Following a profitable 2011 in their export business, U.S. poultry producers face a new question in 2012: Will the reentry of Thailand to the market for raw poultry in the EU ignite increased competition among poultry exporters in the U.S., Brazil and Thailand? Very likely, the answer is yes.
The EU will lift an eight-year-old ban on imports of raw chicken meat from Thailand on July 1, which means Brazil soon will face resumed competition there from Thai poultry producers. Meantime, Thai officials and exporters are optimistic that Japan and South Korea will follow the EU’s move and resume imports of fresh chicken meat from Thailand, setting up even more competitive pressure for the Brazilians.
As Thailand’s poultry producers escape the trade bans they faced following the detection of avian influenza there in 2004, they are expected to not only add production but take back market share that Brazilian producers held uncontested for eight years.
Competitive spiral
It’s the scenario foreseen by Gordon Butland in a presentation in the WATTAgNet Webinar Series (see “Poultry outlook and international report on the impact of feed price volatility,” at www.WATTAgNet.com/ondemandwebinars.aspx). Butland, director of G&S Agri Consultants, predicted increased competition in key poultry markets like the EU and Japan, which has ramifications in other markets. This, in turn, could result in reduced profits for poultry producers worldwide.
Brazil’s huge stake in exports
Brazilian producers, in fact, now have their backs to the wall in the export business: The exports they are likely to lose in the EU and Japan will be hard to replace. Domestic per capita consumption of poultry in Brazil is now 47.5 kilos with not a lot of immediate upward potential. And while Brazilian poultry exports grew by over 100,000 metric tons in 2011, much of that growth was not in high-margin business like that most in jeopardy from the Thai competition. With over 80 percent market share of the raw chicken imports into the EU, Brazil has a lot at stake.
Brazil, indeed, is the world’s leading poultry exporter, in both volume and value. Its $8.253 billion in poultry exports in 2011 eclipsed the U.S.’s $4.083 billion.
The flash points in poultry trade
The flash points for the potential competition are in the markets where more than 75 percent of world poultry exports went in 2011:
• Middle East – 1,872,000 metric tons
• China/Hong Kong – 1,339,000 metric tons
• Africa – 1,150,000 metric tons
• Japan – 900,000 metric tons
• Russia – 580,000 metric tons
• Mexico – 440,000 metric tons
More direct competition in poultry exports
“Currently, there is not very much direct competition between Brazil, the USA and the EU, but as all three push to help alleviate domestic oversupply, more competition is expected,” Butland said.
He said producers in smaller poultry exporting countries like Argentina, Chile and the Ukraine also can be expected to intensify their fight for a place in export markets.
“Consequently, we will probably be seeing lower poultry export prices. Last year, prices were very good, but everywhere export prices have already started to decline,” he said.
More poultry trade disputes ahead
“I think there will be more and more trade disputes involving poultry,” Butland said.
He discussed a number of flash points where trade disputes might erupt, including on the EU’s own doorstep. “The Netherlands and France have made significant gains in exports in the Middle East, Asia and Africa. The more these EU members export there, the greater the pressure they are going to come under from the importers because of the EU’s own import restrictions.”
Butland mused, “Now, it does seem a bit odd that the EU has very high duties on poultry imports and yet has the highest growth in exports right now.”
Change is the constant for the poultry business
U.S. poultry producers saw things go extremely well for their export business in 2011. They continued to diversify their markets, while registering only 213,000 metric tons of poultry exports in Russia.
“This diversification has greatly benefited U.S. chicken producers in their export product mix,” Butland noted. “Chicken leg quarters in 2006 made up over 60 percent of their product mix in exports. Now leg quarters make up between 40 percent and 50 percent of their product mix in exports. So, U.S. producers have a much healthier export product mix and a much more diverse mix of customer countries.”
Now, there are new challenges for U.S. poultry exporters to face in 2012. The one constant in the poultry business is change.
