 1.35 million tons in 2010, the equivalent of almost doubling production. Additionally, it was proposed that, in 2004, we had to reduce the sector’s idle capacity,” says Domenech.

At the same time that these objectives were drawn up, additional benefits emerged.

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“We were in a situation whereby the poultry industry was cannibalising itself, and we knew that if we could reach these objectives it would benefit the industry in its entirety. Up until this time, producers or companies had hoped that their competitors would fold or exit the market. However, with the strategic plan in place, there was the opportunity for peace and prosperity for everyone. Cannibalization, apart from being a disaster for the industry as a whole, tends to foster distrust amongst everyone. A plan such as the one that we drew up, on the other hand, tends to foster confidence not only in the sector but for the sector.”

Exiting fixed exchange rates, moreover, brought with it other much needed benefits for the poultry industry.

Correcting imbalances  

“During this period, what we wanted to sell was expensive, and all that was sold to us was cheap. Later, this was reversed. Our production costs meant that we had to sell at US$1,100 per ton, while with the introduction of the peso we could sell at US$650 per ton and profitably. Up to that point, chickens had been entering the country at US$700/750 per ton from Chile or Brazil. These countries took our maize or our soya, fed them to poultry and exported these birds back to us at prices that ruined our market,” he explains.

“With all these changes, we started to grow with a speed that was much faster than what we had expected. Prices had become stable thanks to the change in politics; that allowed us to build consumer loyalty and, at the same time, a number of factors occurred that resulted in definitive growth. The first was the dispute between the government and the livestock sector; the second was the emergence of avian influenza in Thailand – the second largest exporter of poultry meat in the world – and its withdrawal from international trade,” says Domenech.

At this point, the Argentinian poultry industry found itself with a home market that absorbed all that it could produce, and an international market that had to turn to Brazil to secure what it had previously sourced from Thailand. Brazil delivered all that it could, but with this not being enough, the world started looking to Argentina and then to Chile.

“We had visited countries such as Russia and Vietnam, searching for new markets for our products. Everyone said that we had to wait. The Japanese had said that we were fifth on their list of possible suppliers, but this meant waiting for 15 years. Suddenly, we found buyers wanting to buy all that they could.”

This was the opportunity that the Argentinian poultry industry had been waiting for.

“We were able to capitalize on this opportunity, only because we had a growth plan. On top of this, I have to mention the good work of those working with foreign trade and all of those companies that were already exporting; without any organization, they pulled together to deliver something. In the end, we managed to enter 60 markets throughout the world.”

The year 2005 ended with production levels of 1 million tons, previously unimaginable, even as part of the planned program. This was equivalent to being two years ahead of schedule. Between 2003 and 2005, Argentinian poultry production grew by almost 50%. Growth remained stable until 2007, and because of the impetus within the industry, an important milestone was achieved since arrival at that point had been planned for 2010. Three years ahead of time the industry reached the target of 1.34 million tons, and additionally, with annual consumption on the home market of almost 27 kg per capita. With regards to exports, the figures were around 240,000-250,000 tons.

2008’s new targets  

“In 2008, we started with 1.34 million tons and we made 10% growth projections for 2010. Despite recording a spectacular year, both at home and abroad, in October 2008 the financial crisis occurred in the US, spreading to the rest of the world. We could cope because of the strategies adopted in 2003,” explains Domenech.

This is one of the differences that poultry production has when compared with the other livestock sectors. It has managed to orientate itself towards the future, and not only look at problems of an immediate nature.

“Another tool that the sector was able to bring into use was establishing agreements with the central government. Because of this, when in 2006, and again in 2007, the price of commodities began to rise rapidly, the poultry industry was able to strike an agreement guaranteeing the price of chicken. In 2008, with compensation, the contraction in exports did not hit the sector so hard and, in any event, exports still only represented 16%-17% of production – standing at 280,000 tons. We worked hard, we controlled prices on the home market, we even worked below agreed prices for two months. The consumer response was spectacular, and at that point we broke another record – annual per capita consumption of 31 kg,” says Domenech.

In January 2009, signs of an upswing in international markets began to appear. By April of that year, global demand was practically back to previous levels. Finally, 2009 ended with 290,000 tons of exports and annual per capita consumption on the home market of 34.5 kg and daily slaughter levels at 2.3 million birds.

2010 was another year with excellent news for the sector, not only because of the 310,000 tons of exports, or because annual per capita consumption had reached 37 kg, but because the sector was again looking toward the future and planning for the long term.

“That year we launched the 2011-2017 project that outlined investment of at least US$600 million and a growth rate of 6% that would result in production of 2.5 million tons in 2017 - 600,000 tons of exports and home consumption of 44 kg per capita. But what do these figures actually mean?” asks Domenech.

“In 2009, Brazilian per capita poultry consumption stood at 39.5 kg, while in the US the figure stood at 44 kg. This means that by 2013, we are aiming only to reach that consumption level that Brazil had in 2009 and by 2017 to reach the US’ 2009 level. This is achievable.”

As regards the 600,000 tons of exports, Domenech says that the world currently sells 9 million tons of chicken, and that surely by 2017 it will sell 11-11.5 million tons annually. “What we envied about Brazil in the 1990s, we are now beginning to have for ourselves,” says Domenech.