Global poultrymeat market in the ascendancy

The meat market is a global business and poultrymeat is a major part of it. But what does the future hold and where are the threats and opportunities? Philip Clarke reports

The global meat market is very much in the ascendency and poultrymeat in particular has an important role to play in meeting the increasing demand for animal protein.

According to a new multi-species study by international meat consultants Gira, total demand for meat is set to grow by 40m tonnes over the next 10 years – equivalent to a 14% expansion.

About a third of this will be in China – the new economic powerhouse – and around 60%, or 24m tonnes, will be for poultrymeat, mainly chicken.

This domination by poultry reflects the fact that it is the cheapest form of animal protein, says report author Richard Brown, and will be at the expense of the red meat sector in particular.

Gira also estimates that poultrymeat will grow at double the rate of the pigmeat sector, overtaking pork as the number one meat in the world by 2020. The total meat trade is also set to grow by 18%, with poultry again the dominant force.

But exactly how soon these trends will establish, and how accurate the forecasts will be, remains to be seen.

“There is still a great deal of uncertainty,” says Mr Bown. “After all the turmoil of 2008, we are now seeing new growth in the global economy. But the recovery is weak and there are questions about whether we will face a double-dip recession. Also, can we really believe the tremendous growth figures coming out of China and India?”

CONSUMPTION TRENDS

Looked at in more detail, Gira says the trend towards stronger demand for poultrymeat is broadly spread, with all countries seeing some increase over the next decade.

As well as the price advantage, poultrymeat also enjoys shorter preparation times than other meats, is versatile as an ingredient and is not subject to religious restriction.

Improvements in deep chilling technology also means that “fresh” poultry now has a longer shelf life, while consumer confidence in the product following H5N1 has been restored.

The Gira analysis points to particular demand growth in the USA, South America, Russia, the Middle East and China (see graph).

In the USA, where poultrymeat sales are dominated by breast meat, economic recovery will help push the market forward. But the real driver is population growth, especially in the lower income groups and the Hispanic immigrant sector.

“US consumers are also less sensitive to welfare issues than the EU, helping strengthen poultrymeat’s popularity,” says Mr Brown.

The typical American already consumes more than double the world average volume of poultrymeat, at 53kg per person per year, and five times as much as the average Chinaman.

The picture in South America is also positive, with strong economic growth in Brazil, Argentina and Chile. Argentina in particular is expected to see consumption increase by 4% a year for the next five years, while Brazil is slightly more muted, with consumers favouring beef.

Russia, meanwhile, will see continued strong growth from a low base, while the Middle East market will expand quickly due to the preference for poultry as part of a Muslim diet and rapid population growth.

But the most significant increase in poultrymeat consumption will be in China, due to its affordability and suitability for everyday Chinese cooking. Consumer confidence is also recovering fast from the impact of the H5N1 and SARS outbreaks of recent years.

Chinese poultrymeat consumption is forecast to grow by 5.4m tonnes in the next 10 years to almost 18m tonnes – or from 9.7kg to 13kg per person per year.

Closer to home, Gira also sees some further expansion of the European market, especially in eastern Europe where incomes are still increasing. There will also be an increase in demand for welfare-friendly poultry meat, which will push up the “spend” if not the volume.

“It’s often said that the EU market is saturated,” says Mr Brown. “It’s mature, but there is still room for some growth.”

PRODUCTION AND TRADE

So with global demand for poultrymeat on the increase, where is all the additional meat going to come from?

According to Mr Brown, much of it will be indigenous, produced in the country or region where it is needed – but not exclusively so.

The USA and Brazil in particular are where the greatest rises in output will be seen – and are the two main countries that will have significant surpluses to trade.

The USA is expected to put on another 3.3m tonnes of poultrymeat production in the next 10 years to over 22.7m tonnes, driven by the huge scale of its processing industry, buoyant domestic demand and the large availability of feed grain.

The relative weakness of the US$ will also help the export trade, especially leg meat to the Middle East and North Africa. Gira estimates that the USA will increase its total poultrymeat exports from 2.97m tonnes this year to 3.67m tonnes in 2020.

Brazil is also expected to see its output grow faster than demand, and could be shipping over 5m tonnes of poultrymeat by 2020 – a rise of almost 20%. “The Brazilians think in terms of scale, have a supportive government and have the feed grain production to go with it,” says Mr Brown.

“The rate of export growth from Brazil has slowed in recent years as the Real has strengthened,” he adds. “But they have good access to most markets, including whole birds to the Middle East, breast meat to Europe, legs to Japan and by-products to China.” Brazilian exports to the EU are expected to be maintained at a steady 0.5m tonnes a year.

The other producer to watch is Thailand, which is forecast to almost double its exports to 1.2m tonnes by 2020, mostly to the Middle East, Japan and China, but also cooked meat to the EU.

“Thailand has cheap, skilled workers and has really pushed forward in terms of adding value,” says Mr Brown. “It used to be a producer of commodity chicken, before avian flu hit. Since then, they have invested in cooked and processed poultrymeat – and they are very good at it.”

The other two big players are Russia and China. Both are driven by governments determined to increase their food production levels over the next 10 years.

In Russia, prime minister Vladimir Putin has pledged to achieve self-sufficiency by 2015 and has even talked of being a net exporter by then.

According to Gira’s analysis, Russia is likely to almost double production in the next 10 years to 5.3m tonnes. Imports are also likely to drop significantly to just 200,000t. But self-sufficiency looks a little unlikely.

And it’s a similar story in China where the government strategy is to boost domestic meat production. Imports will still be important, however, and are forecast to increase from 890,000t to 1.47m tonnes by 2020.

“Brazil won’t be shipping chicken to China in future, but it will be shipping soya to feed all the extra birds,” says Mr Brown.

But while Russia and China are working to reduce their dependency on imports, the same cannot be said of the Middle East and North Africa.

Gira’s analysis suggests the 20 countries that make up the region could be importing over 4.3m tonnes of poultrymeat in 2020, compared with 2.7m tonnes this year, representing a good opportunity for poultrymeat exporters.

MARKET RESPONSE

Against this background, Mr Brown says the world poultry sector should benefit from better prices, so long as it does not fall into the trap of over-production.

“Poultry production is pretty flexible and can be turned on and off more quickly than some other forms of livestock,” says Mr Brown. “If the integrators do their forecasting right, they can increase production slowly to match the rise in demand.

“The EU industry has been very sensible in this respect, expanding slowly and allowing prices to rise to cover feed costs. But the Americans and Brazilians have not always been so smart, pushing for incremental tonnage and ending up flooding the market. The hope must be that they have learned that lesson.”