According to analysis from the USDA, EU28 broiler production is “expected to continue to grow in 2013 and 2014”, with domestic demand growing slowly as consumers switch from more expensive meats to lower-priced poultry meat. While high global grain prices in 2012 directly affected broiler production costs, “data shows that producers were able to pass most of the increase to domestic customers.” Analysis of the latest OECD annual review of trends in domestic support to agriculture show that while domestic EU agricultural prices were mostly aligned to world market prices, prices received by EU poultry farmers “were about 30% higher”.

The USDA report notes that since the first part of 2013, a “significant decrease of grain prices in the EU28” has occurred, with this expected to increase the profitability of EU poultry production. However, the report cites analysis from the French poultry industry highlighting “the lower competitiveness of broiler production in the EU28 versus Brazil, Thailand and even the United States”. Feed costs were on average “25 to 30% lower in Brazil and Thailand…, with slaughter and processing costs also lower”. This generates a situation where “total production costs in the EU28 are, on average, 30 to 40% higher than in Brazil and Thailand” (this cost difference was even higher in the 1990s and early 2000s).

USDA recalls that an earlier EU study in 2010 “showed that domestically produced broiler breast meat was barely competitive against imported meat, even after payment of import duties”. However, significant differences exist between EU member state poultry sectors, with the Polish poultry sector gaining market share in some EU member states, displacing imports from Brazil.

In the EU, sales of cheaper cuts of poultry meat (legs and wings) have been increasing “faster than sales of more expensive parts, such as breasts or sales of whole birds”. This trend is “expected to extend into 2014 in the absence of any economic recovery”.

EU broiler meat imports are projected to decline slightly in 2013, while exports are projected to rise slightly in both 2013 and 2014. The re-entry of Thailand to the EU market has increased competition for Brazilian poultry meat exporters – the quality of Thai poultry meat is preferred by EU importers.

In the short term, the suspension of EU export refunds for whole birds will negatively affect French exports to Middle Eastern markets. However, with the demise of the French company Doux, which filed for bankruptcy in June 2012, it is thought likely that French poultry exports will grow again in 2013.

USDA noted that “exports of low priced cuts and mechanically deboned meat to sub-Saharan Africa, especially South Africa and Ghana, will continue to grow”. South Africa is becoming “the largest customer for EU28 broiler meat exports”. Three African countries account for 43% of EU28 poultry-meat exports (South Africa 21%, Benin 16% and Ghana 6%). Exports to South Africa are expected to reach 140,000 tonnes by the end of 2013. Significantly, the EU “has not joined Brazil in its WTO challenge against South African poultry tariffs”.

The USDA suggests that competition from Brazil and Thailand has kept prices of EU poultry meat exports to sub-Saharan Africa down. The second half of 2013 and 2014 should show a decrease in prices for export destined for sub-Saharan African markets, as EU production costs decline in response to lower maize prices. For destinations reviewed by USDA, the average price of EU28 broiler exports in 2013 was lowest in Ghana, with average EU export prices to South Africa lower than average EU world export prices. This is largely attributable to the composition of poultry-meat exports to these different markets.

Meanwhile, despite the new increase in MFN tariffs for five poultry products introduced in South Africa (see Agritrade article ‘ South Africa selectively raises duties on five poultry items within WTO...’, 17 November 2013), South African poultry firms are bracing themselves for an expansion in exports from the EU, as EU exporters are unaffected by the new tariff measures. Business Day reports that the South Africa Poultry Association (SAPA) has petitioned the International Trade Administration Commission (ITAC) to make “use of the safeguard measures provided for in the EU–SA agreement to deal with what the association claims is dumping”.

EU28 broilermeat production, consumption, imports and exports (tonnes)

Source: USDA, GAIN Report No. FR9146 (see below), p. 9