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People's Republic of China - Poultry and Products Annual 2009

by 5m Editor
8 January 2010, at 12:00am

China's broiler meat production will rise three per cent in 2010 to 12.5 million metric tons, according to Michael Woolsey and Jianping Zhang in the latest GAIN Report from USDA Foreign Agricultural Service. Higher domestic production will cause broiler meat imports in 2010 to slide three per cent. Egg output is also expected to rise three per cent.

Executive Summary

FAS Beijing projects a modest increase in China's 2010 broiler meat production, rising three per cent to 12.5 million metric tons (MMT), following an estimated two per cent increase in 2009. Domestic demand continues to rise steadily, fueled by rising sales through fast food chains and other food-service channels.

Post forecasts China's total broiler imports in 2010 to decrease three per cent to 360,000 metric tons (MT), following an estimated seven per cent decline in 2009. While overall imports continue to slide, demand for imports from the United States has risen, up 10 per cent so far in 2009 on top of record sales in 2008. The recent opening of China to direct sales from Brazil may challenge continued steady gains in US sales.

Post forecasts China's broiler meat exports in 2010 to increase three per cent to 287,000 MT as the global economy begins to rebound. This follows an estimated two per cent decline in 2009 as slow sales to Japan are partially offset by higher exports to Hong Kong.

POULTRY MEAT

Production

Modest production gains are expected in 2010. FAS Beijing forecasts China's broiler production in 2010 to increase three per cent to 12.5 million metric tons (MMT) from an estimated 12.1 MMT in 2009. Sluggish sales in early 2009 are being offset by rising demand in the second half of this year, fueled by the rising Chinese economy and a steady rise in pork prices (up 15 per cent since June). Traders report the large volume of frozen stocks at the beginning of the year has been mostly depleted, further improving incentives for Chinese producers.

Producers are also benefiting from a general decline in feed prices, down nearly 10 per cent from mid-2008. Ministry of Agriculture is projecting modest growth in corn production in 2009, which should create additional downward pressure on feed prices into 2010.

Rising foreign investment through joint ventures (JV) in raising, slaughter and processing is improving production efficiency at large-scale operations in China, which account for an increasing share of Chinese broiler production. In May 2009, US Tyson Foods Co., Ltd. set up a fourth JV with Xinchang Group in Shandong province. Meanwhile, Japanese investors recently agreed to a JV with Shuanghui Group with a total capacity to hatch, raise, slaughter and process 50 million birds a year. Post expects the latter is being geared to meet the specific requirements of Japan, China's most important export market.

Consumption

Strong food-service demand is bolstering consumption growth. Post forecasts China's broiler consumption in 2010 to increase three per cent to 12.6 MMT following a two per cent increase in 2009. Modest demand growth is being fueled by lower prices and rising food-service demand, especially at foreign fast food chains. Kentucky Fried Chicken (KFC), the largest foreign fast-food chain in China, is now operating over 2,400 outlets, up from 1,206 in 2004. ATO Guangzhou notes KFC mainly procures its broiler supplies locally through opening bidding based on price and KFC internal food standards, which require no higher than minus 12°C air conditioned container at the time of delivery, and pieces, i.e. believed to be 1.06 to 1.41 ounces (30-40 grams) for drumsticks and 2.82 to 3.50 ounces (80-100 grams) for boneless chicken legs used as fillets. McDonalds is also relying on chicken items to pursue growth in the Chinese market. Recent promotions include chicken leg-quarter burger and three-piece chicken wings, value-priced at RMB9 ($1.25). Foreign fast food chain restaurants in China will play an increasingly important role in Chinese broiler consumption.

Trade

Imports from the US continue to rise while total imports decline in 2009

Post forecasts China's total broiler imports in 2010 to decrease three per cent to 360,000 MT, following an estimated seven per cent decline in 2009 due to increased domestic production. While total broiler meat imports are lower, demand for imports from the United States continues to rise in 2009. In the first six months in 2009, total Chinese imports of US broiler meat (including trans-shipments through Hong Kong and chicken claws) reached 391,723 metric tons, up almost 10 per cent from the previous year. The strong performance in the first half of 2009 follows record sales in 2008 that totaled 641,000 MT, up 19 per cent from the previous year. Traders report the strong demand is due mainly to competitive pricing and reliable supplies from the United States.

On 31 March 2009, China suspended poultry imports from the State of Kentucky due to an outbreak of low pathogenic avian influenza (LPAI). Up to now, four states in the United States (the other three: Virginia, Arkansas, and Idaho) are banned due to LPAI.

Direct imports from Brazil are expected to rise in the near term as the number of facilities approved by China for export expands. In May 2009, China announced it had resumed trade by provisionally lifting its suspension on 24 Brazilian plants. However, traders report that only five of these facilities are currently approved to ship. Historically, Brazilian broiler products mainly entered China via Hong Kong or Vietnam through grey channels. The first direct shipments from the recent plant approvals are reported to arrive in late summer. Traders predict Brazilian broiler meat may become a greater threat to US sales gains as Brazilian chicken claws and whole wings are competitive based on quality, and prices will be lower compared to Brazilian chicken marketed through grey channels.

Turkey meat imports down

Lower US turkey production and a double-digit price increase in 2009 have dampened Chinese demand for US turkey meat. Sales through June are down 55 per cent to just over 16,000 MT compared to the same period in 2008. Since broiler meat is a close substitute for turkey meat, turkey meat demand will likely continue weak into 2010, unless prices fall vis-a-vis chicken. Imports account for the great majority of the Chinese turkey meat market. Total turkey meat sales were estimated at 50,000 to 60,000 MT in 2008, with local production accounting for just 5,000 MT of total volume.

Broiler meat exports to rebound in 2010

Post forecasts China's broiler meat exports in 2010 will increase two per cent to 287,000 following an estimated two per cent decrease in the previous year. Japan remains China's largest export destination accounting for almost half of total shipments. Sales to Japan continue to be sluggish due to the weak Japanese economy and rising competition from Brazil. Overall, traders report stocks in Japan are high and do not see potential for growth until the Japanese economy improves in 2010. Meanwhile, exports to Hong Kong are expected to rise in the near term due to Hong Kong’s declining chicken production capacity.

EGGS

Steady Growth in Poultry Egg Production

FAS Beijing (Post) forecasts China's poultry egg production to increase three per cent to 28.7 MMT following an estimated three per cent increase (27.8 MMT) in the previous year.

China total egg production, 2003-2009 (thousand metric tons)
2003 2004 2005 2006 2007 2008 Estimate
2009
Forecast
2010
% Change
2010/2009
Eggs 23,331 23,706 24,381 24,240 25,290 27,017 27,830 28,700 3.13
Source: National Statistics Bureau

In the first six months in 2009, egg prices decreased four per cent on average compared with the same period in the previous year. Low prices have been fueled primarily by over-supply.

According to the Chinese egg layer industry, in the first 21 weeks in 2009, the weekly inventory of grand-parent (GP) generation breeding stocks was 627,700 sets, a 27 per cent increase from the same period in the previous year. The inventory of parent-generation breeding stocks from 31 commercial farms across China increased 24 per cent to nearly 4.7 million sets from the same period in 2009. From January to June 2009, although China's imports of GP-generation breeding stock decreased 40 per cent to 73,900 sets, domestic developed new GP-generation breeding stocks – Jing Red 1, and Jing Pink 1 – produced by Yukou Poultry Company are expected to fill up the gap.

China's egg exports have fallen eight per cent so far this year, after rising 37 per cent in 2008 to $105 million. Hong Kong and Macau continue to account for over 80 per cent of China's exports.

Further Reading

- You can view the full report by clicking here.


January 2010