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Japan Broiler Market Outlook 2010

by 5m Editor
5 July 2010, at 12:00am

The on-going recession will continue to support consumption of broiler meat especially in the home, according to Kakuyu Obara, agricultural specialist in the latest GAIN Report from the USDA Foreign Agricultural Service.

2010 Japan Broiler Semi-Annual Voluntary Report

This report updates JA9057. Post made major changes to the last annual forecast numbers particularly for imports and year-ending stocks based on the preliminary data available. The 2009 situation is summarised below.

For the 2010 outlook, the basic underlying economic trends described in the 2009 broiler annual report have not changed. Prospects for an increase in jobs and incomes continue to be gloomy this year; and a deflationary trend is adding additional uncertainty to prospects for an economic recovery. Similar to last year, consumers will remain highly sensitive to price and value. However, the on-going recession will continue to support consumption of broiler meat.

Quantities listed in the text are made on the basis of product weight and no conversion rates are used (unless specified otherwise).

  • Domestic broiler meat – dressed whole, bone-in
  • Imported broiler meat – customs clearance basis (boneless and bone-in combined but the majority is boneless)
  • Imported prepared broiler products – customs clearance basis
  • Stocks – product weight (mostly boneless) – includes small amount of spent hen stocks – no broiler-specific stock data is available.

Structure of Japan's Broiler Market

Broiler meat accounts for over 90 per cent of the Japanese poultry meat market (share). In general, Japanese consumers prefer leg meat (bone-less) over breast meat. Nearly half of total imports comprise 'prepared (or cooked) products of broiler meat', mainly supplied by Thailand and China. Imports of broiler meat from the above two countries have been on continuous suspension due to persisting outbreaks of highly pathogenic avian influenza (HPAI). Domestic broiler meat holds a majority share of sales in the retail sector. Japan's food-service sector utilizes large quantities of imported raw bulk cuts, mainly from Brazil. Japan was once a major market for US bone-in leg cuts, including those to be processed into prepared products after entry into Japan. However this market has become smaller over the past two decades because of increased competition.

2010 Broiler Market Outlook (Revised)

Solid broiler consumption projected to continue in 2010

Due to the continued economic recession, post has not revised this report from earlier projections for total broiler consumption in the 2009 annual report (JA 9057), which was estimated at 1.955 million metric tons (MT). The total is up marginally up from the level reached last year. Although competition with pork cuts and even with seafood will remain strong, chicken and the cooked chicken products are expected to retain their competitive edge.

However, given the rapid reduction in frozen poultry stocks and drastically reduced imports of bulk broiler meat cuts during the second half of 2009, post adjusted the last 2010 projection upward for both domestic broiler production and total imports as follows.

High level of domestic broiler outputs projected in 2010

Assuming solid retail demand for competitively priced domestic broiler meat in 2010, domestic broiler outputs are projected slightly higher than the previous year by one per cent at 1.265 million MT differing from post's previous forecast. [Note: Post initially projected output slightly lower than the previous year based on the assumption that domestic growers would start to adjust their production in response to considerably weakened market prices for produce in 2009, but this no longer seems to hold true.] There will be an increased number of broiler chicks placed on feed this year according to a grower association’s survey conducted at the end of January, which points to higher domestic broiler output than last year.

Significantly lower monthly poultry stocks than last year may help to fend off further downward pressure on price for domestic cuts this year. Thus, post expects that market prices for domestic broiler cuts will remain roughly the same as the previous year and stay competitive through this year, at least for boneless leg meat. Prices for breast meat, which is less popular in retail, may not fair as well. Should the supply of less popular breast cuts become too abundant relative to demand it may need to be sold at a heavy discount. This could effectively erase prospects for overall price recovery for domestic producers but may likely be offset by the reduced costs of inputs, particularly with the decreasing price of formula mixed feeds.

Modest rebound in imports projected in 2010

Post's previous projection for total imports in 2010 was also adjusted upward in anticipation of a modest rebound, up by eight per cent to 685,000MT (bulk broiler meat cuts up by 12 per cent to 370,000MT; prepared and processed products up by four per cent to 325,000MT). For bulk broiler meat cuts, post projects a rise in imports of Brazilian boneless cuts, up by 12 per cent from last year to 345,000MT with a 93 per cent market share.

The key for the import recovery in 2010 is largely dependent on recovery of the food-service sector from last year's slump. As noted in the 2009 situation summary, ending stocks considerably lower than the level of last year's monthly end stocks may likely lead to purchases in order to replenish stocks toward the latter part of the year. For bulk broiler meat cuts, however, trade sources have stated that many Japanese importers will remain cautious of making any commitments for extra purchases through the first half this year. This is because the industry suffered from severe financial losses last year related to the Brazilian deals (See 2009 Situation Summary). Thus, any purchases by importers could occur sometime later this year depending on Brazilian offers, the availability of boneless cuts, and monthly ending stock levels.

Japan's extra purchases of US cuts hinges on ability to supply boneless cuts

Recent developments surrounding US exports to Russia and China reportedly resulted in US suppliers diverting stocks to the Japanese market this year. The situation may induce some extra import demand for US cuts (bone-in leg) but not a great volume. After speaking to several trade contacts, it seems the real opportunity for the United States clearly lies with its ability to supply competitively priced boneless cuts with Japanese specifications as Brazilian suppliers do (Thailand and China used to do that prior to Japan's imposition of an HPAI-related import ban on their broiler cuts for several years beginning in 2000. Thus, any growth for the United States this year would be limited to bone-in legs, which post projects to be up from the last year by 11 per cent to 20,000MT. Average import prices (CIF) continued to stay low in accordance with the previous year, in part owing to the strong yen.

Modest recovery of China's cooked product exports to Japan forecast in 2010

Similar to the previous year, post projects the continued recovery of exports of Chinese cooked products (mainly yakitori and fried chicken items), up by seven per cent to 145,000MT. Products from Thailand are expected to remain at almost the same level as the previous year at 175,000MT.

2009 Broiler Market Situation Summary (New)

High level broiler consumption sustained in 2009

In 2009, Japan's total broiler consumption was sustained at relatively high level despite the recession, up one per cent to 1.95 million MT. This increase was largely due to market prices being lower than the previous year. An increase in the average household purchase of chicken products (quantity up eight per cent to 13.65kg, expenditure down two per cent to ¥12,614) points to solid retail sales for chicken in 2009. This may well help to offset the fairly weak food service sales reported in 2009.

In 2008, the price of the domestic cuts shot up to levels higher than the previous year. However, while the Japanese economy nose-dived in 2009, at the same time the industry sustained a high level of domestic broiler meat production at 1.255 million MT, allowing wholesale prices for domestic cuts that were substantially lower than the previous year down by 17 per cent on average at ¥600 per kilo for domestic boneless leg and also down 31 per cent at ¥233 per kilo for breast meat. The trend for consumers to seek lower priced and better value product clearly worked in the favor of more competitively priced domestic cuts and pushed sales in 2009. Leg meat (boneless) in particular is a popular item in the retail sector.

In contrast, food-service demand for imported cuts (boneless) reportedly remained fairly sluggish in 2009. With the exception of the fast-food segment and ready-to-eat foods, sales at restaurant family style restaurant chains, drinking pubs and coffee/tea shops were reportedly fairly sluggish. Despite featuring low-priced menus, the number of customers in this sector was reportedly decreased by three to six per cent, according to the data published by the Japan Food Service Association.

Eating meals at home to reduce daily food expenses was particularly responsible for weak performance in the food-service sector. This in turn led to positive sales of domestic cuts in the retail sector in 2009.

Large carry-over stocks depleted following a reduction in imports in 2009

Frozen product stocks at month-end from carried over to the next year and were held in the frozen inventory through the first half of 2009. These stocks were previously purchased during a period of higher prices. This was reportedly a serious challenge for Japanese importers of broiler cuts from Brazil in 2009. Strong downward pressure on the price of Brazilian and American cuts at the wholesale level prevailed in 2009. Prospects for the immediate price recovery of imports during the year were very grim.

In light of that situation, many Japanese broiler importers rushed to get rid of their expensive inventory after entering into the second half, even at a huge financial loss. Imports were decreased despite prices that were lower than the previous year. The average CIF price of broiler cuts in 2009 was down 20 per cent to US$2.49 [Brazilian cuts (mostly boneless) down 20 per cent to $2.51 and US cuts (mostly bone-in) down 11 per cent to $1.78].

This price move in fact resulted in a rapid cut-back in monthly ending poultry stocks during the same period, which quickly reduced year-end stock levels to an estimated 116,000MT level, down 34 per cent from the year beginning. Trade sources reported that some of the Brazilian products were placed into the retail sector with a special discount and some were even put into the processing sector as well.

Thus, the imports of bulk broiler meat plunged during the second half resulting in total imports significantly lower than post's early forecast with a total of 645,000MT, down 12 per cent from the previous year (broiler cuts down 22 per cent to 331,091MT; cooked broiler meat: up one per cent to 314,000MT). For bulk broiler cuts, Brazilian product (frozen, boneless, mainly legs) was down 22 per cent to 307,941MT with 93 per cent share of the total. US cuts (mainly bone-in legs) also suffered and were down 23 per cent to 18,316MT.

Imports of cooked products steady in 2009

Japanese imports of cooked products held steady in 2009 supported by steady demand for convenience foods. Chinese cooked chicken products, after suffering a significant market share loss over a series of the food safety-related incidents a couple of years back (non-chicken processed food such as melamine-contaminated milk, etc.), have recovered somewhat, up six per cent from the last year to 135,677MT. Chicken products from Thailand were down two per cent from the year before to 175,466MT and held the number one position accounting for 56 per cent of the category total in 2009.

Further Reading

- You can view the full report (including all tables) by clicking here.


July 2010