Poultry consumption in Venezuela is expected to increase in 2011, however, imports will take a larger share of the market as domestic output is pressured by fixed output prices and high feed costs. According to the US Department of Agriculture’s Foreign Agriculture Service, poultry imports from Brazil and Argentina will make the domestic industry less profitable as it faces stronger competition.

Poultry production down  

Venezuelan poultry production was down in 2010 because of price controls and high feed costs; price controls, which have been in place for a number of years, compromise profit margins but boost consumption, a trend that is expected to continue in 2011.

A boost in consumption is expected as the government is an active importer and distributer through its state-owned food distribution networks, where subsidized products are even cheaper than current controlled prices. The government imports poultry from Brazil and Argentina, which are not subject to tariffs or custom charges.

According to the president of the National Federation of Poultry Producers, Brazilian exports to Venezuela led to variable poultry production during the first months of 2010. In January, March, and May of 2010 output decreased by 13.9%, 1.4% and 4.2%, respectively.

Average chicken production during 2010 was 77,336 tons per month, 0.76% less than in 2009, while average egg production stood at 882,562 boxes (30 pieces) per month. Estimated 2010 poultry production was 874,000 metric tons, a 5% decrease from 2009. This decrease in production was driven by increased imports from Brazil and Argentina, price controls and high feed costs—Venezuela imports a significant amount of its feed components and is impacted by world grain prices. Poultry demand is expected to increase because it is relatively low priced compared to pork and beef, its main competitors in the market.

High feed costs  

The Venezuelan poultry sector is strong, organized, vertically integrated, and well-managed. These attributes are key to sustaining the industry in spite of a price control policy which does not allow producers to raise prices in step with growing production costs and competition from increased government imports. Investment in the industry continues, as producers must use modern technology to remain viable. Venezuela produces and consumes only small amounts of duck and turkey.

Venezuela’s poultry producers work closely with animal feed processors through vertical integration within the industry. The trend is toward greater concentration of farms and processors. All animal feed is domestically produced from a combination of imported and domestic inputs. Yellow corn, yellow grease, and soybean meal are imported. Locally produced yellow corn is also used by the animal feed processing industry.

The partnership between the poultry and animal feed industries is important because imported inputs are subject to an import licensing scheme administered by the Ministry of Food. Venezuela could be 100% self-sufficient in poultry if it had greater access to imported feed ingredients, according to industry representatives. Issuance of import licenses is technically tied to the purchase of local grain crops, but this has not restricted trade recently because import demand is significant.

The poultry sector will continue to look for quality improvements and cost reduction. The tendency for the near future is to maintain investments to upgrade the sector. Feed represents about 80% of total production costs, which move with the price of imported inputs. In addition, labor costs (minimum wage and increasing labor benefits), transportation, marketing and security services are also increasing.

Price controls  

Retail prices for poultry have been under a government control policy since 2003. That is, whole poultry and cuts are sold at a fixed price established centrally. The poultry industry continues to lobby government authorities to remove poultry and products from the list of price-controlled products. However, the government has agreed only to ‘review’ current fixed prices. It seems unlikely that price controls will be lifted in the short term.

Tracking controlled prices for poultry has been a challenge. Poultry products, such as whole chicken, breast and leg quarters, as well as their boneless and skinless versions, have only sometimes been included in the controlled price listings.

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In some cases, certain products have been removed from the list, while for others a unique price has been established. Large stores, such as hypermarkets, supermarket chains and established butcher shops are required to sell products at the established price on the price control list. Charging more than the official controlled price is illegal and leads to steep fines and possibly temporary closures of poultry facilities, supermarkets and hypermarkets.

Consumption to grow  

Consumption grew steadily during 2010 because of increases in poultry meat imports. According to the Venezuelan Poultry Federation, domestic poultry production stands at 900,000 metric tons per year. The National Federation of Poultry Producers commented that domestic production could supply 100% of the private market and address government demand.
Domestic producers place 30,000 tons of chicken monthly in PDVAL, a government distribution chain, and work with CASA, the buying agency of the Ministry of Food, to supply 8,500 tons of whole chicken every three months in their Mercal stores. While price controls compromise industry profit margins, they have helped to boost consumption.

The poultry sector foresees a boost in consumption as the government continues to play an active role as a leading poultry supplier and importer through its state-owned food distribution network. PDVAL imported 200,000 tons of poultry products in 2010. Poultry products offered through the government’s distribution network even are cheaper than current controlled prices. Government poultry imports from Brazil, the main supplier, are subject to neither tariff nor custom charges.

According to figures presented by the National Federation of Poultry Producers, between 2007 and 2008 annual per capita consumption increased from 33 kilograms to 35 kilograms.

Poultry products offered through the government’s distribution network are cheaper than current controlled prices. In addition, shortages of beef registered through 2009 and part of 2010 strengthened the demand for poultry. About 80 to 90 % of the poultry produced in Venezuela is purchased fresh by households; the rest goes to the processing sector (hams, sausages, frozen nuggets, and others).

Trade relations, Colombia  

The government has frozen trade relations with Colombia, which has been the main supplier of poultry genetics to the country. The National Federation of Poultry Producers reported that programmed purchases—those that were contracted before the freeze—entered the country gradually as they were scheduled. Poultry producers have since replaced them with imports with Brazil. The government is also negotiating prices and quantities with producers in Argentina, but there is concern about availability. Some items previously imported from Colombia are now produced in the country.

Imports are only conducted by the government but are sold to both the private retail sector and government food distribution network. Poultry imports are forecast to continue an upward trend. There are no official statistics regarding the exact level of imports. According to the National Federation of Poultry Producers, after the suspension of commercial relations with Colombia, which was the main supplier of poultry genetics, Brazil became the first supplier of baby chicks and fertile eggs for the poultry industry nationwide.

Argentina is also a major supplier of baby chicks and fertile eggs. The National Federation of Poultry Producers notes that the recent decline in exports from Brazil was due to an increase in chicken consumption in the domestic market of that country, so sales were restricted to Venezuelan breeders. This situation is being resolved--Brazilian production has recovered—and the industry grew 15 % in 2010 compared to 2009.

Chicken imports had two major downturns in the first half of 2010. Contrasting March 2010 versus the same month of 2009 shows a 79.8% drop in foreign purchases, while in June 2010, compared to the same month last year, the decrease was 82.3%. But in January, February, April and May 2010 imports increased 129.7%, 35.8 %, 267.6% and 104.6%, respectively, versus the same period of 2009.

Industry analysts note that these significant variations are due to seasonal stages in poultry production. When there is lower domestic production, imports rise. In the World Trade Organization’s Uruguay Round negotiations, Venezuela established a tariff rate quota for poultry products at 3,426 tons. However, the Venezuela has effectively had a ban on unprocessed (fresh) poultry meat since 1993 and has effectively barred imports from any country that could not or would not certify to being free of avian influenza both high and low pathogenic.

The current ad valorem tariff for poultry meat from third countries is 20% plus a variable duty. Whole poultry and poultry pieces are included under the Andean price band system. This system raises or lowers the ad valorem duty of groups of related products according to the relationship of the prices of specified “marker” commodities to set floor and ceiling prices.

Since 2007, a law against hoarding, speculation, usury and any other action that could affect the normal distribution of food products under price controls has been in effect. Therefore, producers keep stocks at minimum levels due to the fear of being accused of hoarding by government authorities.