Record highs for broiler prices were reached in several parts of the world in the middle of 2011, bringing producers some relief from the escalation of their production costs due to more expensive feed grains. The strength of demand linked to its competitive retail price has helped world production of poultry meat move to 100 million metric tons for the first time as an annual total volume in carcase weight equivalent terms.
The remarkable rise in volumes over the years is shown in chart 1, which identifies the year in which each new landmark of producing another million metric tons was reached. Recorded world production did not pass 50 million tons per year until 1994, yet it was already at 80 million tons in 2005 before adding another 20 million tons in the last six years.
Between 2009 and 2010 the global growth in poultry meat output was up to 4%. A rise of 2% from 2010 to 2011 therefore looks small by comparison, said market analysts, but it was still higher than the growth rates being achieved by other meats.
Disease problems as well as high feed costs have limited the increases possible for the chicken sector internationally. Health issues were especially evident in Asia from early 2011 as H5N1 avian influenza struck poultry flocks in a number of Asian markets. But a U.S. Department of Agriculture report noted that the countries in line for production gains in 2011 include Iran, India and Turkey, where the number of poultry farms has doubled since 2010.
Effect of feed costs
The four main producers of chicken meat are the USA, China, Brazil and Europe’s EU-27, as chart 2 confirms. These countries represent a combined market share of almost 60%. Chart 3, adapted from an analysis by the Food and Agriculture Organization of the United Nations, underlines the gap in output between the top three and the rest of the European Union member countries.
The extent to which feed costs moved ahead of broiler prices in the USA in the 2010 to 2011 period is demonstrated by USDA data as in chart 4. By July 2011, the combined effects of expensive feed and a relatively slow meat market brought the U.S. ratio of broiler price to feed price down to only 2.9:1. By that time the price of chicken breast meat stood 27% lower than a year earlier while the feed cost was up by 77%.
Margins for American chicken producers were said to be the lowest ever, leading to a cutback in chick placing on broiler grow-out sites. As on previous occasions, however, the effect of growing fewer birds on production was likely to be offset by higher marketing weights. For the USA in July 2011, the average weight at slaughter for broiler chickens was 6% more than in mid-2010.
While North American production of poultry meat seemed to rise by less than 1.5% between 2010 and 2011 (see table 1), increases of 2.8% and 2.2% were expected for Latin America and the Asia-Pacific zone respectively.
The price of chicken in Europe has fluctuated less than pork and beef in a period of overall food price inflation (chart 5). But the output growth possible in the European Union remains a matter of conjecture. In its publication, “Prospects for agricultural markets and income in the EU 2010-2020,” the European Commission’s directorate-general for agriculture and rural development suggested that the amount of poultry meat produced in the EU-27 could increase to 11.9 million metric tons in 2011 and almost 12 million tons in 2012, after reaching 11.6 million tons in 2010. This would include about 9 million metric tons of broiler meat, mostly for domestic consumption (table 2).
Impact of welfare rules
One aspect that is sure to be influential is the extent to which European producers react to new community rules on bird welfare. Since July 2010, producers have needed to limit the stocking density of their meat chickens to no more than 33 kilograms per square metre unless under special circumstances – in which case the permitted maximum could increase to 39 kg/m2.
A study of Europe’s poultry and egg sectors, undertaken by consultants on behalf of the European Parliament, reported an estimate, based on economic calculations made in Belgium, the U.K. and the Netherlands, that lowering stocking density to meet the directive’s requirements could potentially increase production costs at farm level by 1% to 1.5%. The study also pointed out that stricter bird density rules already applied in Sweden and Denmark as well as in voluntary schemes in the U.K. and Germany.
Along with currency exchange rates, production costs inevitably affect the ability to compete internationally. The report said that although the European Union remained self sufficient in poultry meat, this disguised the fact that demand for breast fillets was higher than for low-value cuts. Such cuts are therefore exported while breast meat is imported, primarily from Brazil.
Individual EU-27 member states differ in their rates of self-sufficiency, from Netherlands (186%), Belgium / Luxembourg (180%) and Denmark (141%), down to Germany, the U.K. and Spain (94% to 97%), Ireland (90%), the Czech Republic (80%), Austria and Greece (73% to 74%), and Latvia (52%).
A government aim to achieve self-sufficiency is boosting poultry meat production in Russia. On the world scene, the chicken sectors of Brazil and the USA have been supported by strong export sales, while the relatively low price of poultry against other meats has meant an opportunity for extra output in China.