Executive Summary

The negative impact of the global financial crisis on meat consumption in Europe and EU-27 poultry exports is expected to slow broiler production growth to slightly above one per cent in 2009. Such sluggish growth is expected into extend to 2010 in the absence of strong economic growth. EU-27 turkey production will likely continue its downward trend in 2009 and 2010.

The EU-27 trade balance is expected to remain slightly positive in 2009 and 2010 with stable imports and exports. In 2008 and 2009, Brazil and Thailand filled their tariff rate quota established in 2007. Imports from Chile will again double in 2009. Imports of preserved and cooked broiler meat from China, which were non-existent in 2008, are expected to exceed 3,000 metric tons (MT) in 2009.

For 2009, the primary markets for EU-27 broiler meat exports are expected to be Russia, Saudi Arabia and Ukraine; Vietnam is also a growing market for EU chicken meat. The 2009 Russian ban on some EU poultry plants due to alleged sanitary concerns is having a negative impact on EU-27 exports. French broiler exports mainly to the Middle East, are expected to decrease in 2009 and 2010 due to their lack of competitiveness despite EU restitutions.

Turkey imports should remain stable under an import quota. EU-27 turkey exports should only decrease slightly as lower French exports to Africa are partly offset by higher German and Dutch exports to Russia.

EU-27 consumption of broiler meat is expected to continue to slowly grow in 2009 and 2010. The fact that chicken is competitively priced relative to red meat benefits consumption, even in times of economic difficulty. Overall, poultry meat remains a staple among the general population.

Turkey meat consumption in the EU-27 is expected to decline in 2009 and 2010 as consumers shift away from turkey to chicken, which is perceived as tastier and more convenient to use.

More mergers and takeovers are projected within the European poultry industry, which has been weakened by increasing production costs and strong competition from Brazil.

The United States lost a 100,000 MT market in Romania and Bulgaria after these countries joined the EU due to EU sanitary regulations and the ban on the use Pathogen Reduction Treatments (PRTs) in poultry processing plants. Despite European Food Safety Authority (EFSA) findings in 2003 and 2005 that these treatments were safe, Member States continue to resist approval for use in the EU-27 and for use on imported products. In January 2009, the USTR requested that the World Trade Organization (WTO) undertake dispute settlement consultations with the European Union on the PRT issue. As those consultations failed to resolve the dispute within 60 days, the United States is now entitled to request that a WTO panel be established to determine whether the EU is acting consistently with its WTO obligations.

BROILERS

Production

The negative impact of the global financial crisis on meat consumption in Europe and EU-27 poultry exports is expected to slow broiler production growth to slightly more than one per cent in 2009. Such sluggish growth is expected to extend into 2010 in absence of a full economic recovery.

Major developments from key MS

In 2009, Benelux domestic production is expected to stabilise, or possibly increase further. Demand remains strong on the EU domestic market, as well as on some export markets (Ukraine, Vietnam). Prices of broilers and legs are above the five-year average, while feed prices are low, resulting in average to good profit margins.

Czech Republic poultry production is foreseen to decline through 2009 and 2010, due to the effect of high feed prices in recent years (although declining) and economic crisis (credit crunch). It is also adversely affected by increasing cheap imports from both the EU and third countries.

In France, broiler meat production is expected to decrease by one per cent in 2009 and 2010, driven by lower intra and extra-EU exports not fully offset by slightly higher domestic demand.

Germany’s poultry industry is optimistic about 2009 and 2010 and German slaughter companies are looking for new contract producers. The poultry industry was able to pass on higher feed costs to retailers and consumers. Slaughter increased to record levels in 2008 and 2009 albeit at a slower rate than in 2007. This is a result of increased slaughter capacity and strong demand. The successful promotion of the D/D/D origin labeling (German born/raised/slaughtered) also is an effective incentive for increased slaughter in Germany as opposed to neighbouring countries.

In Hungary, production of broilers increased slightly in 2008. Until the middle of the year, producer prices were above 2007 prices. By the end of the year, prices had decreased and commercial stocks were built up. The industry expects stagnation or a small drop in production for 2009 and 2010.

In Poland, reduced feed costs are expected to stimulate the production of chicken meat by five per cent in 2009 in comparison to 2008. The expected increase of production in 2009 also stems from growing domestic demand caused by shortages of pork and the continuing high level of exports of poultry meat to the EU-27 market.

In Romania, despite the feed-market situation in 2007-08, poultry domestic production grew by 11 per cent in 2008 and is expected to maintain this upward trend in 2009 and 2010, as broiler meat continues to be a top consumer preference.

The demand is expected to increase slightly, broiler meat being more affordable than alternatives. Domestic production is expected to partially replace imports from both EU and third countries, leading to a drop in total imports in line with consumer preference for fresh, local and diversified products.

Broiler production in Spain and Portugal in 2008 showed a significant increase compared to 2007 levels. Industry sources do not expect major changes in production levels for 2009. According to production estimates for the first quarter of 2009, Spanish and Portuguese production were roughly equivalent in the same period of 2008. In the long run, current and future adverse economic conditions, uncertainty and expected general reduced domestic consumption will likely prevent the sector from expanding. Industry sources indicate that the situation for 2010 is uncertain, depending on the evolution of domestic consumption and international cereal prices, as Spain is a net importer of corn, soybean and wheat.

UK was declared avian influenza-free in November 2008. Poultry production is expected to increase in 2009, supported by increased domestic demand.

Consumption

The EU-27 broiler meat consumption is expected to continue to grow slowly in 2009 and 2010. Soy prices are expected to increase significantly in line with Argentina’s short supply and US soy exports to Europe came to a virtual halt because of the commercial risk of low level GMO detection in conjunction with EU’s zero tolerance for unauthorised varieties. As a result, chicken production costs could decline, in line with sharply decreasing grain prices, as grain comprises as much as 70 per cent of chicken production costs. Moreover, production of red meats requires a higher proportion of vegetable proteins than chicken. Thus chicken meat will remain competitive even if total meat consumption declines due to the financial slowdown, since it should continue to be a relatively low cost replacement for red meat. Overall, poultry meat remains a staple among the general population and is especially important to the growing EU-27 Muslim population.

Trade

The EU-27 trade balance is expected to remain slightly positive in 2009 and 2010 in light of stable imports and exports.

Extra EU-27 imports

Broiler extra EU-27 imports (top five EU-27 Member States; '000 MT)
	2008	2009	2010
Benelux	262	266	266
United Kingdom	178	175	170
Germany	108	110	110
Spain	32	35	35
France	30	29	30

EU-27 chicken meat imports are expected to continue their growth in 2009 and 2010 due to their lower prices. Brazil and Thailand remain the largest suppliers of broiler meat to the EU-27, followed by Argentina and Chile. Imports from Chile doubled in 2008 and are also expected to double in 2009. It is noteworthy that imports from China which were non-existent before 2009 are expected to exceed 3,000 MT in 2009. The EU-27 imports mainly preserved and cooked broiler meat from China. The United States, which exported as much as 92,000 MT of broiler meat in 2005 to Romania and Bulgaria, is no longer a supplier to the EU-27 due to the PRT issue.

Following their successful WTO case in 2005, Brazil and Thailand got a TRQ for imports of salted poultry meat, preparations of turkey meat and cooked chicken meat into the EU-27 in July 2007.

The annual tariff rate quota (TRQ) for salted poultry meat (HS code 0210 99 39) at a bound rate of 15.4 per cent is allocated as follows: 170,807 tons from Brazil; 92,610 tons from Thailand; and 828 tons from third countries. In addition, a TRQ for preparations of chicken meat (HS 1602 32 19) at a customs duty of eight per cent was created representing 79,447 tons annually from Brazil; 160,033 tons from Thailand and 11,433 tons from other countries.

The TRQs for salted poultry and preparations of chicken meat both filled in 2008 and are expected to be filled again in 2009, with the exception of salted broiler meat from Thailand, which remains limited due to AI-related import restrictions.

Extra EU-27 exports

Broiler extra EU-27 exports (top five EU-27 Member States; '000 MT)
	2008	2009	2010
France	253	240	235
Benelux	210	205	205
Germany	92	90	90
Poland	34	30	30
Spain	31	30	30

EU broiler exports continue to face strong competition on the world market from Brazil and the strong Euro is also adversely affecting trade. For 2009, Russia is expected to remain the primary destination for EU-27 broiler meat exports followed by Saudi Arabia, Ukraine and Benin. Vietnam is also becoming an important market for EU poultry meat, with a 30 per cent growth for the first semester of 2009 compared to 2008. In 2009, the Russian ban on some EU poultry plants due to alleged sanitary concerns is having a negative impact on trade (minus 20 per cent in the first semester), which is likely to overall lower EU-27 broiler exports. Russia imports predominantly frozen cuts (legs) as well as mechanically deboned meat products while Saudi Arabia/Middle east imports whole chicken and sub-Sahara Africa imports inexpensive cuts and mechanically deboned meat.

Source GTA and Posts calculation

French poultry exports to the Middle East and sub-Saharan Africa have stabilized but have not returned to their pre-avain influenza levels while French exports to Russia plummeted in the first semester of 2009. Higher EU export restitutions, which almost exclusively support French whole carcass exports to the Middle East, are necessary to offset the difference between French production costs, estimated at €0.69 per live kilogram of chicken, and Brazilian production costs, estimated at €0.45 per kilogram. Russia continues to be the main destination for German broiler exports, followed by Ukraine.

TURKEYS

Production

EU turkey production is expected to continue falling, particularly in France and the United Kingdom, with losses forecast to outweigh gains in Germany, Poland and Hungary. The 2010 forecast for EU turkey markets is a continuation of the downward production trend.

Consumption

Turkey meat consumption in the EU-27, overall, is expected to decline in 2009 and 2010 as consumers shift away from turkey to chicken, which is perceived as tastier and more convenient to use. Processors also prefer to switch to broiler from turkey as processing yields on carcasses are higher.

Trade

Imports should remain stable under import quota control. Lower French turkey exports to Africa will not be compensated for by higher German and Dutch exports to Russia, leading to an overall decline of EU-27 turkey meat exports.

Further Reading

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