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EU-27 - Poultry and Products Semi Annual Report 2010

by 5m Editor
16 April 2010, at 12:00am

The negative impact of the global financial crisis is forecast to slow EU-27 broiler production growth to less than one per cent in 2010, according to the latest GAIN report from the USDA Foreign Agricultural Service.

Executive Summary

The negative impact of the global financial crisis on poultry meat consumption combined with stable poultry meat trade is forecasted to slow EU-27 broiler production growth to less than one per cent in 2010. However, with decreasing grain prices lowering producers’ costs, the profitability of the EU-27 poultry sector is expected to increase further.

EU-27 chicken meat imports are expected to remain stable in 2010. It is unclear if the quota allocated to Brazil will be ill-managed in 2010 as it was in 2009, leading Brazilian exporters not to fulfill it. The rise of broiler meat imports from China, which reached 3,800 metric tons (MT) in 2009, should be watched closely. Some analysts believe it could reach 10,000 MT in 2010.

EU broiler exports are expected to continue to face strong competition on the world market, especially from Brazil. They may however benefit from the recent drop of the value of the Euro against other currencies (including Brazil’s real). For 2010, Russia is expected to remain the primary destination for EU-27 broiler meat exports. European poultry exporters however do not believe they will indirectly benefit from the Russian ban on US poultry as Russian imports are limited by an import quota. Poultry parts exports to Hong Kong are likely to benefit from the growing demand in China.

Poultry meat, which is the cheapest source of protein, was less affected than other meat by the Economic Recession in Europe. However, per-capita consumption is foreseen to slightly decrease in 2010 as a growing part of EU population, hit hardly by the recession, simply lower its animal protein consumption.

The EU has started negotiations with exporting countries on redefining certain tariff lines that, when cleverly used, may offer new loopholes to evade duties on poultry imports. The EU will also implement on 1 July 2010 the poultry welfare directive. which limits the stocking densities for poultry. It is likely that, as a consequence of this new legislation, new labelling requirements for poultry imports will be proposed. On the same date, a regulation updating the EU’s marketing standards for poultry comes info force. It more clearly defines fresh poultry meat and does not allow thawed and further prepared poultry meat to be sold as fresh. It also tightens standards on water content in poultry.

Broiler Meat Production

The negative impact of the global financial crisis on meat consumption in Europe combined with stable poultry meat trade is forecasted to slow broiler production growth to less than one per cent in 2010. However, with decreasing grain prices lowering producers’ costs, the profitability of the EU-27 sector is expected to increase further.

Consumption

While global meat consumption in the EU-27 has been negatively impacted by the economic recession, poultry meat, which is the cheapest source of protein, was less affected. However, its consumption growth is less than the demographic one, showing that, per capita, consumption is probably decreasing. Several market analyses showed that while consumer switched from beef or pork meat to poultry meat, the low-income consumers such as immigrants simply reduced their protein purchases, switching to carbohydrate products (bread, pasta). This trend has especially happened in Spain, hardly hit by the recession. Sales of cheaper cuts also increased to the detriment of more expensive parts. Such trend is foreseen to extend in 2010.

Trade

EU-27 chicken meat imports are expected to remain stable in 2010. It is unclear if the quota allocated to Brazil will be ill-managed in 2010 as it was in 2009, leading Brazilian exporters not to fulfill it. Imports outside the quota will remain hindered by a tariff rate of €1 per kg. The rise of imports of preserved and cooked broiler meat from China, which were non-existent before, but reached close to 3,800 MT in 2009, should be watched closely. Some analysts believe it could reach 10,000 MT in 2010.

EU broiler exports are expected to continue to face strong competition on the world market, especially from Brazil but may benefit from the recent drop of the value of the Euro versus other currencies. Exports of French whole chicken to the Middle-East are also expected to remain stable as no increase in restitution is envisioned by the commission but importing countries (such as Saudi Arabia) are less affected by the economic recession. For 2010, Russia is expected to remain the primary destination for EU-27 broiler meat exports followed by Saudi Arabia, Hong-Kong and Benin. European poultry exporters however do not believe they will indirectly benefit from the Russian ban on US poultry as Russian imports are limited by an import quota. EU-27 poultry exports to Ukraine are also not expected to recover due to the currency issue and likely political instability. Poultry parts exports to Hong Kong are likely to benefit from the growing demand in China.

Policy

EU negotiating on closing new customs duty loop-hole

The EU has started negotiations with exporting countries – mainly Brazil and Thailand – on redefining certain tariff lines that are believed to offer new loopholes for exporters to evade out-of-quota duties on poultry exports. In past years, EU imports of processed poultry under HS 1602 32 30 have increased rapidly to reach close to 50,000 MT in 2008 and even 75,000 MT in 2009. These imports benefit from an ad valorem duty level of 10.9 per cent, compared to a fixed duty of €102.4 per 100kg net for out-of-quota imports under HS 1602 32 19. The in-quota tariff for HS 1602 32 19 is eight per cent. By adding non-meat product to processed poultry to bring the poultry meat content below 57 per cent, exporters can extend low-duty poultry exports to the EU beyond fixed quota numbers.

Implementation of the broiler welfare directive and new poultry marketing regulation

1 July 2010 is the final implementation date of Council Directive 2007/43/EC [1] of 28 June 2007, known as the poultry welfare directive. This directive lays down minimum rules for the protection of chickens kept for meat production. As a general rule, this directive limits the stocking densities for poultry to 33 kg per square metre, although Member States may still allow higher stocking densities under certain conditions. It is likely that, as a consequence of this new legislation, new labelling requirements for poultry imports will be installed, as Article 5 of this directive specifically mentions that the EC will submit a proposal in this context before the end of 2009.

On 1 July 2010, Commission Regulation 543/2008 [2] comes into force. This regulation updates the EU’s marketing standards for poultry. It more clearly defines fresh poultry meat and does not allow thawed and further prepared poultry meat to be sold as fresh. It also tightens standards on water content in poultry.

Problems with EU exports to Russia

EU meat exports to Russia were severely hampered in 2009, as Russia implemented stricter hygiene and residue standards. However, towards the end of 2009, most EU exporters were re-listed for exports to Russia, after the EU agreed to meet the stricter standards and processors implemented these. As a result, EU processors are moderately optimistic about increased EU poultry exports to Russia in 2010, especially as the Russian economy recovers from the 2009 economic crisis. However, in the longer term, these exports are uncertain as Russia is systematically decreasing meat import quota from year to year and openly vows its goal to reach self-supply sufficiency in 2012 or about.

Highly pathogenic avian influenza (HPAI) situation

Since the 2006 outbreaks, the EU was spared from any significant outbreaks of HPAI in commercial poultry flocks. However, regular findings of HPAI in wild birds in various EU Member States are clear warnings that continued caution and strict surveillance remain important. However, a few cases of H1N1 infection in turkey flocks were detected, but these were all suspected to have occurred from human-to-animal infections.
[1] http://eur-lex.europa.eu/LexUriServ/site/en/oj/2007/l_182/l_18220070712en00190028.pdf
[2] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:2008R0543:20090619:EN:PDF

Industry

After several take-overs and mergers in recent years, it seems that the European poultry industry has now regained competitiveness, especially for the cuts and elaborated product markets.

Further Reading

- You can view the full report by clicking here.


April 2010