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I F C G I o b a I A g r i b u s i n e s s S e r i e s

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The World

Po u/tryIndustry

Richard HenryGraeme Rothwell

IFCKINTERNTIONAI. FINAN( ECORPORATION

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I F C Gl o b a I A g r i b u s i n e s s S e r i e s

The World

Po u/tryIndustry

Richard HenryGroeme Rothwell

itIFCTNrnmnoL FpNawCE CRoRAuTION

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The Interna tional Finance Clorpora non (1 FC) an aftfiliate ot''l'he World Basik. proiisote the econtomic developmentof its Itoerllher countitries through i uvestnmen t in the privatc sector. It is the wo rld's largest m Lltilateral orgaliizarionproviding financial assistance directly it the forns of loatts and cquirt to private enterprises in developing counitries.

The findings. iltcrpretationis, and concltusions expressed in this paper are entirelv those of the authors atsd should noijtbe at rributed it anv manns er to the IF(C Irr rite World Bank or to memilbers of their Board of Executive Directors or thecounitries rhey represent. T'he World Bank does not gtiaranitee the accLIracy of the data inclLided ini this publicariott andaccepts n1o respotisihilitv s hatsoeever fir aniv cotsseq tetece of tleir Use.

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The comoplete backlist of publications fruont The WVorld Batsk. hilLtLidi in [those of the IFG(. is s host T in the ann ual Itdexof Publications, svhich contrains ani alphabetical title list (with full ordering irtforniatioti) and indexes of subjects.authots. andlc1 coutitries ansd rt.iotss. Tfse latest editiors is availaable free of charge front the l)istribution Uinit. Officeof the Publisher. 'lsc WVorld Banik. 1818 H Street, NA. \Washington, D.C. 20433., U.S.A., or from Publications, The\Vorld Bank, (i6, avelttie d'ld sa, 75116 I;aric, Frattce.

ISBN 0-8213-3429-S

ISSN 11)20-3850

Riclsard Hen's is a senij(Sr econonsist antd (:raenme Rotlwvell is a senior engi ieer, hoth iTs thse Agribusiness Departmenst ofthe IPFC.

l.ibt-at of Congress C'ataloging-in-Pnblication Datallenrvs, Richard, 1950-

The world poultry industtr' / Richard Hcnrv. Graeuit Rothw%ell.p. cm. -(IFC Global agribusiness scries)

ISBN 0-82 I13-3429-81. IPoulir' industrry 1. Rothvwell, Graeme, 1941-11. Tirle.

111. Series.HD9437.A2H4 1995338. 1'765-dc2( 95-32116

ClIP

FOREWORD v

ACKNOWLEDGMENTS . ... vi

SUMMARY .. .. .. .. . . . . . vii

I INDUSTRY ORGANIZATION AND STRUCTURE.. .. ... .1

Introduction I

Methods and Rate of Integration I

Technology Supply 4

11 GLOBAL POULTRY MEATS MARKET. .8

Introduction 8

Regionial Demand 8

Demand Structure II

I)istribution 15

World Demand Parameters 17

Consumption Trcnds 19

III POULTRY PRODUCTION . 22

Introduction 7

Regional Production 23

IV DIMENSIONS OF COMPETITIVE ADVANTAGE .30

Cost Competitiv eness 30

L-ive Bird lProduction Costs 32

Processing (Costs 36

Economies of Scale 36

Non-cost-related Sources

of Competitive Advantage 41

V INTERNATIONAL TRADE IN POULTRY MEAT .. 44

Introduction 44

Trrade V ersus Local Production 44

Determinants of Irade Flows 46

\'ain Poultry Importers 47

Mlain Poultry Exporters 54

VI GOVERNMENT INTERVENTION AND POLICY REFORM . ... .61

Introduction 61

Rex iew of Selected Countries 62

International Trade Agreemcints 65

Regional Prefercntial Agreements 67

Trade Perspecti%cs 68

ANNEX 1 World Poultry Consumption, 1988 to 1993 . ... .. . .70

ANNEX 2 World Poultry Production, 1979 to 1994 . ... . . ... .. .. . ... .. .. 71

ANNEX 3 Major Poultry-Processing Companies. . 72

BIBLIOGRAPHY. . ... . 74

F O R E W O R D Dominated by developed countries' exporters

a few years ago, the world market today is

largely shared by developing countries, some

of which may be highly competitive for yearshis report is the first of a series to to come. The authors of this report estimatebe published by the IFC Agribusi- that annual world consumption might growness Department. The series will by another 15 million tons by the end of the

comprise sectoral presentations of industry decade, thus making poultry meat thetrends with specific emphasis on developing second most popular meat in the world aftercountries. The objective is to make this pork. This growth should support additionalinformation available and highlight the investments of about US$2 billion annuallyincreasing importance of emerging countries during this period, including LUS$0.7 to $0.9in the world economy, not only as quickly ex- billion for grower production facilities andpanding markets, but also as competitive US$I to $1.2 billion for integrators' produc-production bases. It is hoped that the Global tioni facilities. Most of these investments areAgribusiness Series will underline the strong expected to be undertaken in developingproduction assets of developing countries countries.

and thus help to generate additional private

investment in these countries. The informa-

tion presented here has been collected from

various public and private sources in several

countries and continents.

K A R L V O LT A I R E

Poultry meat consumption has been growing Dir-to; Agribusiness Deparnet

at an exceptional rate over the last decade, International Finance Corporation

spurred by its nutritional value and price

relative to other meats. The evolution of the

poultry market in recent years epitomizes the

emergence of developing countries as global

competitors in the agribusiness sector.

I A C K N O W L E D G M E N T S

Detailed comments were received on an earlier version of this report from the following reviewers:

Jacques Risse (Fed6ration des Industries Avicoles), Arthur Karlin and loannis Karmokolias (IFC),

George Watts and Bill Roegnick (National Broiler Council), Milton Madison (Economic Research

Service, U.S. Department of Agriculture), and Cornelis de Haan and Tjaart Schillhorn Van Veen

(The World Bank). Their time and assistance is herebv gratefully acknowledged.

ri

S U M M A R Y the current rate of convergence to best industry

practice, an example of which is the emergence of

Brazil as arguably one of the lowest-cost producers in

the world.T he poultry meat industry will clearlv grow

on a worldwide basis at 5 percent per Cost of production comparisons favor countries with

annum for the foreseeable future. Variation ample low-cost rawn material feedstuff supplies and

in growth of per capita consumption will see faster low labor cost. To some extent climate and industry

rates of increase in developing countries than in the structure do have an impact on competitiveness but

developed world, largely because of increases in per not to the extent that they can overcome disadvan-

capita disposable income and population. Trade in tages in the two factors mentioned above. However.

poultry meat products, although small as a propor- in spite of the range in cost structures, the industry

tion of total world production, will continue to grow in most countries has a strong local production base.

as some countries, particularly Japan. find it increas-

ingly difficult to mect consumption demands from International trade as a proportion of total production

local production because of high production costs is a small part of the world poultry meat industrv.

and problems related to land use and environmental The strong local production base in most countries

considerations. is largely because of the local market structure,

which tends to be based on live or freshly producedThe supply of raw materials for poultry production, products, whereas internationally traded poultry is

particularly grain and protein materials, increasingly frozen whole, in parts. or in further-transformed

will become a key issue in forming the growth and products. The three main importing groups of coun-

relative competitive strengths of the industry in tries are relatively developed markets: whole frozen

various countries. In particular, in some developing poultry at low prices in the Middle East; frozen

countries the link between poultry meat and grain breast meat for the institutional market in Europe;

will mean diversion of some raw materials from and frozen leg meat varying from bone-in legs to

direct human consumption to animal consumption. preprepared, fully transformed products in Japan. A

In this respect poultry meat will compete very well further produict range is emerging in international

with other meats when relative feed conversion trade-prepackaged, branded, precooked or frozen

factors are considered. The issue will become breaded products.

particularly important in areas where there are

natural land constraints on production of raw Increasingl] developing countries, particularly in

materials. Latin America and Asia. will assume greater propor-

tion of international trade in poultry meat productsTechnology is readilv accessible on a worldwide basis, as companies in the sector gain experience in target

and growth in individual countries will not be markets. Local consumption growth, which will be

constrained because of lack of access to technology,. high in these areas. will compete with export oppor-

Indeed, in developing countries the ability to compete tunities for locally produced resources and in some

with more developed countries will be enhanced by countries will constrain the ability to export. The

VI

Uruguay Round outcome will reduce exports Technology has been available there for as long as

from Europe in particular, even though grain it has in the W\est, but inefficient business

prices are expected to fall in the European Union structure and rhe lack of market discipline have

(EU). The ability of the EU's producers to stifled development of a sustainable poultry meat

export significant quantities to their primary industry.

Middle East markets without export restitutions

is doubtful in spire of the high degree of mecha- Growth estimates for the global poultry industry

nization used in processing frozen whole broilers. indicate an incremental volume varying between

Nonfeed costs are significantly higher in Europe 2.5 and 3 million tons annually. Investment

than in the developing countries with which they requirements to meet these estimates will be

compete, and productivity advantages in Europe between US$1 billion and $1.2 billion annually at

are likely to erode as industry structure in devel- the integrator level, and between $750 million

oping countries matures further. and $900 million at the concract broiler growerlevel. Therefore, combined investment needs in

The United States will remain competitive in the poultry meat industry worldwide are between

the export of chicken parts that do not find favor US$1.75 billion and USS2.1 billion each year for

in their domestic market, but it will come under the foreseeable future.

increased pressure to allow access by countries

such as Brazil to the high-priced breast market in

the United States. U.S. companies are expected

to increase the penetration of their brands of

further-processed products into world markets,

but the products may not necessarily be produced

in the United States.

The areas of the developing world where there is

slow development of the industry include a large

part of the African continent, which appears to be

at a very early stage of development in poultry

meac production. Realistically transforming

scarce grain and protein supplies into animal

protein, albeit efficiently through chicken, does

not appear to be an option on a large scale in

most of Africa.

Eastern Europe and the former Soviet tJnion

have yet to restructure from an essentially state-

run, horizontally integrated production system to

a modern, vertically integrated industry that can

capture the rype of production efficiencies that

are common in other parts of the world. The role

of hard-driving entrepreneurs in developing the

industry in most countries has been an important

ingredient in the industry's progress, and perhaps

until these people emerge in the Eastern bloc, ic

will remain difficult ro predict the rate of change.

uiii

IND US TRY OR GAN I Z AT IO N AND ST R U CT UR E

Introduction

The poultrn industry is characterized in most countries by a high level of vertical coordination, gener-

ally through production contracts betweeni poultrv growers and processors, althougl in some countries

some degree of pure vertical integration mav also be involved' with the processor operating part or all

of the poultry tbrms. These contracts are designed to provide growers with appropriate incentives to

manage the broiler farms so that the integrator s returns are maximized. In return, the grower seeks to

optimize his net re[urns within the constraints of the contract.

Methods and Rate of Integration

WrhY in'"r-rat ?

The most common form of organization xwithin the poultry mleat industry is vertical integration.

Figure 1-1 shows a very simple production model for a vertically iitegrated poultrv company. The

diagram depicts the main elements of integration usually found and also includes an optional feedmill

and further-processing operation. A feedmill is not alwvays part of the integration but it is an essential

part of the production flow and a further-processinig operation is becoming more prevalent as proces-

sors seek to add margin to the-ir business and as thcy become closer to the fisil customer.

There are generall] three main forces pushing v\ertical integration: (a) market oxnership and margin

control, (b) hiosecurity and quality. and (c) economies of scale and optimization of capital resources.

The nature of the poultr, meat industrv is such that product pricing is a major wveapon in companies

competitive arsenal. This in turn leads to prTessure to lowAer production costs. Coupled with this is the

need for significanit x olumes of consistent product to supply large customiiers that emerge as retail and

wholesale networks develop. To compete effectively on pricce and to minimize prodtiction costs, most

industry operators prefer to control the range of technical inlpuits in the business at all levels. The

dri\e becomies to miiinimize thei cost added per unlit sold in the process betw-een the base ilnpUt costs

and the final overall cost. linability to control the process completely or having to prosidc excess mar-

gin to an independent operator x ithin tht process cani lead to an inability to compere and, therefore,

subsequenir loss of volumre md profit. Mirketinig benefits such as brandinig and consistencv of produict

quality are important features of process control throughi integration.

Figure 1-1

(/i (/! li/h St/ti/ol// i/it PARENT STOCK

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Jurther -proess•ed

thirken prodlu, a

Biosec urity is important within poultrv meat operations and good biosecurity is a significant benefit of

well-ron vertically integrated operations. A majority of economically significant disease conditions are

transmitted vertically so a consistent policv of hygiene control at all levels within the integration is

very important. Intcrnational suppliers of genetic imiaterial invariably supply stock that meets high

standards of health and freedom from the major poultry diseases, and there is real economic benefit in

maintaining that freedom as much as possible w-ithin the integration. Control of bacterial human

public health contaminants such as sr/mon/ll/t. campyl/o/late and E. co/i is also a significant benefit of a

vertically integrated system, although many/ feel more progress is needed to control these

contanminants effectively'.

Thresholds in production units tend to set a minimum efficient size for an integrated poultry operation

compared with a simple localized family operation. Most important is the size of a modern slaughter

plant where the typical single line operation would be 7,000-8,000 birds-per-hour capacity This

equates to a single-shift capacity of 16 million birds per year. Smaller-size plants are available, but

their production costs are higher. Ulnit sizes of other facilities witlhin the integration are smaller so that

expansion into other activities is based on multiples of facilities such as breeder and broiler sheds,

serters, and hatchers.

As a consequence, the barriers to significant entrv into the poultrv industry in a well-developed market

are relatively high. The cost of establishing a I million birds-per-week integrated operation in the

southern U nited States was estimated at $75 mnillion in 1985 (Figure 1-2)(Barton 1985). Recent expan-

sion by major integrators suggests that, overall, this figure is still valid in part because of technology

gains lowering investment costs in rcal terms. It is possible in some countries to enter the processing

sector on a partly integratecd basis by formiing an association with a major integrator who may supply

2 I F C G L O B A L A G R I B U SI N E S S S E R r E S The World Poultry Industry

day-old broiler chicks or lixe birds for slaughter to a relatively small processor. Sometimes there are

benefits to thc larger integrator because of the extra scale in livestock production and there is a

degree of dependence built up by the smaller operator who will probably operate in the market uinder

the iiHluence of the large integrator.

There is little presSure to integrate at the most highly complex levels, such as genetic developmenit

and pharmaceutical and chemical inputs, or at the base commodity input levels, such as grain and

proteins for fecd wlhere markets are well organized. prices are v isible, and input costs of competitors

can be readilk assessed.

The poultry meat industry has shown a ten(lency to form relatively large integrated structures in most

developed countries and thc same holds true in developing countries. It is interesting to compare the

aggregating tendlency in the poultry meat industry to the structure of the egg-producing industry be-

cause the two industries developed from a common base.

Thle egg-producing industry in most developed coLitrics has a number of large operators who may

have an integrated feedmiiill and somctimes a hatchert operation, but the industry still has a signifi-

cant number of small independenit operators who purchase day-old chicks or pullets at point of lay.

buy feed, and sell their owvn egs. Sometimes the eggs are sold on a cooperative basis and sometimcs

ildustry-wide productioll controls prevent surplus eggs from disrupting markets. Because egg industrv

products can go directly from farm to retail Without going through a significant processing transforma-

tion, barriers to entry' are relatixelv low. The industry is therefore susceptible to low pricing led by

marginal producers on a seasonal basis. Lower barriers to entrv, coupled with the fact that the egg

industry has a relatively lower technology base. alloxNs the egg industr\ structure to he less concen-

trated than the poultry meat industrs

Figure 1-2

('u/P/il R(Iiivqah'cmrls Is,-,/ Ill i;',-/s,"IIik BIPo,, I.6

('r/mp/r X. I //br! 'Stuns.

IQ/S * PIt'! Hou.se

(I 1h,"b _o Breed Houses,\ ,,,,,,, . /, ,, /,,,; /.J,s, ' ~~~~~~~~~~~~~Pr o(esJsing Lby e/

B*roiler-Houses

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l e*(dinillFar,,, D~~~~~~~~~~~~'e/ UJkmltuy~~rorsi?,, Pa

hlli,,siarl O,'rja,,'zu/;(nan Strl A,,, ill' 3

.Siit (Iii ic of thru pl <oes fsin2- induiistr y

The worldwide poultry meat industry has a tendency to concentrate in relatively large integrated busi-

nesscs uSilng up-to-date. readily transferable technology; and moderin businless practices. The pressure

for concentration comes from the cosr advantage of large production units and rnore consistent quality

of product. As markets become more sophisticated, the industry structure changes to react to the

pressure.

There is no conisistenit l atcril to the number of poultry meat companies that operate in ani individ-

ual market. although iln couLItries where the industry is relatively developed one company tends to

emerge as the largest in the industry and is generally twice as large as the second largest company

Examples exist in the tinited States (Tyson Foods). 1razil (Sadia), France (Doux). Netherlands

(Plukon), [19K (IIillsdown). Germany (LohmannA-esjohann). Australia (Inghams) arnd Thailanid

(Charoen-Pokphand). In countrics svhere thc industry is still developing or has gone through a major

change, major players are emerging who could also take a dominant position-for example,

Hungary (Babolna), Turkey (Koy 'Fur), and C hina (Shanghai Daijang, Zucheng). In most councries a

number of strong second-tier companiies com11pete v igorously and there is usually a third tier of small

fai ilv-based comiipaniies using relatively low technology and generallv with a low-cost structure that

supply a localized market.

Technology Supply

Elite, breedetr,s

The influence of worldwxide suppliers of genetic material is profound. The origin of the chicken meat

induscry was as a by-producc of che egg production industry more thani fifty years ago wlheni excess

male birds svere rctained and reared to scll for meat conIsumption. The characteristics that typify an

egg-producing strain of poultry are nor compatible with efficient meat production. Egg strains are bred

for lowN body wseight and high egg production and egg quality characteristics; meat strains require a fast

growth rate to a large body size with consumption of a minimal amount of food for each kilogram of

body weight producedl.

As a result of the differing objecrives, specialized breeding of separate "heavy" breeds for chicken

mcat production began and the two sectionis of the poultrn industry have been diverging ever since.

Improvements in genetic potential of commercially available meat chickens have been substantial over

the last thirty' to fort\ years. The techniical input to maintain competitive genetic material has meant

that the suppliers of genietic material fur the world chickenl meat industry has declined to a few major

breedinig companies. which cmploy substantial resources to cointiniue improvement programs and to

maintain a supply pipeline.

There are arguably three or four companies that can claim first-rank status and compete on a world-

wide basis. Three of tIhe companies are based in the Uniited States (Arbor Acres, Avian Farms, and

(Cnbb-½'antress) and onc in rhe LI.K. (Ross Breeders). Two of the companies have common ownership

with integrated poultry mcat companiies (Cobb-Vaitress owined hv lvson Foods and Avian Farms

owned bv Charoen-Pokpihand). but operate completely independently of them. Three of the companies

were foirmerlN significant cgg-layer strain breeders as well but have withdrawn from that sector, which

indicates tihe extent of the divergence of the technology and business style of the twxo sections of the

,1 I F C G L O B A L A G R I B U SI N E SS SE R E S The World Poultryl Industry

poultry industrv; Several other breeders have a strong regional presence in their own markets in the

United States. France, the Netherlands, and Germanv, but a lesser presence in other markets. British

United Turkey (BUIT) dominates the world market in the supply of turkey genetic material.

Dissemination of genetic material from breeding stock developers is by vertical transmission and

multiplication through a range of joint ventures and regional distriburors whio have a long-standing

contractual arrangement wvith the breeder. The distributors purchase great-grandparent or grandparent

stock, depending on the size of the market, the closeness of the commercial tics, and a number of

other factors. Commercial incegrators purchase either parent stock, which is mated to produce

commercial broilers, or if they are large enough, grandparent stock one generation back that will

produce parent stock for their own use.

Typically, commercial broilers result from a combination of four different lines that reflect a number of

commercial characteristics so that production cost in integration is minimized. For example, a male

parent will result from two lines that combine growth, feed efficiency, and high-yielding carcass

characteristics while a female parent wvill have some of those characteristics but will have also been

selected for her abilitv to lay a large number of hatching eggs so that dav-old broiler chick costs will be

minimized. Because there is a natural anragonism between high body weight and maximum egg

production, the extent of the technology involved to finesse the balance among competing objectives

in a breeding program, and the subsequent design and release of a commercial package for the

industry, is substanltial.

The genetic potential of the breeders and broilers used by the poultry industrn worldwide is deter-

mined bv the breeding companies, but the commercial expression of that potential depends on a

range of skills and inputs that varies considerably throughout the industry. The breeding companies,

as part of general customer support and, in part, as a market defense mechanism, are heavily involved

in technical support of their products at all levels of the industrvx They are regarded as commercial

centers of technology excellence of poultry production, particularly in live production at all levels of

the poultry meat industry. Their influence also excends to the processing industry because of the

influence of carcass characteristics on processing yield and, since the development of further-processing.

the breeders have undertaken significant work on improving the vield of high-value parts of a chicken

carcass by selecting strains with high breast yield and lower fat content.

Equipmeni suippliers

There are three main streams of specialized equipment suppliers in the industry: farm equipment

such as feeders, drinkers, and climate-control technology; hatchetr equipment such as setters and

hatcheries for incubation of fertile eggs and production of day-old chicks; and processing plant equip-

ment, which tends to be industry-specific at the slaughter end of the plant and more general toward

the further-processed product end of the plant.

Suppliers in these sectors tend to be poultry meat industry specialists and operate on a worldwide

basis with a range of distribution means to the industrv including direct supply, licensed manufacturing

and service, agency agreements, and commission sales. There are a few innovative key manufacturers

in all sectors who developed highly sophisticated equipment as a result of their focus on the industrv.

Industry Organization and Structure 5

Technical innovation in design and function of the specialized equipment in the industry is usually

developed in the equipment companies, and mainstream supply companies maintain close links to the

induscry. Innovations are demonstrated at trade shows held regularly throughout the world and the

disseminationi of new technology is rapid. The rate of adoption of new technology is high as the

innovators tend to uliderstand the needs of the industry and the criteria by which industrv operators

judge improvement. The industry is highly quantitative and cost of production is the key measure.

There is a range of other general equipment suppliers who supply the same type of equipmenit to a

number of industries and operate in a number of food-related industries. Examples include major

industrial food-packaging companies, further-processed equipment supply companies, and refrigeration

companies.

Feetl ingreielent s applietrs

The suppliers of grain and protein materials to the industry have little or no technical input. In fact, the

reverse mav be crue as specifications on product quality are usually set by the ptirchasing companies.

which often assist suppliers, particularly of some protein materials, in improving their extraction processes

to optimize product quality to meet set specifications.

The cost of poultrv rations accounts for between 50 and 60 percent of the total cosc of producing

poultrv meat. Therefore, the cost and availability of feed ingredients is an important issue. PouIlry

rations are made up of three groupings of ingredients: premixes. protein, and grain as an energy source.

Premixes consist of viitamins, minerals, essential amino acids, such as Iysine and methionine, and some-

times prophylactic treatments, such as coccidiostat to prevent coccidiosis, a protozoan that causes mor-

tality in young growing chickenis. The major international protein source is soybean meal. with other

vegetable protein meals also playing an important role. Poultry meal made from the rendered by-produLcs

of poultry processing is also used as a protein source, but it is common to use only poultry meal

produced within the integrated operation for biosecurity reasons. The most prominent grain used

worldwide is corn with wheat, triticale, and, to a lesser extent, barley is also used where corn is unavail-

able or expensive. Other energy sources such as flour milling by-products are used to a lesser excent.

Full fat soybeans that have been cooked to improve the digestibility of their oil have become an impor-

tanit source of protein and energv and are commonly used in high-quality broiler rations.

Rations are formulated to meer specific nutrient requirements for optimal cost of production of

poultry mear. Typically, an integrated broiler operation will have a minimum of four differenit rations in

the breeder phase of the operation and three rations in the broiler growout phase of the operation.

These rations are designed to meet specific needs during each production phase. Each available raw

material is assigned a nutrient value and unit cost and then is combined in an optimizing least-cost linear

program. Mlost optimizing programs allow all rations to be formulated simultaneouslv so that scarce raw

materials are allocated to particular rations where the greatest overall financial benefit is obtained.

The overall cost of feed rations is the major cost in an integrated broiler operation: as a result the cost

and availabilitv of the major raw materials in poultry rations is a key issue when assessing international

comperitiveness. Of the three major groupings, grain typically is around 60 percent of ration cost,

protein around 30-35 percent, and other ingredients between 5 and 10 percent. Corn and soybean

meal prices. as the general ingredients of choice, are key determinants of competitiveness.

6 IFC GLOBAL AGRIBUSINESS SERIES TheWorldPoultryIndustry

Preimix, fine chemicals

Suppliers of fine chemicals and premixes are often a source of technical nutrition advice. Companies

that providc these inpurs tend to be large international chemical companies that are able to source

and provide information on a worldwide basis. Ingredient supply companies in the further-processed

product sector are an important source of product development and recipe information.

Animal health

Animal health products for prevention and remedial use are generally provided by international

pharmaceutical companies. which are a source of research and general health matters from their own

development laboratories and the general scientific community. They are generally very active in the

industry in animal health issues and are largely responsible for new product development.

Patent protection has expired on a significant number of products, which are consequently sold on a

generic basis with little or no product support. The general supply of animal health products tends to

be a mixture of the two and is likely to remain so in the foreseeable future.

Researc h labor alori es and adlv isor s 5cr vices

There is a worldwide network of centcrs of excellence in poultry research. These are supported bv

industry, government, and private funding. Information generally is freely available through scientific

literature as well as a number of forums within the industry. Typical of these is the 'World Poultrv

Science Association, whiichi has branches worldwide and sponsors regional meetings as well as a major

internationial meeting every four vears.

General tech t i al support

Compared withi many agribusiness sectors, companies within the poultry meat industry are major

employers of skilled technologists because of the highly focused nature of the industry. The adoption

of inputs from the range of sources available is high in most countries, consequently the transferability

of technology on a worldwide basis is relatively rapid.

Notes

I In thet estf tho hrepose, theterm integration" has been iflioe toefir to the tVpiceIlorgi,7si.atwo of the pouldtry industrl in rfrrenre lo its wide-spread ,wif sin te industry Rtsoaiips pro essrsge.neral/do ss not own ry oierarms. rnoonusstsprf/S r to speak o,f rertiMal mardination through pro/u.-lion ontra, /X.

2 . d/ivts uwon ol0 thi .wt of food-bolrne illnesses, antis on1993 is og a/i.ptrl} 'ht poultry industry Ispravisled ini Jordan I.in it'. /993.

Industry Organization aiel Strur.ure, 7

* a G L OBA L PO U LT R Y ME AT S MARK ET

Introduction

Poultry meat consumption has increased greatly over the past decade. During the years 1988-1993,

world poultry consumption increased at a 5 percent annual rate (Annex 1). This growth has been

driven by a number of converging parameters:

* demographic growth;

* growthi of disposable income, which favors consumption of income-elastic foods such as meat;

* price competitiveness of poultry meat relative to pork and beef due to higher productivity gains in

the production process:

* widespread consumer acceptance of poultry meat products. as opposed to pork, for example;

* dietary concerns that have favored substitution of white meat at the expense of red meat in the

more developed economies; and

* strong product development efforts by the industry to follow consumer demand for more highly

processed products that carry an added service to the consumer and to the fast-developing

foodservice sector.

Regional Demand

WVorld consumption levels vary widely across regions. within each region, and across countries. This is

illustrated by the case of Asia, the second-largest consuming region in the world. Per capita consumption

varies widely in the region, however, from less than one kilogram in India to forty-seven kilograms in Hong

Kong.

World consumption is dominated by three regions: North-Central America, Asia, and WVestern Europe,

whiich account for 75 percent of the total. However, this grouping masks significant differences

between highly populated regions like Asia where average consumption per capita hovers at a low level

(four kilograms), and high-income countries in Europe and North America. where per capita consump-

tion averages betweeni twenty and forty kilograms.

Over the past five years, most of the consumption growth has been realized in three regions: Asia,

North-Central America, and South America, in that order. Annual growth rates have been highest in

South America (+ 10 percent annually) and Asia (+8 percent annually). Consumption is also growing

at a high rate in Africa (+5 percent annually), although in that region it started from a very low base.

Consumption in NVestern Europe has grown moderately, while the transition from a planned to a mar-

ket economy has had severe consequences on purchasing power and, therefore, poultry consumption in

Eastern Europe (-6 percent), and even more so in the former Soviet Union (-7 percent annually).

8s

Figure 2-1Potilli-i- o1( CI/t,, l/i//plioll/- 16 Million Tons KG/Capita

Pou/wv 1, lea! wR, l eu;/i' _ 1 £ ,,sumpp,m i .14 _ numnption I QQ3 30

,,, (.,/,,,/ /",/ITh / F 1( 41()ae.12 Pet . P(pi,, (onsurnIp11

25

10

208~~~~~

156

4 10

2

A00 0Africa North South Asia Eastern Western Oceania Former

America America Europe Europe Soviet Union

Figure 2-2a

14 Mn 8 ,00Tons KG/Capita 20

600 -15

400 10

200 Bo ie

* Other Poul,r(

Conorla Mexito UniledSla0 (.',s,uonpin,,Egypt South Africa 6onsumption

Figure 2-2b -Million Tans KG/Caplia 5

Not Jn I) (l 12 so

40

10

8 ~~~~~~~~~~~~~~~~~~~~~30

20

*Broiler

Tiurkeyl0

2 oth~~~~~~~~~~~~~~~~~~~~~er Pan/tn

Canada Mexico United States -osmtn

9I

Figure 2-2c

SWIth. IMO/ l iw 3500 1,000 Tons KG/Capita 25

. ,:r,is / XIZ ar e3000

20

2500

2000 15

1500 1 r,~

1000I,ke

500 OPhat

Pc,- (.apPif

o Argetina BFazil Venezuela 0 (R'onsuinption

Figure 2-2d 7 MillionTons KG/Capita 50

40

4 '.Onsum/lioll// / (GpiJa 30

3 ~~~~~~~~~~~~~~~~-20

2

10

0 0China Hong Japan Korea, Philippines Saudi Singapore Taiwan. Thailand Turkey

Kong Rep. of Arabia China

Figure 2-2e

IM/('f -iA)(' i/~ 800 1,000 Tans KG/Capita -25

1600

1400

1000

800 Union

600 FLrkTy400 5 itili Piultr200 Pe__ _ _ _ _ _

Bulgaria Hungary Poland Romnania Former Ukraine Soviet Union

F C G LOB A L A G RI BU SIN E SS SELRkI ES Th.eWorld PoultrylIndustry

Figure 2-2f 1,000 Tons KG/Capita

l h,:t,/, 1.W{/tv/), 14000 I 25

'''f''r;1s/)I- 1200 _ 1

800 5 R ,9s p6000

600 | | | | | | | | | | _ * P,, Ge,t10

400 Tzrkep

200 P ei, (IPlta/

FFance Germany Italy Netherlands Spain UK

Demand Structure

PoultrY ,onusunption ini thi Un'it ted VaIrCs

T he modern broiler industry formed its roots in the LUnited States in the late 1930s. It -rew substan-

tiallv in the 194()s and 195f(ts most broilers were thcln sold as xlhole birds, originally Nexw iork dressed

(only feathers and blood removed), and later as readv-to-cook (legs, head. and viscera removed). In

the 1960s and 1970s, increasinig numbers of broilers were cut up and sold with all the parts in a tra'

pack. or as individual parts (breasts or legs). The share of whole birds dropped below 50 percent in the

1980s and fell rapidly to 19 percen1t bx the 1990s (Figure 2-3). Many ne\u products were developed by

the industry, such as frozen prepared dinners, frozen breaded chickenl entrees. poultr' frankfurters,

and poultry-meat frankfurters.

Figure 2-3

f)'.' V. 1'/ -o ( r ~ ~ C) ISa/rv ol- Percentage

Broi/- /by Pr*oit o;/-,,I/ 100%

.V,,.,,, 'iC"'' 80%_ _

60%-/

40%

0%~~~~~~~~~~~~~~~~~~~~~~~~~~u po at

1962 1970 1978 1985 1993

Figure 2-4 Percentage

U. S. Bo/i/ul .1 , rk Oi/utIs 100%

80%

60%

40% U* xtorts

_ ~ ~~ ~ ~ ~~~~~~~~~~~~~ _ *P, For)dIRrnderiiw

20%

0% _ _* tailU(,ro,eriew1974 1983 I3

'I'he expansion of fast-food outlets was instrunIcrital in stimulating consum1ption growth and product

development. Kentucky Fried Chicken and orhers contilnued to sell complete cut-up chickens, but

also breasts. xwings. and legs. The number of chickeni items also increased in the 1980s in hamburger

chainis. These chains, however, generallv wanted onkv certain parts of the bird and needed the conve-

nienicc of a boned, precut product, which the industry quickly supplied.

A feature of the American market is the marked and increasing preference for wvhite poultry meat over

dark. 'This is reflected in consistentlv highier chicken breast prices than for leg: in 1960 chickeni legs

averaged 80 pcrcent of the price of breasts at wholesale, but in 1995 legs are generallv valued at only

65 percent of breast mcat. Manx of the newer consumiler and fast-food products use boneless chickeni

breasts. At the wholesale level, prices of this value-added item have beeni volatile, while at retail bone-

less, skinless breasts cost about the same as the better cuts of beefsteak. Because of this bias in the

domestic market, newv outlets had to be souLIlt for chicken legs and thighs (dark meat). Together w-ith

winas. legs have fouLid specialized export mLirkets, and now make up most U.S. chicken exports. The

largest domestic outlet for dark meat, howecver, remains mechanically del)oned meat for chicken franks

and other products. The less desirable chickenl parts, especially necks, backs, and giblets, are largely

used b\ pet food manufacturers, wfith some broiler operations having constructed their own renderitig

facilities to hanidle such itemils.

S'rut fuia'/ /ha '('S 1n tUintt' a5 it s dj matid i for mrcats

Nleat consumption in devclopcd economies has clhaniged dramatically over the last decades. Nowvhere has

this change beein more striking thanl l thc LUnited States wshere poultry meat has passed pork and beef

on a retail weight basis as the main source of animal protein in human food conasumption (Figure 2-5).

I? IFC GLOBAL AGRIBUSINESS SERIES TheWorldPoultry industry

Figure 2-5 KG/Capita

V. S .Jled gtanlbish 120

f 100

80

40 _imb & |I. tton

Pork

20 Totil f r'olly

E F,h A aielfish

1960 1965 1970 1975 1980 1985 1990 1994P

The tremendous producti\ itV improvements achieved hv the poultrv iidustrv (Figure 2-6) no doubt

have played a signihcant role in molding consumption patterns. As indicated in Figure 2-7, retail prices

for poultrv producLts haex fallen consistentlv in real terms since 1960(. bv an average of 2.6 percent for

broilers and 3 percent for turke\. This compares \xell with an a\erage aniual price decrease of 0.3 percent

for pork and an increoase for beef.

Figure 2-6

U S. Broil/e I Pro( //j),n 1994 US S/KG It hlsik Pri(,r's/r 1 955m,o 1994 6 -r

.\ 5 Proreo'ssi7

(i/her Gi ower

* Feed

3-

2

1955 1960 1965 1970 1975 1980 1985 1990 1994

(,'/,,/,,/ I',,,,/tr /,1 I,,,', /

Figure 2-71994 US S/KG

l :.S. Rx,,,i/.1,h/ t1Pa , 12(o.',i,,,,,, /9()/ ; .'.S,%

('ii': I 9-I 10(_.\

8_\

6 Dir/knv

4 Pe

2 _ ~~~~~~~~~~~~~~~~~~~~~~~Por/;2

01950 1955 1960 1965 1970 1975 1980 1985 199O 1994

The suciden shift observed in U1S. meat conlsumiiptioni over the last two decades has raised questions

abotit fundamental struictural changes that might have occurred, particularly in light of increased

dietary concerns expressed hy medical authorities. Non-stability of preference is not easilv testable

and measurable in econometric w% ork, and this has led to proliferation of literature in academic circles.

Althouah the debate is far from over, there seem to be some convincing grounds for the hvpothesis of

gradual structural change in tI.S. beef and poultry consumption in the late 1970s. to the benefit of

poultrv meats. The lacest researclh supports the idea that meat consumption patterns observed over

the last two decades cannot bc explained filily by the dynamics of prices and income (Nloschini and

NlIcilke 1989; Eales and l.ineverl1 1993). Simiilar analyses for other developed countries would be

tiseful in strengthening or challenging these findings.

It is generally accepted that U.Si poultry demand has become more price- and income-inelastic over

timc. with ctirrenit consen1sus estimiates of about -0.2 and 0.4, respectively. It also appears that price

andL income elasticities have decreased continuouslyI over the last decades, while low to zero cross-

price el.asticities indicate a lack of sensitix ity to beef and pork price changes.

'Ihese findinigs indicate that llS. conisunmers arc becomning less sensitive to price changes. The

remarkable attractivencss of poultry meat mav be dLue to consumners' heightened awareness of its low-

fat and high-protein conitent, which creates a stable purchlasing pattern less sensitive to relative meat

prices. Another explanationi lies in thc fact that, thaniks to efficiency gains, poultry production costs

anid retail prices have become relatively so muchI lower than heef and pork that moderate price fluctu-

ations are less likel to xield significait siifts in coisumers choice of ieat (Figure 2-8).

/71 I F C G L O B A L A G R I B U SI N E S S S E R I E S The Word Poultry Industry

Figure 2-8

'.S. RPaul! Ik/a PH/i lhu/\ 140 - 1960=100(,w//'/,1/1/ 1994), l '.S'.,'

JfW,= /L1i120

Sn''.I'Al) I - Broie

80 _

60 -.. -Pork

40-

20-

01960 1965 1970 1975 1980 1985 1990 1994

Distribution

'rhe developmenr stage of the wvholesale distribution and the retail sector in most countries is an im-

portanit catalyst of structural chiange in the poultry industr, In most cases, development and concen-

tration in distributioni are accompaniied bh major changes in produc form and conceintration in supply

compalics. In many countries wherc the poultry industrs is establishing itself, the major integrator's

success has been linked ro its abilitv to crcate a stable market for hygienic products, based on (a) in-

stitutionial and foodservicc customers, and (h) a comprechiesive distribution network to service a large

number of small retail outlets xvhtn modern forms of distribution arc still underdeveloped.

The U.S. poultry industry su)plies a strongly developed wholesale and retail distribution system and

can he considered a benichmark a-,insst h Iich other countries cani be compared. Major broiler market-

ing chinnels and product floWs in the LJ.S. market are shown in Figure 2-9. The flow of product from

the broiler processor to the destination markets is comiiplex because of the variety of products that are

produced from poultr\ and the variety of retail antI foodscrvice organizatiotns thalt supply tlhe domestic

U.S. food mairket.

Preser\vation and transportation required to mteet consumer demand are important considcrations

because of product freshness anid food safety concerns. When poultry nceds to bc shipped long distances,

shippers ofteni choose to chill their products to colder temperatures to prevent spoilagc. Marketing

costs are thus increased, but thel are offset by losver losses larcr in tht marketing chain. Whlile consumers

generall Iexpress a prefereince for so-called frcsh chickei. national legislation regarding poultry- product

labeling has differcd across couLntrics in their intciprerationi of "freslincss." For example, this issue has

beein debated cxtetisi\elv in the United States umer thc last thrc vears (Clauson 1995; Madison

1995). Under current legislation. raw poultry cani be labeled as fresh cxeve if the interilal telilperature

was at onie time heloxs -3sC.. Under proposed FSIS rtegulaltioll the terim "fresh" might he changed in

the fuIture to 'previouslt frozen' anid reservcd for poultry that has becn maintained at -3"C or above by

all handlcrs (processor, handler/shippcr. ssholesaler. purchaser).

;/ob/,a//t,o/ri .1 (t/s I hSkv 15

Figure 2-9

(1hInIs am!/ P)ir//III( Fl/owsiiin /11 ,Uil,y . Sniw%, 1993

*S -

*@ S t6**

o -A.

According to the Nationial Broiler Clounicil (NBC). in 1993. 42 percent of all 1U.S. biroilers were shipped

fromi the processing plant in ice or wect or CO? pack. Ice or CIO, pack refrigeration imiplies chiilling to

approximately 10'to 4"C anid packinig in containers with ice or solid CO? for a shielf life of five to eight

dax's. Another comimoni method of preservation ftir transportationi is chilled prepack, for ahout 19 percent

of all broilcrs shipped in 1993. Thiis involves chilling- at about -2" to OCl and paickinig in contuainecrs

Without ice or CO,. Chill pack poultry products normazlly have a shielf life of ten to fouirteeni days when

niainitainced at about WIC. or twenty-onie dlays if hield it "2C. It is estimiated that only 10-201 percenit of

pouL1try, is shipped over long distanices in thec LI.S. m-rarket, which may re(luire colder chiing.ii

Simiiar iniformatiion for ai ranige of countries is shiown in Tahle 2-I. Not aill figuires are strictly comparahl)e

hecause thie leg,al definiition of termis such as freshi mnav differ across counitries.

/6 i~~~~~~~~~~1F C G LOB A LA GR I BOUSI NtESS StER EtS The Worid Poultry Indus"r

Table 2-1 I4ztrryts o / ol'Rroio/r Cmsunpiioi l/A le (aed Coiwlriik

rn , I ( p,//;,y[/Aw- ,/es 1- ColliIIIII)II'n Ln.ii- 4;'/ bGi"" ar" P//r,P Itp 11ob, Biplz

Argentina 2(1.0 95 5 15-'2( 8()-85Brazil (domestic) 18.1) 21) 80 10-72( 80-9)0Brazil (export) 11(11 37 03China (domestic) 21 1(00 -

China (export) I )() IN11France 1().8 90 1( 30 70Hungary (domestic) 15.6 100 75 25Hungary (export) - 1(10 1()0 ()Philippines 4.7 40Poland 5.8 85 15 53 47South Africa 14.4 .37 63 58 42Thailand (domestic) 9.1 >7i 2( 1(1) <20 >8(0Thailand (expert) 100 (5 5Turkey 5.3 8(1 21) 2 78United States 36.01 92 8 8 1(7Zimbabwe NAk - 0 5 95

The information reflects, to a large extentt, the degree of development of the xs lolesalinig/retailing

iofrastructure in various countries. Significant differences may exist, however, in consumer tastes or

habits in countries of similar development levels such as Western Europe: frozen poultry represcrts

about 50) percent of the market in the 1.1K, and 6(0 pcrcent in (Germany, compared wvith only 10 percent

in France.

The differenice between export product mix and domestic mix for those countries that are significant

exporters, such as Thailand. China, and Brazil, is also of interest. Exporters in these countries have tai-

lored their production output to destination markets rather than exporting surplus domestic product.

Experience in de\ eloped markets such as the tiUnited States would indicate a gradual transition from

frozen to fresh product and ftrom whole hirds to parts as distribution and retail outlets develop. Table

2-1 demonstrates a broad relationship between per capita con)sumption and the rrenid in product typIe

in the market. For instance, in Hungary the market is all fresh with a predominianice of parts versus

whole bird sales and therefore tvpifies a well-developed market with a relatively high per capita con-

sumptioni. On the othcr haid, the C'hinese domestic market is characterized by a predominant live

bird trade, \shich implies a lack of development of the food distribution system.

World Demand Parameters

The major determinants of poultry consuL11ptioln on the world marker will remain price and incomile

parameters in addition to populationi growth and urbanization. Elasticities for poultry demand in

couLntries other than thc tUnited States tend to be significantly higher, although data are sparse. While

numerous food demnand studies ha\e been undertaken, most have focused on single commodities, and

thus do not iliustratc rthe dramatic consumption shifts that are occurring within indiv idual countries. A

sur\ev of selected countries (Mitchell and Ingco 1993) highlights changes in the relative shares of

food products: as incoMes rise, meat consumption per capita increases, from an axerage of ten kilo-

grams for lox-income countries to eighty-five kilograms in high-income counltries (Figure 2-10).

(i/,ok fi'//try J/nl MlenId I,

Figure 2-10 KG Per Capita

bl./ (.wwpfion/iir /,, 100 _

80

60

40

20 - * U- _ _ ff f f ~~~~~~~~~~~~~~~~~~~~~~~~Po'l*CESES: fLDzeT;S; _ _ _ * ~~~~~~~~~~~~~Bovine.

0Low LoweF-Mid Upper-Mid High

Income Groups

The \Vorld Bank (Mlitchell and Ingco 199t) recertl evaluated shifting food consumption patterls in

three Asian countries at different levels of per capita income ( Japan. Korea. Philippines) hased on cross-

scction and time-series data. These studies oldicate income clasticities for poultry of between 0.3 and

I and dcclining witlh income. The more detailed analysis for the Philippines (Bouis 1991 ) underlines the

fact that this elasticity is highest for the lowest-income group in the population at 2.1 and declines from

t[he lowest- to the highest-income groups. It is also significantly higher in urban areas (Table 2-2).

These parameters arc generally in Ihoe with other independeor studies. A World Bank reviexv of

China's grain sector estimated income elasticities for poultrv of 1.3 in urban areas and 2.2 in rural

areas. A report on Indooesia's agriculture confirms these numsbers with an estimated income elasticitN

of 1.9 foir poultrv meat.

Significant dict chanues in low- and middlc-iocome countries can be expected therefore in coming

years in relaltion to economic growsth I)iets wvill improve in cerms of energy and protein content, as

well as in variety. Demand for meart will likelv continuC or accelerate irs growsth under the combined

influence of pcr capita income growiih and urbanization. In developing countrics poultry consumption

will henefit from this trend( based on its favorable relative price and the relative easc with which local

production can be started and developed.

Table 2-2 I'/f/i/)/mairr //ir 00/r IK/artirfir t I)naaniti/ ir l/r<Aats / ' hmr,ar (Ir,)I/p

F,r,nl I[/,in; f/it m (;r1 op 1 ./annr RuNfal

Beef 1 1.99 .1 82 1.35 1.913 I.00 1.824 (0.68 1.(2

Perk 1 141 -

2 1.18 2.30,

3 0(1.76 1.404 (1.35 1.04

Poultry 1 2.08 (.552 1.35 0.573 0.96 (1.35

4 0.69 0.38

SIrrr.. tRow /99.L

itt ~~~~~~~~~~~I FC G LOR A.L A GR I BU SI NCESS S ER I ES The WorddPoultry industry

Consumption Trends

The main determinanits of poultrx consumption growth in the world depend on a number of parameters:

* per capita disposable income growth.

* population growth,

* direct price effect tinder the influence of productiviit improvement and cost reduction

* substitution effect with alternative sources of protein.

* product innovation, and

* development of moderin distribution systems, etc.

It is not feasible to incorporate all of these factors in a meaningful forecast for the world as a whole.

However, the analysis cani be Imnited to population and income effects to evaluate the magnitude and

source of increases in consumption.

The forecast sceniario assumes that consumption iicrease will be driven only by income, population,

and an assumed income elasticity decreasing wirh income. In view of the elasticities reported

previously, elasticities of 1.5 wvere assumed for low-income and lower-middle-income countries. I for

higher-middle-inconme countries, and 0.4 for higlh-inconie countries'.

Table 2-3 summarizes consumiiption) growth over the last few years in the main world regions. as well as

projected growth rates over the 1995-2000 period. The main lesson of these projections is that demand

for poultry will continue to grow strongly, at more than 5 percent a year (Figure 2-11 ). Developing

COuntries as a whlole are expected to accelerate GDP growth at 4.9 percent. compared witlh 2.8 percent

in developed economies: as demilanid for poultry meat is highly income-elastic at low- and middle-income

levels, the bulk of consuml1ption growth over the coming five years will occur in developing countries.

GJrowvh will be unleven, however: higher in Asia, wvhere current growth is expected to accelerate at

more than 10 percent. and lower in developed countries, where it is expected to he below 2 percent.

Demand will also con1tinIue to grow strongly in South America at more than 4 percent a vear. Finallvy

consumnption) in Eastern Europe and the former Sovict ULnion is expected to resume with economic

growvth.

Asia will prox ide the bulk of market increase (Figure 2-12), because of its large population and high

forecast GDL)P growth per capita. It is also expected to overtake the North-C'entral America region as

the major consuminig region (Figure 2-13). Most of the expected grow th in consumptioni is also ex-

pected to comc from developing countries in Asia, South America, Eastern Europe. and the former So-

viet Ufnioni.

Poultry cOnISsumnptioni is expectcd to increasc by ahout 15 million tons, or about 2.5 million tons annu-

ally. Given the currenit ratio of investment to sales, an equivalent additional production would call for

fixed assets investments of about lUSS1.0 billion annually at the integrator level and US$750 million at

the grower level.

(,/l/bal/ Poul/trl .1wlls. l,ar/k 19

Table 2-3 (i1;,! IS,/P,i// Iit C1orn .t.ieptioiio Yumr),ua,17

,,o at! U,-,, ie/, R,a,'/

lt',,,/,, v 11, ,,, (ia.iu,npiw,zroo1 2iuze

1 4 .? I i,/,,,,,, .l1,,,,,,,,/ (;1)J - Psu/i/ ir GI kit

(t,,s/a Ra,, (J;)P P,[ ('aIpi/a "'pi/af/isn (wausmpi/inao

/.&O(V /i., (A) (%) ( , (0-)

Middle East and Africa 2,098 h6) 6.6Suh-Saliaran Africaz 3.8 (.8 3.0'diddle l'ist and North Africa 3.2 0.3 2.9

North-Central America 13692 5.0 1.4

Higih iicome 2.8Other 3.5 1.8 1.7

South America 4.667 .)0 3.5 1.8 1.7 4.1

Asia 1 ,343 1.( 11.6East Asia 7.7 6.3 1.4South AMii 5.4 3.5 1.9

Eastern Europe 1 312 0 3.4 2.7 0.7 3.7

Western Europe 6.6(9 1.0 2 .8 1.7

Oceania 549 3.0 ' 1.2

Former Soviet Union 2,791 -4.0 3.5 2.8 17 3. 7

Swim.Vsi,o .I/i,,/,/ /Ik /V9i, ,h /iQ/,.

FigFure 2-1 1Million Tons

ff0/in/I [oul /1 I / 1ha/ 25(CoZnsumption /o )V/r 2 00I

20

NVor th- (.rntrals15 4ineiwa

| * .~~~~~~~~~~~~~~~~~~~~~~south .4n xzI ri,-f

10 _.4i,4 4 ggr ~~~~~~~~~~~~~~Favemr,7 Euztrope

S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 _ v| | |* riu7t Etirope

1994 2000 Forecsts

2,1 I F C G L O B A L A G R I B U S I N E S S S E R I E S The Wrsrld Poultry Industry

Figure 2-12

J6,1/t, Alesi. o (w;J/l/in/ /:Pfi 100%

VY'dSC I/f' Rt,',,,,j .. . ...1994-200t

80%* oiu 1om-.Vovtst ('/zionZ

60% _Eurpe

E tweviEurope

40%

_~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~ , z/ flnizh.ru/. ine r,20%emiawC.nsK/l,lnetZ/m1

2000 Forecast

Figure 2-13

llri// Po,'/tri (;l/mimp/iol/ 100%

/,,,,,,,.t:~~~~~~~~~~~~~~~~~~~~~~~~~~~~ R,i,n/./,. _ _nu,

60%

IG F m rmope.

40%

20%A _ * r;,,awE,a/A,tam

0%1994 2000 Forecast

N o t e s

/ l.7,; er/on o/npr.,snon ti N//O,o. ,ereN,,V: /z'p ,z/('/,,it no, I'8%.' I"'! to!. lw,b th N,an,!1amhetr 192.

2 I/h, f/o eli, t,oo rNle, oo/ ll 1 a',o,o/,nr to /N f 9 (/'A Pp, '- p/1a v ,s, The WXorld Bon k Arlas znutlhlou. i ao' o rr ,. ba -w, m,n,. N59P or

letr: /owle-m,//,-, on,, ,mOQ6-X?. 7.o S i: op/or-o -ml on, oNn, SN T'-r6 .r! h. o0h-in, moe r9. o r ,f,,2

!oP/ IhotlK//tro-' llott.' l/a/ka/ 21

* P 0 U L T R Y P R 0 D U C T I 0 N

Introduction

WVorld poultrv meat production in 1994 was estimated at 49 million tons carcass-weight-equivalent

(cw.e.), or approximately 2(6 percent of total world meat production. Poultry meat thus ranks third

among major meat sources, behind pig meat (40 percent) and beef (28 percent). Chicken is the domi-

nant source of poultry meat (86 pcrcenti) turkey accounts for only 10 percent.

Figure 3-1200 Million TonsihEl150

100_v s;

50 0 ) 1 ' 9' 0' - ;E''99E - .~~~~~~~~~ShaeplGoa50

mE PB,

0 1965 1975 1985 1994

As indicated in Table 3-1. growth of world productioll has been shared unequally among major meats

over the last ctwenty-five years. Over this period, pig meat and poultry meat production have been the

main sources of growth. Over the past decade, 84 percent of the increase in world production has actu-

ally been accounted for and shared equally by growth in pig and poultry production.While pig produc-

tion seems to have slowed dow n recently, it appears that poultry production will keep its momentum

and remain the major source of additional world meat supply during the 1990s.

Table 3-1 I)/,/-//.lh/,r io,/,,(ol,a. hillua/ (G'rowth/ ('.4)

li,,,- B,,t /' J h'af,.1/ ht'o//6IrV ih.t'C'oa/ Al,a To/al

1970-1980 1.6 4.0 5.6 0.7 3.11980-199O 1.o 3.0 4.7 '.8 2.81990-1994 -In 1.8 4.6 0.3 1.5

.Sau,, : (.,,/ ,,/,,/ m Irani (J ,/at.

Figure 3-2Million Tons Percentage

1f l , /&,~/j / zJ/f >///to 20 r10l%D/

.1,,,A,,.:110 R_ 1 1 _ 1%15 ~~~~~~~~~~~~~~~~~5%

Prod/a/lon /988

10 0% P,odwfion 1994

* .I111ua/ / (,'rsth

5 .50

0 Africa North South Asia Western Eastern Oceania Farmer Soviet lOgAmerica America Europe Europe Union

Approximately 6)0 percent of poultry production cUrrentiv originates in developed countries. The

tuinitedl States is the largest worki produccr. vith about 77 percenit of world production. Other major

producers include China. Brazil. the former Soviet Union, Fraice, and Japan.

Regional Production

Afr, i, ,,

Total African production was 2 million tons in 1994. This is probably an undererstimate of actual pro-

duction as noncommercial production is notoriousls difficult to cvaluate and official figures often rely

on so-called controlled or commercial production. In most African countries, production is still domi-

nated by backyard operations xvith a fex integrated operations emerging from the supplyV of feed and

day-old chicks and progressielx integrating the processing side of the business. Only four countries

hate productionl that e;ceeds 100,000) tons: Eggpr, Mtorocco, Nigeria, and Sourh Africa. The develop-

menit of industrial poultry productioni in Africa has generally been frustrated by economic instability,

inconsistencx of policies for feed and meat products, and lack of enforcement of fiscal and hygiene

regulations. In addition, the relative tndlerdevelopment of institutional market and modern distribu-

tion. including a cold chain from processor to consumer, has not provided a natural outlet for volumes

produced bv integrators.

.Sro uth/ Af,-it,i

Sooth Africa is clearl' the liargest producer in the region, wyith an annual production of almost 400,000

tons in 1994 (FAQ). Altcrnativc national sources put the actual production at 731,000 tons in 1991,

ihcluding 173,000 tons from the noncommnercial sector (Poultry International 1994a). Per capita con-

sumptioln figures have been stagnant for the last ten Years, at about eighteen kilograms, reflecting the

performance of the national economy. The product mi.x nor surprisingly, reflects the dual nature of

the economN with somiet features of middle-income countries: frozen poultrv and parts account for

twvo-thirds of the total market and portions for about 601 percent of the market.

,3

Nor-thf-enri-al Jmetr-ita

('n/hzi!e .Stares

Poultr\ production in North-Central America is dominated by U.S. productioll; the 1!S. poultry indus-

trv is the largest in the world. In 1994 U.S. productioll totaled 13.1 millioni tons-about 27 percent of

world output. The size of U.S. comlipaniies also reflects the dominance of the U1S. poultry sector:

Tyson, the undisputed leader of the IT.S, market, processes more than 2 million tons of poultry annu-

all: that exceeds all of Africa's production. Tyson currently accounts for more than 4 percent of world

poultry production. A list of the major U.S. poultry companies is provided in Annex 3.

The broiler sector is generally concentrated in the South-C.entral region, wvhich accounts for abour half

of total U1S. commercial production. The second leading region is the SOuth Atlantic, which accounts

for another 40 percent of IThS, production. The concentration in these regions results from relatively

low land and labor costs. favorable climate. ability to ship in ample feed supplies. proximiitv to major

metropolitan consumllption centers, and historical development in each region of a vertically integrated

broiler production and support network.

The turkey sector is less regionally concentrated, although two regions (South Atlantic and NVesr

North-Central) accoLnt for about 60 percent of national production.

Soulth Amer ica

Brazil

Brazilian poultry production in the 1980s has been increasing at a 10 percent annual rate, spurred by

increasing domestic demand and competitiveness on world export markets. Competitive advantage of

the country is derived from easy access to low-cost feed, relatively cheap labor, and a strong rivalry

among the major integrators that has brought technical performance to a level comparable to European

and 1T.S. producers. Sadia, Perdigao, Ceval. and Frangosul dominate Brazilian production and account

for 40 percent of national outpu.c The first two companies account for a substantial share of exports:

35 percent and 25 percent, respectivelxy This performance has been accomplished despite a very

unstable economic environment characterized by mediocre economic groxvrh (1.5 percent annual GDPgrowth over the 1980-1993 period), high unlemployment, and inflation rates that often exceeded 20

percent per month. The scabilization program initiated in 1994 has had a dramatic impact on inflation

and has provided for a significanit development of the domestic consumer market.

Brazil is also among countries where turkev meat has become an alternative to other meats, althouglh

producion represents only about 3 percent of broiler production. Turkey production is essentially con-

centrated in Santa Catarina and dominated by Sadia, Brazil's largest company in the animal products

sector. Turkey consumption remainis highly seasonal; 85 percent of sales occur during the pre-Christ-

mas period. Sadia has attempted to overcome this situation through development of further-processed

products (ham, nuggets. etc.) supported by intensive promotional campaigns. A list of the major

Brazilian poultry companies is provided in Annex 3.

24 F C G L O BA A G R I B U S I N E S S S E R I E S The World Poultry Indusiry

China

Marker liberalization has transfornmed China's poulrVx industry into onc of the most d\ynamic agricul-

tural industries in Asia. Annual production growtth over the past five xears has exceeded 16 percenit

(Annex 2): most estimares point to a 15 percent increase in 1995. This growvrlt has heen facilitated hv

a large influx of foreign crapital, technolog, aLid hrccding stock. The dexelopimient of large-scale inte-

grated broiler opcrations is increasingly altering the landscape of the sector and transforming China

into a pownerhouse) on the exporr market. NIume rous Japanese and U.S. compaLnies, the Thai CP group,

and other Asiai conicrins are insolved in these dcveclopments. In 1991 an estimated tsentv process-

ing plants in Chilia wecre thouglht to bc producinig exclusively for the Japanese market. Tyson Foods

aninouniced recently that it had enterecd into agreements w ith two companies from 'Ibiwan (China) and

Hong Kong to develop fully intcgrated poultr production operations in two pro\liices of China. Lo-

cated in Shanlghai. Tianjin. Guan-gdolng and Shandong prox incts. joint \ enture plants are exporting

mainly cut-up and deboned portions.

China is competing directlI sx ith Thailand for exports of these frozen products. and has the adv-antage

of lower feed and lahor costs. Some experts also helieve that Chinia max target Japan's chilled fresh

market. xvhich is currently supplied by Japan's (domestic broiler industry. Port-to-port transportation

between China and Japan takes oiilv two to thrcc days, no more than thec transportation of products

from the most distant production location s\ithin Japan. Although these investmiienits were based on

plans to supplN the lucratixe Japancse marker, expccted increases in domestic consumption xvill pro-

vide an additionial boost to poultry productioni in the future.

While joint-' encure operations are setting the pace of technologicalc developmicnit and tecrhinical perfor-

man(c, the bulk of poultry meat production remains in the hands of small-sCale ullits. This segment of

the ioduostr remains exposed to fundamental weaknesses in the production process: poor-quality

feeds from local feedimiills; lack of quality animal health products; annd inefficient management prac-

tices. whicb result in high mortality arid poor feed conxersioni efficiency. 'I'he level of biosecurity is

geeicrallk los. with poultry production facilities located close togtcher, feed transferred from one farm

to another. and lirtle disinfecting of anilml transportation crates.

Despite these problems, China's poulrmx sector has show%n that it can produce high-quality broilers

and, because of its losv wages. further-processed products. (China's broiler sector is expanding at a

rapid pace. hut dhe indust' is facing ello\ Oobstacles SUCh as the rising COSt of feed that followed a partial

market liberalization and strong er competition for labor and laLic in t[he fast-dcleeloping coastal pro inces.

In addition, central and provincial governmncits are beginning to express conicerns about [he effect of

high-Volume production on the enviroonment.

I',,,/ar [ P,,,/,,, {,s, 'S

Jpel/

Japan is one ot thle rare eXCeptiOlls in :\sia in that its poultry production decreased in recent sears.

Expansion of production is incr)easingl- heing hampered 1\ lack of land, scarcity and cost of lahlor. and

environmental corceris. In addition to substandard technical and ccoinomilic performnance. the conmpet-

itiveness of lapanese poultr1 pro luctinni is heing eroded fiurther by the strength of thc ten. A poultr\

stud\ group made tIp of thirt -onc leading Japanese broiler integrators recenitl took stock of this

alarming situation. It estimaLted that. oer the 1994-2003 period, domestic production is likelv to

decrease at a 3 percent aninuatl rate. Linder this scenario domestic productionl \tould supply Iess than

50 percenit ot the Japanese market in the Nlear 2()(3.

Local integrators anid importers have long anticipated this trend. Investments in Thailand started in

the mid-1 9 70s to compmlemnt imports from the Ulniitecl States. Over the years several processing

plalItS \were sct up il joint yen-tLircst i th rhai companies aLid dedLicateti to exports to the Japanese

market. Similar investments and alliances. although on a smaller scale. hate been arranged in a num-

her of othlr Countries, includiig China, Indoniesia, Nlala\ sia. Brazil, and ( hile.

'I; iiei/e,/X,

PoLuir\r prodLIction tecIM11101V and organization in Thailanid is generally similar to that in the United

Staites. Most chicks originate fromii imported parent and grandparent stock from the Uinited States and

the LIlK. Fed ing technology has been introduced hb integrated poullry companies that supply prodiucers

uLider contract Approximatelk 8) perceint of Thai pool trt production is gencriated bh abOCut ten large

verticall integrated companies. \\tith independent producers acCouLntilg for thc balance. In 1991,

( Charon okphiand (C. P. \\tat Ctillated to he the production leader, acCouLItilIg for 3? percent of thc

market. Sabafarm's s halre' \\as 14 percent. Broiler prodduCtion is located primarily in the central region.

close to the hatcheries, fted mils anid processingg plalints. Farim capacity ran"ges fromll 1(() (0(H) to

.50,(100( birds.

Exploiting its competiti\e advantage deri\cd from ilto\ sages, IThailanid hals been particularly successftul

in exportiing broilcr meaLt during the 1X980s. Japanese investmenit in joinlt \entures (Better Foocds Sri

Thai Plno lt; Ccniiragro) stas instrruienItal iii supporting induscrr development antI facilit ating access

to the Japanesc market. ProdtiuCtion em phasis has bcen on carving alid furthier processing of broiler

mear for the specitic demanid fromil the Japanese markce-thlIt is. deboned breast aid thigih mcat. but

wirth an increasing demand for fancv cLutS ()iakitori, tulip Wilgstick, skylarkl. blioless leg steak. and

boneles.s leg block).

Recen tnl\ ho\ve\cr. Thailand has fouinLIl it more diffiCuIlt to iilcrevase its broiler exports because ot a

dcclitie in its competitise advantage in produictiiol costs (labor and feed) and the emnerlne o,f oChina

as a strong comilpctitor. 'rhis is forcingg m)ost integrated processors to pa' more attenliti(oi to the domestic

marketr and ro proimote furthier-processeul produCts to domestic and foreign cuIsromers. This has also

bcen an aduICeu incentive for sOilm of thesc groups to relocatc il neig 1bori ug countries (Indonesia.

Chi na) \ ith los cr prod UCtiOIl COts aid atLtractise domestic gro\\ th perspectives.

2 I F C G L O B A L A G R I B U S I N E S S S E R I E S The Word Pouliry Industry

'G/s/e t1/ f ht"111''P

JIi'8('iilA/ ;/it}/Wi

The Europetan I 'nioni (EHL) is the world's second leadinlg poultrv prodIcer, and the leading poultr-

exporter, In 1994 El I poultrn production totaled 6.8 million mnt, or about 14 perce-nt of the world's

total. \ithin the El.tl France is thc leading poultr- producer (27 percent) and exporter (54 percent).

followed b1 Italv (I 0percent). thle Ul t (I6 percent). and Italx (12 percenit). 'rhe Frenichl poultr\

industrym has becomic increasingly conccitrateL. geographically and in terms of market shlre. The

major firms are xerticallv integratedL as in the I nited States and increasingly have located their

facilitics in the xc estcrn region of the country, hich accoulnts for 711 perce'tu of national productioll.

Tlherc has beci limited cross-horder investment so far xxithin the ELJ, Nx ith notable exceptiolis such as

I)ouX (Germanx, Spain). Bourgoin (Spain), Hillsduovn Holdings (Netherlands). and BP Nutrition

(Spaill. Netherlands). Production in ealchi counltr is usualkl dominated by a local company. The only

companies to excecdl 5 perceit of European production are Dotix (12 percenit) anid Boorgoin (6 percelnt)

in Fnrance and H lillsdown Holdings (6 perceit) in the L.K. Recent acqluisitionIs by I)oux and BoUrgoin

x ill strengthen the Europcani leadership of these to io ompalies fLirtier.

Specificitv of European poultrx productioll stems frolnl the dix ersit\ of mea.ts supplied Althou'gh

broiler meat is dominant (7(1 percent). turkex, duck. pheasant, quail. etc .,accouIt for a significanlit

sharc of total production.

Gross tli of the European pooltry inodustri in theI I t 80s, particularly in Francet 1)eD mark, alid the

Netherlands. is also Ilinked to increatsed exports to third counitries, particuLlarl thc Nliddle East mlalrkct.

BecaIse of thte Common AgricUlturoal I olicv ((CAIP, hich increased ElI cereal prices above other

world prices. these exports werte conditional oni cxport suLbsidies. WVil tIte World Trade ()rganization

(WTG) agreement iriilerneited in Jol\ 1999 the European irndustrv stands to lose i itnmediately an

otilet for 230,1)00 torts of poul try mcat-that is. ont-third of cirrenit exports. A 1-mber of producers

have rcduced their prodUctioll targets. hxlbile those thatt are most exposed to third-coUoIrn exports

have atttempted to redirect their output to ard the European fresh poultry markcr. Most of them are

also incre-asing iheir presence il the fUlrther-processed segmnmit. which hald remainied relativelk

undeldeveloped. With a ntmb)n)cr of im t stlrents comtting on board recently. To the extent that the

surpILIs cannot be exported \x ithouo subsidies, hoer cr, a severe consolidationi of the iodustr has to

he expected ill cominiig vears as domtestit con1suImption grtoX Li \ ill not accotitimtodate additioial supplies.

In addition, there xxill be increasing pressure otin tc maijor companies to lcerage the ir indUstrial

CeXperietlce aiu1d exlpanid iln otler eottititriCs, CsseL i iall, emierging cconiu tie-s xwhere prospects for

consuImptioll gross th are noorc positise and access to essential inputs less rcstrictive for a competitixe

production.

ast r Ai , uiop/F,,,,mr, i- Soviet (i non

'The t-lunaalriall poultry industr xsas idcly regarded as the best in Eastcrin Europe and as a succcss-

fu l adaptation of produCtionl in a soicialist countr\ to the dcmtands in the in rernatioinal market. In 1988

H ungarC exporte__d 225.(0 trlts Otf poutl rt meat-almotst one-half of total production-and xx as thicreforc

1I5'/uI / /d /u', 2i/ _,

a Ieading exportcr. From I 1989 o, however. thc transition to ai market cconomy has proven parti ularly

hard. The indusrrl had to hear thc loss of its malini malrket. t[he former Soviet republics, and redirect its

exports to \Wstern malrkcts whilc facing con)siderablc inlstability in its ccoiiomiic cnvironment. AgriCuli-

turall anid nona,.gricultura:l inpur markcts were liberalized: cooperatives anid statre farms, vhicM stipplied

the bulk of the broilers, were uLiFiergoinig transformation and privatization \hile the reaiil sector was

progressivel being regionalized and privatized. Otn the foreign trade sidc, HunLiovis's former n0onop-

olv oas abolished. lUnder these circumstances, the weaknesses and multipic inefficiencies of the sec-

tor organization became consp)icuous: the horizontal integrated structure typical of economic sectors

under socialist rule did not pro idc CInouLh flexibility and efficienc for each poultry integrator to re-

visc its straorg rapidi and ilpt ro thc ne situation. Poultr production has decliined by about a

thir(i and exports bky 4ff percent since 198M. Tlhe industry has Ieen supported by domcstic consump-

nion, which has declined onIv moderaelc in the meantime.

'[he complex operational and financial sector situaltioll has niade the privatization process rather slow.

although a few foreign compan ies have participated recently in rhis process. In the medium term, the

prospects for industrr rcx italization are positive: industrial experience is solid. fced resources are

adequate if protein-rich meals can he imported freely aLind vages remaini signiificanlrlv lo cer than) in

\Vcstern Europc. In addition, I [unpigr, has traditionally producedt a \ide ranige of poultry products

(wholc broilers, parts, turkc, ducks, geese, goose li er, etc.) that can find a market in Europe.

ircferenitiai access to the El marker has been granted to HuLngarV inder the association agreement.

although this is for a limited volumIe of about 40,000 ton1s in year one of the agreement.

Russian 1½-/meamon

Producrioni in the tormier So iet I iiion w as dominated bw Ptiscprom (Indusrrial-scientific corporation

fiir poultry prodtction). vhich accounlted in 199 1 for 70 percent of total productioil. State and collec-

tive farms accoUlled foir lcss thai .5 perceiit w ith the rest of the prodluctioii coming from back ard

producers. This strucure is slo\ brcakiig down and, in the most progressi e republics and regiolis

individual poultrx farnis are being pri arizcd. A significant share of the production facilities is located

in the central economici regioii. 'his is explaiiied by the prcsence of hulge poultrv complexes rhat were

built aroulid NMosco\ to provide t[hc capital with meat and eggs. The same logic explains the

importance of ipriultr production iri thc trals. a h1eavil industrializcd area. Significant poultry produc-

tioin has also developed in the North Caucasus and Volga regions. because of the local feed resources.

M\ost poultr meat in t[he former Soviet Unliionl comes from chicken, with turkey meat representing

about .3 pcrcenlt of total production. Currently, about 42 pcrcent of total poultry mear is produccd

from broilers. with the rest of thc nicar coming froni cocks aiid henis. This has resulted in lo\wer

cfficienc- of feed use and, t[hcrefore, higher production costs. The quaiity of the feed continues to be

one of the most serious constraints on producti\ itv. Feed rations are generalls unbahanced arnd they

lack sufficiClet \ itamiins proteins, and fat. [Ihis is compounded by inefficienicies at all levels of the

production process: lack of adherencc to technological process, loss labor discipline. outdated facilities

aind Cetiiplllllr.

The ildutriU h1as also been seriouslysN disruptled by a deterioration in its terms of trade. stemminig fro(m

the abandonment of the planned ccoirimy and its producer arid consumiser subsidies, which resulted in

fallinlg consLimer demand. Animali inventories anil output have fallen markedh over the past four years.

28y I F C G L 0 B A. L A G R I B U S I N E SS S E R E S The Word Poultry Industry

To compensate for fallinig domnestic production. poulrry imports have been increasing significantly,

both from the tUlited States and the Et'. The state continiues to play a significant role in the sector as

its surv ival depends on direct and indirect subsidies: for example, feed is sold to poultrv complexes at

subsidized prices. Stace trading organizations also plav a significalet role in the markeritig of poultrv

meat: in 1993 it is estimated that these organizations bought about half of total production.

Domestic poultry meat production undoubtedly will recover from the current situation and, as in

most countries, eventually xvill supply the major share of the Russian poultry market. This will require

siginificanit restructuring and performanice improvcment at all levels of the production process.

however. Massive investments will be required not only in poultry production, processing. and

marketing. but also in the infrastructure required to establish anl efficient feed market.

A',u//I l, P'rod,//1,1r1, 29

f l DIME NSI ON S OF CO MP ET IT IV E AD VAN T AGE

Cost Competitiveness

Broiler cost of production per kg RTF for selected countries is presented in lable 4-1. Costs of pro-

duction capture relative costs at a specific time. In this case most of the data were gathered in late

1993 and early 1994; relativc costs and exchanige rates have chaniged since then. Furthermore, some of

these data rclate to average industry standards, while others relate to specific companies in a given

counrLrr (Cost differences, therefore, should be interprcred with caution. These figures are indicative

of broad trends. In all countries, feed cost at broiler level and as a component of chick cost is the major

cost of production. The ulnit cost of labor and labor productivitY, including grower labor, is the next

mciss important COSt itcm; all other costs are relatively small in comp,rison

There arc substantial dLifferenices among countries in total cost of production of chicken meat cx plant.

The tUnited States is an appropriate benchmark to compare relative performances. The industry is the

best-developed technologically, with a secure market position and per capita consumptioni at levels

higher thaL virtuallv all other Countries. Industry structure is mature, and concentration in the indus-

try is suCh that large companies have captured all of the efficiencies that scale brings. In addition, the

United Statcs is a large exporter of feed ingredients, and its domestic feed market is a reasonably good

indicator of interiLationial feed prices.

O(ther couLntries in Table 4-1 th:at are cost-competitive with the Ulnitcd States are also in a strongly

competitive rawv material cost position. In the case of couLntries suchI as Brazil, China, and Thailand.

wh,ere the overall cost of production1 is cheaper ex plant, the cost advantage is gained in areas other

than bird production-for example, lower labor costs and lotwer grower-related costs, which inevitably

is related to labor cost.

CIountrics such as the Netherlanids and Franice, where teclhnical indicators are equal to the U nited

States, but wvhcrc costs of production are highi, also have a very high comparative cost of feed raw

matcrials. In addition, thcy also suffer from relatively high labor costs. Overall, they are in a potentially

poor competitive positioi.

In between these two positions are a number of couL1tries-for example, Hungary and Poland-where

the industr`- is in a transition and the potential indicated from the rawr material supply position and

labor costs is not realized because of poor techinical efficienicies.

30'

Table 4-1 Poll//i I'/9a-/iO// (.r,x/x 2,, .S'/rtu/(.;///c

I',,/z,,z,,,,(~~~ ~~~ ~ s 11/, 1f4)1IR l111, ,,P,, ,azd, , (/,,, ki I-,,, 1haj, ;o,,/; §, F,,,, /irr;n,, T,ik/t 1' S I A

104,vJ /,,,/, 199,4l /QQ 1,),14 /f99)l I'9'9z ///9 Q /'vt> I 1' /Q5 /99-1

Live Cost(USc/kg liveweight)

chick cosr 14.6 (9.4 10( 14.3 12.7 16.) 11.4 15 .3 9.8 12.0 8.3 12.1f&ed cost 46.7 35. 9 42.9 57.1 55.6 55.2 76.() 65.6 51.5 47.7 36.8 52.4groWer paymnCt 13.8 5.3 5.8 19.2 20.3 25.8 5.0 15.2 6.3 21.4 8.8 9.9xet & medicauioni .3.3 (.1 2.0 i.3 (0.8 1.5 0.9 1.7 1.5 1.1 1.3service & grower admin 9.2 (.0 1.1 6.8

kirm cost 87.5 5(1.7 1 )10.7 91.9 89.3 98.4 1()5.') '7.1) 69.3 82.7 .56.1 79.1lirehaUl 15 I.() 1.8 1.() 2.0 1.() 2.8 3.9like cost at plant 87.5 52.2 61.7 93.6 89.3 98.4 1)05.11 98.)) 71.3 83.7 58.8 82.9

Meat Cost at plant(USc/kg RTC) 1(09.4 68.9 81.4 123.6 117.9 129.9 131.3 129.4 94.2 1 10.5 77.4 103.7

conidcmnations I.()

offal ctredit -2.2 -1.7net meat cosr at plant 109.4 68.( 81.4 123.6 117.9 129.9 131 .3 129.4 94.2 11().5 76.2 1112.1)

Plant Costs(USc/kg RTC)

labor 6.3 16.2 9.8 8.2 7.9 15.4 10.1packagirig 3.3 4.3 4.0 4.6 5.7LitilitieS 1.7 2.6 5.3office. supplies. rmi,c. 2.0 8.6 7.1 4.1 3.2 2.9 6.4

fi\ed CostEs 3.2 2.8 1.6 1.0 ( 3.3 3.1nonlabor 1H1.1 11.4 13.1( 4.1 8.3 13.4total nondisaggreg. 22.1) 11.8 35.0 33.51 21.11total nionnimat cost 2.0( 16.5 11.8 35.1) 27.6 33.5 21.0 22.8 12.4 16.1 28.9 310.6

Total Operating Cost 1.31.4 85.4 93.2 158.6 145.5 1.4 15 2.3 152.2 106.5 126.6 1()5.( 132.6

Overhead and Interest 8.() 4.8 4.11 4.2

Total Cost(USc/kg RTC) 141.1) 85.4 93.2 1 5 8.6 15(.3 163L.4 15h6.3 152.2 101.5 126.6 101(.2 134.6

Production Parameters I. I- l|,I' R .3 2(1 23 2)) 273 1.( 21 2 4 2.) 2.)) 2.11 3.)) 3.0

W\;eight at slaughter (kg) 2.41 1.91 2.6) 1.9 1.9 1.8 2. 1.8 1.9 1.9 1.9RT(C wcight (kg) 1.9 1.4 2.| ) 1.4 1.4 1.4 1.7 1.4 1.4 1.4 1.5 3.6-7.3 6.3-10).1)Age (days) 45-52 41.9 | 56.0) 43.1) 46.1) 42.1) 49.0) 49.0 45.() 41.8 42.( 14-16 wks 2)) *sksFuropean Broiler Index 21)9 227 21)1 225 182 2 L 1)4 1 211 229 2311 L()

Feed cost(USS/Ton) 01)4 181 186 '91 4)1 '98 353 2 7) 258 245 184 176

Farm cost/index'100 42 _ 30) 41 49 42 5 1 03 33 36 24

Total Operatingcost/index 100 63 I s 401 70 | ) 7 7, 5 1 00 ;( 1 5 ( 40

I'able 4-1 also shows a ratio of total operating cost and the ltroiler-growing etfciecnyc iidcx that acts as

an indicator to rank rtlatixe competitiNeness. For examtiple. at the very competitive end Brazil is more

competitixe than the UIniited States because of a lower cost srtmeture: at the other enid, evell though

Poland has a slightlN lower cost of procuction than the Netherlands anid Franice. it is in a poorter

cormpetitixe position because of struruaLl and opetratig inefficiencies. By inference. changes in input

costs will benefit Franice and the Netherlands more quicklv than) Poland and Hungart. but there is

greater potential ft'r improvement in oetrall competitive position in the latter two countries from

improvements in structural and operating efficienc.

I)msir,nl.v O/ (sm/s////'it'{ sfif -a "

Figure 4-1

Li. r BI?/ (.;si I //c/l

Live Bird Production Costs

The cost of a live bird delivered to a slaughter plant can be determinied by the cost m-odel depicted in

Figure 4-1.

The relative importance of variouIS comiponients of the live broiler cost varies across the countries studied,

although feed cost is always rhc most imiportant single cost item. Figure 4-2 sumimarizes 1994 broiler

costs in the Uniited Stares RUSDA ERS broiler model), and the relative imiportance of the various cost

componecnts.

3.?1 IFC GL0B A L A GR I BU SI NtESS StEtRItES The World PoultrylIndustry

Figure 4-2

'S't 11,wu( / [i' Boiroz ogr Inlt// Un/ilevISlaete s 19())

* Feed

-9 9 rower Payent

_ 1,9 * M~~~~~~~~etermna,

1 S7r,m e and Grower.4tmmistration

Lvehauto Plant

* Day OChk

The cost of feed is the most important cost in broiler production, not only because of the cost of

broiler feed but also because of the influence of the cost of breeder feed on day-old-chick cost. Feed

cost per kilo of liveweight produced is a function of the cost of feed itself but also of the feed conver-

sion ratio (FCR), which is defined as the amount of broiler feed required to produce one kilo of

liveweight. The underlying genetic potential of the broiler growout is basically the same for all coun-

tries because penetration of the modern breeding companies is virtually universal (with the exception

of the former Soviet Ulnion where relationships are still being developed). Therefore, variations among

countries in feed cost per kilogram of liveweight are influenced by differences in feed costs and effi-

ciency of broiler growout management.

The genetic potential for broiler production under ideal conditions can be estimated from the claims

of the breeding companies. An example is the standard published by Arbor Acres, which claims the

followilng:

Liveweight 2.57 kgs

Feed conversion ratio 1.91

Age at slaughter 49 days

Index value 274.6

The index is a summary indicator of technical performance. It is calculated as:

Index = liveweight x 10.000feed conversion ratio x days of age

Figure 4-3 ranks the countries studied in terms of the degree of competitiveness of raw material input

discussed earlier: cost of feed per kilogram of live bird produced; and the broiler index, which ranks

actual bird performance under commercial conditions.

The tlnited States and Brazil are similar in efficiency in bird performance and cost of raw materials.

but Brazil is more efficient in costs other than feed. At the other end of the scale, the Netherlands is

efficient in bird performance but has high production costs because of a poor raw material cost posi-

tion and high nonfeed production costs. China and Thailand do not reach the standard of Brazil or the

United States in bird performance, but both have relatively low nonfeed costs. China has a highly

D)i,nlnsonzs ol ('ompdihir.4dta,;taee 33

Figure 4-3

,;,Coullil, C;)zomp9a�/iiurlirvsv 400 (USS/Ton)Fr,,,, (.,,sz

350U

300 Fr-ance AiSther/an/tS

Po/andFeed Cost U ThIailal

250 Hunigan- Tur-kr-

200 ~~~~~~~~~China B /aSi:

150

140 160 180 200 220 240

Broiler Index

competitivc rawv material cost, whereas Thailand's competi[ive position is lowver because of its reliance

on imported soybean meal. Both counitries, however, are competitive enIoughI overall to be sianificant

exporters.

Turkev has a competitive bird performance, a moderate raw material suppIV position, and a very high

nonfeed bird cost, particUlarly wheni general cost structures in Turkey are conmpared wvith other coun-

tries. Poland and Hungary currenitly have a relatively high cost structure because of inadequate bird

performance in spite of a favorahlc raw material position. Both countries are in the process of changing

from a cenitralized horizonital integration to a more conventiolnal vertical integration and can be ex-

pected to improve their competitive position markedly when bird performance improves to interna-

tional standards.

The differencc in overall live bird cost between the lowest-cost and the highest-cost countries is 46.2

cenits per kilogramil of liveweight. The differenice in feed cost per kilogram of liveweight between the

lowest-cost country and the hi"hest-cost one is 29.7 so, although variation in the cost of broiler feed

and bird performance is very important. there are nonfeed-relaced costs that result in a significant

variation in cost per kilogram of livewveight.

The grower payment variation amonig counitries is significant; the differencc bcween highesc (the

Netherlands-25.8 c/kg) and lowcst (Brazil-5.3 c/kg) is 20.5 c/kg of liveweight. The components

that contrihute to grotwer payments are labor cost; the capital cosc of shedding; labor productivity; and

the cost of other inputs SucIh as littcr. gas, utilities. etc. As could be expected, low-labor-cost countrics

tend to have low grower payments (Brazil Clhina, Thailand) and high-labor-cost countries have high

grower paynmenits (Netherlands, France). There are exceptions, such as 'Furkey xvhich is reaarded as a

low--labor-cost COtlintry where grower costs are high (21.4 c/kg), and Poland and Hungarv, where labor

rates are relatively low but payments are relatively high. Countries with favorable climates and rela-

tivel, low-cost housing and fewer energy iIputs teiid to have a lotwer grower cost (ULnited States,

Brazil, Thailand, China) compared xvith countries where the climate is less favorable (Netherlands.

France, Poland. Hungary).

34 IFC GLOBAL AGRIBUSINESS SERIES TheWorldPoultryindustry

Broiler farm productivity is an important component of grower cost and it helps to explain the situation

in countries where growcr cost per kilogram is high despite lowv labor and living costs (Turkey, Hungary,

and Poland) and also explains relatively low grower cost wlhere the cost structure would be expected

to be relatively high (UIlited States). It also mitigates to some extent the cost in some very high-cost

countries (the Netherlands). Broiler grower productivity is a function of the rate of throughput of a

hroiler farm, of average farml size, and the hasis of the negotiated growing fee that is paid to a grower

bv the incegraror.

A study of the U.S. broiler industrxv shows a steady increase in farm throughput during the 1970s and

early 1980s when the farm output reached 116,844 birds per year, but farms averaging 237.000 birds

per year output produced 89 percent of the broilers produced in 1982. At around 5.5 batches a year.

that represents an average farmi size of 43,000 birds. The trend toward larger farm sizes most likely has

continued since then.

In the Netilerlanids average annual farm throughIput is around 300,000 birds, with an average farm size

of about 60.000 birds. In Turkey average farm size is 4,000-5,000 birds-a function of the nature of the

development of the industry, which has beenl heavily influenced by a rural development orientation.

In Eastern Europe farm size varies according to ownership. There are many privately owned single-

and two-shed farms in Poland with a capacity of around 15.000 birds a shed. These coexist with large

former state farms withi between twelve and twenity sheds of similar capacity. Hungary's structure is

similar to Poland's.

Brazil and Thailand are similar in that farmers w ith one shed of broilers with a capacitv of 10,000-

12.000 birds predomiiinate as part of a diversified farminig operation that may include crops and other

products.

In genieral, broiler grower contracts are estahlished between the growers and the processor generally

on a per bird basis withi incentives for good perforrmance. The integrator provides the day-old chicks,

feed, and service and support. The grower provides labor, shedding litter, and utilities. The fee is ne-

gotiated and both sides develop an expectation based to some extent on industry structure and local

conditions. There is a difference in Eastern Europe; this will he discussed later.

Therefore, the issue that is more important than) farm size or annual throughput in determining the

growing cost is. in fact, the negotiated fee. Implicit in the fee structure is the expectation that it will

be based on full-time activity, and the definition of full-time activity seemins to vary. In the Netherlands,

where the average annual throughput is 150,000, it is recognized that one farmer can handle 50,000

birds a cycle so the fee is based on a throughiput per aninum of 30,0000 birds (six cycles a year) before

outside labor is employed on hile ftarimi. Farms smaller than che standard in facc would be classified as

part-time and the farmer would recluire income from another source to maintain a reasonable standard

of living. A similar view on part- or full-time farming applies in the UIniited States.

Dit)le ujons ol (Comlipefiti zzi 3.

In Br:azil, broilers are kept on mixed farms wvhere the farmer also derives income from corn and other

crops and, in fact. gains value by applying all of the manure generated from livestock activities to thc

crops grown. Gross incomile is based on ten cents a bird and a throughput of 70,000 birds a year. Shed-

ding construction and equipmelnt is around $3 a bird, which, if depreciated over twenty vears, is

approximatel 2.5-3.0 cents per bird, with labor and other costs being met bv the balance. All of the

labor is provided by the farmer and his family.

In Furkey, the fee is based on a small farm size and alternatives for extra income are not alwavs available.

As a resuIt. the income per bird received by the farmer does not reflect a full-time effort but offers a

ftull-time income. '[his structure, coupled with a low-labor-cost environment, means that it is not

uncommon) for a broiler farmer swithi a standard 10,00(0- ro 12,000-bird shed to employ labor to work in

the shed and to gain profit as well. This is palticularly the case when the farmer also has other income.

In Polaod and HungarV; wihere the industry structure before economic reforms was a horizontallyv inte-

grated national structure with o nershiip of product takeni at all levels ol the production chain, the

margini taken by each level essentially was negotiated. In both countries there was a degree of private

ownership at the broilcr grower level. This, coupled with indifferent inputs and relatively poor industry

performance and the relative strength and entreprelLeurial drive of the growers, has resulted in a more

favorable allocation of the available margill in poultry meat production to the growers. The above-

average growers have done particularly well, although there is a great deal of variation in performance

so that growers in the bottom-performing group have not done well. The price has tended to be set

based on the lowvest common denlominiator. C ontracts were structured so that there was a published

price for all of the inputs and for a gro\ n broiler. so the grower purchased the inputs and sold the

broilers to the processor.

As the industry in both countries restructures to a more conventionial vertical integrationi, bird perfor-

mianmce wvill improve and there iwill be an incentixe for the processor to change the contractual arrange-

mcnts so that the improvement in margin that w ill result will foW cqulitably to all participants. The

vcrticallv integrated structure will mean that livestock ownership will remain with the integrator so that

the benefits of integraLion previously mentionicd can be achieved. In Poland it is not unicommon to see

labor eTp)loVed on farms that are \x ell below tthe size of an accepted one-man unit in the United States.

Variatioll in day-old-chick cost to a largc extenit reflccts differences in feed cost, and to a smaller extent

reflects breeder performance-for example, in the difference between the UtIited States and Brazil.

TIhe other miscellaneous costs are relarivcly insignificant in cansJing variation in production cost among

countries. Livehaul costs are estimated in some cases because there are differences in the structure of

the livehaul operation bet\ween countries. In some cases the cost could not be isolated because of its

inclusioni in a general company-w%ide transport cost: in addiioion, in some cases pick-up labor is provided

by thc growers as part of their responsibilit.

Processing Costs

The components of plant costs are shown in Pligurc 4-4.

36 I F C G L O B A L A G R I B U S IN E SS S E R I E S The Word Pouliry Industry

Figure 4-4

I'/)} s iux Ink, zP (o ICo / IM- cost of bird at = live bird cost/plant yield

social costs of labor

Labor costs wages rates

number of employees

flexible films and traysSLAUGHTERPLANT COSTS Packaging costs

cUrtons and crates

Supplies/Misc.electricity

Utilities gas/fuel oil

water treatment

supervision

Fixed Factory Costs maintenance

depreciation

Coinparisons among countries in plaint processing costs are COnIfo-nclded 1h product mix. In soile cases,

particularls in countrics that export to Japan, he mallual input inlto product preparation is intensivc.

For examiipic, China and Thailand export a fLill raige of ready-preparcd products thait have a Serx high

lahor input. On rhe other haid, thc Liniited Stares exports hone-in legs to Japan that halve little labor

input other than the- standard lahor re(luired for the siaughlter and autom10atic cot-up process. Brazil is

in hetueent %z ithi essentiallv man ual cLiir-u p. deskinninig, and dicing.

Fiangre 4-5 summIiarizcs processing cost dicffereices, as reported inTahle 4-1. Care must be taken in

oiterpretation, houes er. hecause of product mix differenices. Allocation of costs is also a prohlen

becausc utility costs somnetimes are included in fixeci costs, o) packaging is included in supplies.

Figure 4-5 USc/kg RTC

J'/,yg ~ ~ ~ ~ ~ ~ ~~~~~Uck RTC0/( /"o///ll) C(Illp/l//){j//. // 40_

30 Plant (.' '

P/lan (.isgs-* * * ~~~~~~~~~~~~~~~~~~Toi/t/

20

I0

0 Argentina China Hungary Peru Thailand United StatesBrazil France Netherlands Poland Turkey

/)i//, / I/I.\,, , a,/lnpil," .j/ &,1/,,?7,(.,

The major cost of operatinig a pojultrv Slaughter plant is labor, but for the reasons menrioned, the cost

of labor per kilogram of final product does not totally reflect the differences in unit costs of labor or

labor productivity, although it is apparent that the cost of labor per kilogram is lower in low-labor-cost

countries. The information svstems encountered did not tend to separate labor costs between primary

and fiurthcr-processing.

Labor as a percentage of total processing cost varies from 38.2 percent in Brazil to 66.6 percent in

Thailand. Both the 'T'hai and Chinese figures represent the export industry and reflect tbe cost of a

large value-added product range with virtually all of the output hand cut, deboned. and diced. The

Braziliani product mix is made tip of whole frozen birds for the Nliddle East and local markets, hand-

portioned and deboned product for Japan and Europe, and conventional portions for the local market.

The mix is aligned more closely with Hungarv and Poland, witlh the major difference being the balance

betNveen fresh and frozen product, because of the large part of Brazilian production that is frozen for

export and for distribution within areas of Brazil where fresh distribution is difficult.

The costs in the Netherlands and France have not been itemized. but the total processing cost is

consistent with a labor cost per kilo slightly higher thani that of the tillited States. The product mix

would he similar to the U,nited States except that both countries-the Netherlands and more

particularly France-are major exporters of wlhole frozen birds.

Other costs do not showx as big a variation among couLntries because the cost structure of other inputs,

such as capital equipnment. packaging, fuel, and utilities, tends to be tied more closely to world norms.

The weight of birds at slaughter does infliueice processing costs per kilogram as most of the costs in

plant are incurred on a per bird basis. The difference betwelen the average slaughter weights was not

great, w-ith the exception of rhe C'hinese exporters, who process a large bird because a large part of the

output is deboned, and Argentina, where the market prefers a large whole bird. There is likelv to be

more intracountrv variation in slaughter weights due to local market segmenitation than among countries.

To some extent. the savings in cost of slaughter are overcome bv inefficiencies in live-bird cost when

birds are taken to heavy sWeights such as the 2.6 kilograms seen in China. Thlere is alwavs a trade-off

between marker requiremenits for bird size and the efficiencies that can be gained by optimizing

biological efficiency and processing cost.

For purposes of this study the yield of processed product per kilogram of live bird delivered to the

plant was standardized bv using the tlSDA standard. The use of a standard yield will affect meat cost

where the vield is different from the standard because of product mix. The other processing costs are

all on an actual basis so there will be no effect on them because of yield standardization.

Economies of Scale

I i - I's tS / 0 k

Thle steadv supply of live broilers to a processing plant requires careful coordination of placement of

multiplication flocks and balancing of capacities at all levels of the ftarming operations. A tvpical flow is

summarized in Figure 4-6. 1v'picallv, unit shed sizes for broiler and breeder sheds are around 1,000

sqLiare meters holding 4.500 breeders or 20.000 broilers. Farms are made up of multiples of these units

and the maximum farm size is a functioni of placing livestock of the same age.

AV IFC GL OBAL AGRIBUSINESS SER ES TheWorldPoultryIndustry

Figure 4-6

li'/ it! / /s'Ha//hI! I 1/?"/l/ f///l0/f/1/ I'ou/irt' I oS/th//tWi 1O7dr=' Flock t117M!I (.ifs's,; /15-w2c.t

p,,,, ,,, itFaro

Parent Stock Form 4I.ScC)I' (32'1/; /k/rn/JLt ,sradaaioc)N'vw

Frr/, II45

Hatchery I I)t( /ri /,rk

Broiler Growing l,AV000.ii /r 'cr6 a,7 p/lant prus /5k

Live Broilers

In the example shiNs% n in FigUrc 4-6 thc plalcenmcnt of brccdcrs is likeix to he every seven wceks, which

w%oitlti rc(luire foLur rearing ftarimis and eight breeder farimis i)f 501)(00 hirds (levecn sheds cach). 'I'his

\ould ensture aIge seregation, \which has animial halth benefits and a conisistent floss of t'ertile eggs to

thte hroiler harcheri. Nei% facilities generally, are houilr within rhcese guidClirics in most countries in the

sorie\ The influence of the breeding companies in do\snstreami productivity of thtir prodlcie paricC-

larly at rhe breeder lei (l, has IcL to a grear dcal of s ran da rdizarion in panlnllli[Ig anld lIavouLr oft arris so

rhat performianceC is nairmized and disease is miimized. Ho\wvcer, there are a large nlUmber of old

facilitiies in almiost cs ers cooLitrx that arc not of optimial dcsign becaIuse theN' xNi ere costruerCtd prior to

full understanding of rhte nCeds of age separ;rion or befire) niocierin developmicnt of thc indL str

SheLd designi isarics according to climatc, \ith \sarmer clitLates having opcn. lo\s-cost shcddilng and

coldcr climates ha\ ing closcd. rentilated shedding ss i th heating and artificial light. A nLmlibcr of

locations \ss hcr opetn lo\\ -cost She'd(.ding iS nlorimlal arc converting hreeder-rearing sheds frotm open to

closed to take ad\anrage of lighrt trt cointrol sXtLial maltUrits and onscr of prodLIction. 'I'he control of

light dUring rearing has hcttomc a critical manageimicit tool ii recent \'cars and is ani example ot' the

conri nual. technical progress the ind str\ mIaikes.

BeCaIusC hroiler gro\sing is toftcn clIntracted to indepcendent operators. farmi size.s are mtore varied; the

unlit shed Size genlcralkl is colisisen t w\ithil coulitries hut teids to \a xamongcoon trics. Thcre is

morc xarialbilit\ in shed sizc andi farnll size \s1hn couIntrics are compared. This is of'ten determiiined hb

the resour(cs as\ailahle to small cotntractors to construct and equip shcddiig, the polic\ of thc integra-

tor in relatiott to gro\er maningeicit. anid sonic historical farim structIUrc issucs.

tor cxample. fOr des\clopmiental reasons shed sizes in Turkev reyid to he small. \\ith an average shcd

size arto 0nd 4.i)()) to 6,1)0)) hirds. T 'his has allo\scd mani people \s ho \would othersiise have had to

opereC alt a stlhsistenc1Lc agricul ture lcvel to enter the industry in partnership \\it h an integrator. I'hc

diffictdrs is thar rhe structure has creared an ctonomic prodoctih its problem %%with pcr hird costs at thc

equivaIlent it[ o rtv Ce-rsst cciits a hird. s\ hiil could caiSe problieis as trLI oade tpes and Com11petitioll

strenigthicis. it alstt alli\\ss a niargin fttr nr\e cottran;ts to enter \iith a moire Optil lal structure sometime

in the futurc.

I/}/i l/b/ i // ( r.l/P/f/// C

In Brazil, it is common for integrators to restrict individual farmers to onc shed, which is nearly always

run in conjunction with other farming activities. Shed size tends to be scandardized around

10,000-12,000 birds per batch, and bccause of the other ftirnming activities, per bird fees are relatively

low (ten cents a bird). Generally, broiler growing is associated with corn and other crops and the ma-

nure from the broiler farm becomes a valuable input for the cropping farm.

141atchery capacity is based on standard-size setters and hatchers that are common worldwide, and

hatchery volume is a function of multiples of machine units. Scale is significant in terms of overhead

recovery and, to a certain extent, labor efficiency. There is little difference in technology used in all of

the countries in the study.

Pr o ress in g

The product flow in a poultry-processing plant is shown in Figure 4-7.

'I'here are differences among countries in automation in both the primary whole hird processing

(slaughter, defeathering, evisceration) and secondarv processing (cut up, deskinning, deboning). The

demarcation was not universal hut, in areas where plants were moderate in size and labor costs were

low, there was manual evisceration, whereas in large plants, regardless of labor rates, automatic primary

processing was the norm. In low-lahor-cost countries the degree of automation in secondary processing

is miniimal with manual cutting, deskinning, and deboning. In high-labor-cost countries the degree of

automatioii is verv high in primary and seconidary processing, packing, labeling, and distribution.

The throughput of a plant tends to be set by the speed of the primary processing line. A standard line

specd is 8,000 birds an hour, which has increased slowly from 7.200 an hour over the last few years. In the

early stages of automation in poultry plants in the mid to late 1970s plant lines were commonly 3,600 birds

an hour because line speed was governed by the speed of manual evisceration. Throughput increases wvere

first attained by separatinig the Iines prior to evisceration and matching one primary line from live hanging

through to dcfeathering with two evisceration lines to double capacity to 7,200 an hour. Later, with the

refiniemicenit of the design of aLutomatic evisceration e(luipmecnt the capacity of a single evisceration Ii ne was

increased to match the primary line. D)esign improvements have increased line speeds to 8,000 an hour.

Figure 4-7

I/au)it/ I)i v}/rn{ I I/roai iea

v va

a _-

A'f} I F C G L O B A L A G R I B U S I N E S S S E R I E S The World Poultry Industry

Processing techiliogy is freely transferable. so there is little differenice amonog countries in the technol-

ogv inside a slaugh1ter and processing plant. On a single-shift hasis, one line has a capacity of 16 million

broilcrs a veair. a throughput that Would include all of the companies surveyed, and in internationial

terms xzould encompass most of the main operarors wlhere the chickeni meat indu.strv is well devel-

oped. C ompanies with larger volumes arc based on a multishlift. multiline, or multiplant basis so that

economies of scale are further obtained in overhead recoverv. Tvson Farms, the xworld's leading poultry

company. has structured its business and expansion program on 1.3 million birds a week integrated

busilless UnitS. Th1is approximatel coincides withL a plant with two 8.1)00 bird-an-hLour lines runnlilng

two shifts a day and suggests Where the upper limit of scale mav lie in an operationial sense.

The decisioni to enter the further-processed product husiness, and the scale of equipmenit and

processes in thar sector, is largely determinied by the market. In this instance furtlher processing is

defined as significant transfornmationi from a cut or debonied portion-for example. the manufacture of

brcaded cooked or uncooked product; sausage. marinated, or smoked products; prepared nmcals; and

other products. The productionl technologn of these products is available readily throughout the weorld

and the uptake of the technology is a fun(ction of the market pull. Unit sizes of equipment are variable

and in some cascs, particularly breaded cooked frozen product, a reasonably high threshold volume is

reqjuirecd to enter the businiess. On the other band, sausage, marinated, and smoked products can be

produced effectively at low volunies.

Non-cost-related Sources of Competitive Advantage

("Iima I t

The most cost comIIpctiri\e countries ill polt production tend to have a significant part of their

industry located between thirty and thirty-five degrees latitude. For examiple, Alabama. Arkansas,

Georgia. Mississippi, Nortlh (:arolina. and Texas, all within the latitude zone, produced 65 percent of

the total LJ.S, broiler productioll in 1994. In Brazil the industry is largely situated in southern Brazil in

the states of Santa C:atarina, Parana, Rio Cirande de SulI, anid Sao Paulo, which also fall within the

latitude zone in the southcrni hemisphere. In C'hina the main export industrv is centered around the

Shanglhai and Shandong provinices, also in the zonc. Similarly, the industrv in Australia has its main

production base in thirty to thirty-five dcgrees latitude. as does South Africa.

Chickens are physiologically comfortable in intcnisive conditions at temperatures somewhere between

28TC and 32°(' degrees: therefore the laitude bertwcn thirtv and thirty-five degrees provides a natural

comfort zone. lhe require1ents tfor shlcter, supplemrrentarx heating or cooling, and general environ-

mental conitrol arc n0o as great as in other climates. Shed costs for commercial broilers were compared

in the tUnited States and comentional housilng costs in the South wNere 70 percenst of the cost of

eis ronmentalkl controllcd housing in the Northeast in the mid-1980s. Techinical performance figures

werc also compared in the UnIIited States among differenit clilmatic regions at the same time,

indicatinig a feed conversion difference of 0.05 at 1.77 kg bodcweight-a 2.5 percent advantage for

producers in the South (Laslex et al. 1988). Climates \\ithln the so-called comfort zone also tend to

be c lose to the mainL feed ravs maecrial producing areas with corresponding benetits in feed cost.

I)imte sions &/ (C n//)itk /i,' 4E/ an/arc -41

La,,, aUd-/i//lIbi/it, ail,, v,-i //b hu-ft iss//,s

A\iailailili ry of land is not geicrally a problemi for intenisive pooltrs productioll but there is anecdotal

evidence thatr tIhe valuc of laid hals constrained industry decvelopimicir (for example. in japan), and

that environimiicintal issucs related to liter and maIur ic disposal and s asre warter issues are also haltinIg

CxpnLIIsiOII of Ii\Cestock nomibers (for examplI. in the ietherlands). In Japan the land CeSo issue is

coupled \\ ith a high cost structure becatisC of the need to import feed iniredients and gencral lahor

and other costs, so it is difficult to ascrihe a h1alt ii indUsrrv expansion and( the consequent growtth in

imiports to land cost alone.

Spcciallized farms pracricing inteCSivC livestock hUsbandixv prodUCe a surplus of minerals such as

phosphloros. potassiulm1. SodiuIn, aLid nitrogen. In additioni. the' contribtute tO rhe emissioll of almlllmollia

durin"g thc housilng of pigs or pooltry. Increasing regional concentration of poiltry prodIuction in somc

denisely populated countries is fcircirng authioritics to enact enviroinmenital legislationi designed to limit

emissions froml faris. This is the ease in the Netherlands svhere it is estinmattd that animal produc-

tioni produceci ah)out 115 kilogramils phosphate and 2X80 kilogramns nitrogen per hectare of agricultural

land in the earls 199C)s (PouIrrv International 19941) . As a conseciCnccC the tt tUci government

passed legislation to sirictlv lit tht- amotint of pho.spilate per hecrare and fixed a target for reduction

of ammonia eim issioiis h)v thc a"ricUc-iural incLiustrv This affects the piiUcl trI inidcistrv inidirectly. The

I )utchI pocUltrx iicUstr is highly specialized and thus occupies hardly any land area. \Wet manure syas

pre' ioIsly collected b\ crop ftarimiers \s ith(Lit cost to poultr' farmers: cir's ma1 cire could even be sold.

Because loss cr aLmIounts ci' m iUrc are allo\\cd. there is nosy a surplus of mIanUrc, shichiii must be

disposed of at a cost of USS5 to SIOll pel ton. 'lih reductioll of ammonia emissioin hi broiler farms is

also Cxpected to haLIe significant implications as the curreint housilng systeIm maakcs it difficcult to

control amrmonia cimission effecrisfel'e. It is thercfore likelN that alternati\e hciusin"' s\stems based oin

an elc\atcid floor svith air sentillationll sill need to be introduced, at a significanit cost co the inciustr's A

t S. perspecti\e oti swaste-conurrol cOsts is presenited in WVestenharger and Letson 1995.

Standalrdiz-ation of techniology througi"cIIL the \orld meLians that svastc disposali challenges exist in ever'

ounitr. In somic de\eloping couLitries. pocltr\ manuic has considcratbIc \alue as a source of fertilizer.

sshereas. increasinigx ii dev\eliped countries, it has to he disposed of ac a cost. Waste ssater treatment

standards var \ s\idely buti ill geeliral. thter is a micnicerit to\sard appropriate treatnicitr at plant level

as pressure fromil rcgullator\ atithorities intensifies. 'I'he de\elopeintic of large-scale integrated opcra-

tions inl he piciltry mcat indcstry rends to lead to rhe installation of appropriatc treattment facilities,

svhercas small-scale an(i backyard operations general l do nor complv \svirh moderin standards.

.11 k,, i I,'i ll

Tht ainalvsis of conipctitike advaintagc canniot he reciticed to a sole analysis of prodUctiion costs

(Nicolas anid Sinluill 1990). (COmpanies in \ariOics couintries havie been extreimiely successful bI-

setting up i pcomplete productioin svsictis aLid diffcrentiating their products to rarget specific market

iiiches. So-called /lw-/chickens airc aLn example i)f thlis in France. With an accrage grossing period of

ninety dacs for a livc\seiliht of .7 kiiograms and a fecd conversion ratio hi-her than three, the I/u!b/

chickein \\ oricd not comiipare favorably ss ith stancdaLrd or export broilers, siicli can shosv impressive

technical performance icidicatoirs and mcicl lower production costs. Nevertheless, liz/'!chickenr has

)een ahie to gait) a signiticant markct share in the Frcnch ma:zrket. As domestic markets arc progres-

sis'elv deseloped and ias pet capita inconic incre:tses demmand renids to become less homogenreous and a

42 I F C G L O B A L A G R I B U S I N E S S S E R I E S The World Poultry lndustry

Ilir"er xarietv of products is offcred to consLIIers. ()pportunities Will always exist therefore, for thosc

isotitryI companies that arc: able to responid LluicLkl\ to the Cx olUoion of consume_r demand, aLid provide

high-qual irv service ro the distributio ln srtem. In countrics wihrh a latge market for fresh pouLitr

prod Ers, logistics hIave alIso become an ar gument of the coImpetition1 among poultry Corn pan11ies: sonmc

of the m hasxe ctcrual\l become pioneCers in the aIpp IcaCtion of compui tcr s\ stems for tIc continuous

control of production and marketing actix iries, incltidinlg electronic dara interchange.

F 0'Ii / o mit'1/ C C/i I S /' I/ it'/ /I

FinaliLv it should be rememilbered that [he ecoonomic environmeniti1r is a key factor in the dceelopmenCIt of

a competirive industr\. Experie[nce indicates tihat tLhe economiic, legal and social environment max

accclerate or postpone tlhe emergence of a competitive poultrv industrx. The existenice of frce marker.

investor-friendly policies and legislation is equtalkl important in this respect.

The quality and stabiIi t of macroecotnomic polic\ also pla\s a significant role ii the sustainable dcvelop-

ment of the indUsrx. BecaLuse its main prodinets, thar is frozci broilers and parts. are internarionally

traded prOdUCtS, the pOUltry indusrym is palrtiCuLIlrlV Sen`SitiVe to real exchainge rare sariarions thar directlv

affect its colmpetitieness. This is mitigatied to sonic exten-t b! t tact that feed ingredients are

themiselx es generallx traded. In some CouLntries, hoxvcer. trade and agricultural policies halOx in fact

decoupled trIc domestic feed maLrket from the- xorld mazrket. xhich leases the poultry industry extrensels

exposed to real exhange rate ILuctuLalions. This situation is certainilv niot limited to dexeloping

couLntrics. BecaLuse their macroeconomiiic policies tend to ben more volatile, the latter arc however more

suscCptibIl to stiffer fromil macroeconoomic shocks.

1)/mun,ciun,, / (.t/s/t/ Iti l/atilaut Ii

I N T E R N A T I O N A L T R A D E I N P O U L T R Y M E A T

Introduction

Total international trade in poultry meat wsas about 4.5 million tons in 1994. includin*g intra-ELI trade.

This represents about 9.2 percent of total estimated world production, 7 percent wheni intra-EIC trade

is excluded. This percentage has been increa.sinig over rhe past few years because trade accounted for

only 6.3 percenit of world production in 1988. 4.8 perccnt wlheni intra-EIJ tradc W,as excludled. Broiler

nmealt dominates the poultry trade: it accOunlits for more than 83 percent of the total. compared with

1 2 pcrcenit for turkey.

The international market is domniatcd by a fews counltries: the U1nited States, France, the Netherlands,

Brazil, China, and Tliailanid oni thc exporter sidc (Figure 5-1), and Germanv, Hong Kong, Japan,

Saudi Arabia, Mlexico. and RussiaL on the importer side (Figure 5-2). Trade grew% at about 6 percent a

year over the 1985-1994 period. slightly faster than world production, xhich inhcreased annually b1

5 percent over the same period.

Trade Versus Local Production

'I'he example of Tliailaid. Brazil, and China indicates that developing countries can compete effec-

tively on the vorld market. Proprietary technologies are limited in this sector and, svhen the) exist,

thev arc not appropriated by poultrx processors but by genetics and etluipMCnlt suppliers whose inter-

est lics in thc expanided use of technology. not in their restriction to a particular companiv or countrv.

Given that the main inputs il poultry productioll (energy- anid protein-rich materials) are traded

widely an(d availahle to most producers in the xworld, it may be debated whether local production or

trade is more likely to expand iri the fturre.

The economics of transportation gcnerallv favor local poultry production because it is usually less

expensis to ship feed and(i convcrt on arrival into grin-llased animal production, such as poultry and

pig meat. than to ship equivalent volumes of meat (Fable 5-1 ). Because of its efficient conversion of

feed into meat, the poultryv sector is evc'n more predcterminied to be essentially local production.

W'orld trade in poultry and poultry products is effectively a marginal business in world terms as onIv

9 pcrceit of world productioll is traded. In addition, trade is extremnely conlcenitratcd in a limited

number of major markets-thte MNiddle East, the Far East (mrainly Japan). Russia, and, to a lesser

extenit, Europe. (Figure 5-3).

*44

Figure 5-1Figure/ )F 5-11/,// \-/)zstv 5 _ Million Tons

Po l/ i/f(l? A NI(/f/li

2 ~ ~ ~ ~ ~ - -~ EQ/ h>a3 -

I~ - _ * fThai/ands

Fran,

01988 1989 1990 1991 1992 1"3 1994P

Figure 5-2Psn////glurefw/ 5 /-2 /wo/ts 5 Million Tons

4 - -* Foint-, Soe 1 a 'nron

(him:

2

1.-~~~~~~~~ - U 7l

I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~H,n,,,g ,e

1988 1989 1990 1991 1992 1993 1994P

Table 5.1 (.cmpcr-d::. IiY//X/Ya'i (Mf// I, ll,d/,//fr/ (,'/l/4 //6/// / //i /fd/:,. /Q1f,/

I/:p. (Un/p 'ig,)

Is,,,~~~~~~~~~ 1,,,, ',,/,,,1Tmz1 1,1t, /Rg r .~~~~~~~~~~~~~~~~~~S.5,7 l,n

Grain 25 3( 3(1

Frozen Moat in Cartons 2') 251) 2510

(;I-dl l;m:po/t( ":p'; Tan,.1Ial/

Beef (13:1)* .A25 39() 390Pork (4.5:1)* 112 135 135

Poultry (2.7:1)* 167 81 81

This analvsis, howcver, mlakes a number of implicit assuImptiOns al)out cOulntries that dco not necessarilv

hold, particularb (a) biological and econiomilic efficiencyi of conversion are similar across thte world;

(b) con)sumer preferenices are similar; and Ic) there are no specific barriers to the expansion of local

potiltrv production.

-5

Figure 5-3

It/aor I/n/;lI i ' I/s, /994I

/t',V Abog

China 34 =:t Io / 1 - ( /DO

lope 125 C '*/ ~~ ~iiin,~ni ir 72 127 jap,Ho/C Kong 346 r-I /J 1las

i1'K) / I /-9 I

Singapore 31 2' * / '¶ 6

.Al .i, o * ,ob/k l 0416S 29\ 439* i/a oI d agKo jg AI

(.an-/beanl 8

71(

Japan 74

horn Kong 3 ' a~'

' K,

i

tI , , f/to,-, c .h- 1h, -,o d.Th .4flflfl'g.

onr0,0 0/of) rq. a} ono rnaorawoz.ol,:s of /.93 oAt7/a

oYtpiofP( .00,0* /oa' k,rno. - Incluc k/C R qairurant of/ire imiports

Determinants of Trade Flows

Exceptions to these assumptionis actualls 'alidate currcit trade paltterns.

* I ligh ilptI prices (feed, lahor) incrcasingly constrain poultr\ prodUCtion in high-income countries,

such as japan and the ElI. despite a high level of technical efficiencv in these countrics.

* Enrx ironmental considerationis and rclatcivc scarcity of land increasinlgv constraini poultrx

productioln in highi-ilIcom1le couLtLries (Nctlichrlands, Japan, I long Koong, etc.).

* (Conisumer preferences in the tJnited States havc gcnierarcd a loca1 surplus of dark menat poulIrr

paLrts and large export VolUmICS to other coLnotries w hiere consuniers ha\e different preferenices.

* (!ouintries \kith a well-deceloped, miauture poultrv processing sector are able to reap the advantage

prov ided bx economies of scale. Expanding tradc from 3Brazil to Argentina illustrates t[is. Indicatiolis

are. how%ever, thar local producers will adjust to this competition CvCntuUall and will henefit from the

market expalision created bh foreign companies whilc at the- samne time, foreign producers should be

cncoUraged to scr tip local integrarcd production systems, a patterm clcarly observable in Asia.

* Finallyv. OneC SholdOCI nlOt uliderescstimate the magnitude of protection prov idcd by tariff and nolitariff

barriers, partiCUlarlv those that teind to insulate domestic markets from trade competition because

of hlial ti anld sanitarv rcgo lIltiolis. Limiting the spread of diseaises such as a ian influenza and

Ne\'castlc diseaise is al miajor conicern aniong- producilng countrics. ( Concerins have allso been

expressed about clc hniical residues and microbial contamination in a num11ber of ilporting countries.

Ncvertlheless, it has bcen argued lhat thcsc concernis are sometimes used to justify overly

protcctivc regtlatlions.

Giveii the favorable attribuLtes of potltrx mealt and the increaised demaLnd for piUltry products, these

conisiderations tend to create local supply/dcmiand imbalanices that can be filled hv exports fromil the

most coImIpetitive coUn tries.

4/0 IFC GLOBA L AGRIBtUSINESS SERIES TheWorldPoaliryindastry

Main Poultry Importers

A profilc (if thc cighlr major importilIg coILtLics is presenrted in IigLire 5-4.

.1

e/ ti II

Japall is thc leading poolItr net importer in Asia. After reaching a peak of 406.000 tons in 1992. imports

fell to aroLind 402,)00) tons in 1993. 'I'lhcUtback \as a rcefcction of the slowdown in the coUntry's

economilic g)ro\rth. an1d casicr access of bIcf imports \ hichi made this mact more price comipctitive with

chicken. Imports rehounded to 4441)00 tons ill 1994; Japan's broiler indUstm howcver, is in declinie

bheCase of highi operatingg costs ancl scarcit\ of land and labor It is expected that dolicstic prodUCtiOnl

% ill dccrease steadils over the comlina wars tor cL-ovr on nI 5() peceCIt of eCnI)SLIl) onll in 20))03. As a

col1secluence. imlports are expected to approach 600)())0) tons in 20))3.

Japancse poUltrx imports ardi dersificd in product form and origin 'I'he japanese conSU111C], contrar,

to the Amcrican. gencr;alkl prcefrs darkl mcat ocvr \\ Aii As a COInseLoenlce. bonlCless leg meat in Japan

is sold ait a ighcr price thaln boneless breast mCet. Thbis situation pro\ ides opportunities for counitries

like [he the Iited States. riici export hoIne-inlergs. arild cooUntriCs such as l3razil. (lihi La, and Thalilarid.

\whichi export dchoned leg mneat and brerast macat-and faCne cuts in tlie caLse of Tliailanid and (China.

The lilitiid States dorilll[Cnes thc bone-in Ile mairkc, h bilc the processed parts market is supplied es-

senitaLilI f'rom Thailand and (hina, \ itb; a significant participation by Brazil and tbe Ufnited Statcs.

Siice 1987 Thaimland had supplied about half of Japan's processed parts imports. CssCIltially debonred

prod(Cs aSnd falnc\ cuts. Recen tls ho\wcer. China has emerged as he leadinrig exporter to the japan1-

cse mariket. gaining signi beaicr market share at t[hc expenise of Thailand and B3razil. lon\er labor and

feed costs, contiwnLoIs impros-enient in processiig anlid proximi it\ ha\e all w\orked in China's f:r\or.

Figure 5-4a

JelpkIln 600 1,000 Tons

.5'{nu,I 600) _/

500

400

300

200

100 GM

1980 1989 1990 1991 1992 1993 1994P

1/fr ,/,,/mm! 1', it, 1'n ,n//, r La ,,,

Table 5-2 .1(p/11/N/ BIoi/-ll? 1(7/ r I//I//)(i1f lIt Sun t . (ro/ Ii/i, (/I Pk' ojI.)

/11/o /IWO /92 094 1,. roci/9v9-4

Processed PartsChina 20.5 58.8 127.2 + 35.5Thailand 71.8 134.9 ] 1(.(0 +-7.4

B3razil 26.4 60.9 67.9 + 17.1l nired Stares 31..; 38.3 47.0 + 7.0

Otilers 6.7 12.4 5.0 -4.9Suh-lToala 156.7 305.3 357.1 + 14.7

Bone-in-Legl nited Stares 86.7 7. .4 75.8 -

Brazil 7. 7 6.0) -3.6

Thaliliand C.1 7.4 4.6 -1(l.7(Chinia (11.5 0.0 ().2 -14.9

Orther (.3 0.3 0A.4 +5.3Suh-otoal 10)4.1 88.6 87.0) -2.9

Total 260.8 393.9 444.1 +9.'

.S/,v:,' ,iltb m it 1f i/namr./Japua. /995.

llon,g Kon1g/uhili(;h

I long Kong is nominally the largest poultry importer in Asia; significant volumIIes, however, are re-exported

mainilv to China. The Hong Kong poultr-' industry is also in decline following stringent environmental

regulation1s imposed in thc late 1980OS. As a consequence. local production is expected to be phased

Out in this decade. On the othcr hand, per capita consuLImption of poultry meat continues to rise

stcadilb. At about fo-rtv-six kilograms, of wnhich thirt-eight kilograms are broiler mneat, Hong Kong is

one of the higeicst-consumption areas in the world.

Broiler mcat is sold ar rcail level in two forms: live chickens and frozenr products. Live hirds usually

conilc froml ( ChIina, estimiated at about 7(0.()()() tons each year. The hulk of frozen products imported by

I lo1ng KonIg are supplied b-, the I nited Staters. However. about 10 00 tons of imported poultry feet

arid wings are re-exported( to soutlherni China.

Figure 5-4b1,000 Tons

HM,/2 Kuo)u 600

.i'',wi.: I S01).

500

400

300

200

100

0 1988 1989 1990 1991 1992 1993 19I4P

48 I F C G L O B A L A G R I B U S I N E SS S E R I E S The World Pouliry Industry

Table 5-3 Ht,/Z] )kf/! I'/, //t/ I m/p/f 1/1//,1 / /,' .A'o/,, ud h/h (p . 1e 1,) /n

/N 9Y l 1991 .994, (9,4A //m

I/cm l¼rholit '98Y-W

U.S. 74.2 334.1 2. 6 331.5 + 28.5'icChina (.2 18.7 1(.2 8.5 + ±20.2I%EU 19.6 62.4 3.0 59.4 +21.3%

Brazil 12.9 37.3 4.9 32.4 + 19.4%.-

Others 32.8 37.7 33 34.4 +2.3%,

Total 145.7 491).1 24.01 466.1 + 22.4%

Figure 5-4c

(./h,1, 600 1,000 Tons

500

400Brol/,r

300

200

100 _ * i.iI 0

1988 1989 1990 1991 1992 1993 1994P

hit/,wim,zr,,,n,/li had/, m/ 1',,/,/, Ihi 1 , 9tu

Ploultry coosumilptioni has been iocreasinig rapidly in NMexico suLpported by strong economic growth andl

rising icomies. [)omestic turkey supplies are inadequLate hit broiler productioll has been grow-ing at a

highi rate over the past fewU ens-s. t Tndcr NAFTA pouirr- producers .will gain better access to cheaper

fccd resotirces fromil the lioitre(l States. thtis enabling them to support development of a well-integrated

and more efficicit industlry. MIexico has become one of the major markets for l.S. poultir exports, for

chickeni as well as turkey, products. In 1994 Tlexico ranked fourth in export markets for UTS, broilers

and first for UtS. turkey prodtcis. Mexican consumliers generally prefer fresh whole broilers ovcr frozen

prodlucrs. How%evcr, contrary to I .S. consuLImption patters Nlexico has a strong demand for parts such

as legs Icg quarters. and ux ings. and the price gap between breast meaJt and chickeni parts is not as

wide as in the [-nited StatcsThis favorable situation for UlS. exporters has been reinforced bv

NAFTTA. svhich provides for a colmrillucd lowering of trade barriers.

Figure 5-4d

Iliumt 600 1,OOO Tons

AIY, (I5/)! 500 _

Ti djki400

st#/iZi,:~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~I t I)

300

200

200 _ml

01988 1989 1990 1991 1992 1993 1994P

Ali/ c/c//v l Aasc

'ble Mliddlc East remailin nmanori eilortc[- ofpoultr\ mcar.A ntiilercofcointries actuallv are making

Strong attempts to improve their lcv el of self-sufficieinc. Productioll is relatively costls however, and

for the foreseeable furtLire the regioni will remain an important. albcit volatile market. D)emald is

essenLtialkl for w\bole broilers, and the region has been a battleground for m any vears amonig TFrance, the

Ncthierlands, Brazil. and, to a lesscr exteit, the l nited States.

50 IFC GLOBAL AGRIBUSINESS SERIES TheWorldPoultrylndustry

Figure 5-4e1 ,000 Tons

.S;,/a,. 1,,a/, 600

*Orlml-I,,,. Ms) 1. 500 -,,k

* Rr,Z/,400 -Bwe

300

200

100

01988 1989 1990 1991 1992 1993 19941'

E u ro p ea Un_it; ( U " - 12

GermanV is the single largest importCr of poultrv meLlt irh a Volum11e of 5)00000 to1ns itn 199;3i NMost of

;ermanv'.S imports, howeXer. coImle from oither EUl coLiuntries, essentiallN the Netherlands and France.

ElI imports from third countries are risil1 but the absolutc \olum-1e is still less than 3 percent of total

El J consumption (Figure 5-5). Chicken meat imiporrs have increased in percentage terms anid now

represenit more thani half of total imports. Mosr of rhe imiported chicken comes in as frozen, deboned

breast meat and, because of this concentration, cxerts do\wnx\ard pressure on internal prices greater

than thc import x\oluincs mi'it impl\. Brazil and, more recenctl. Thailand and (China have emerged as

major anLI grow% ing supplicrs to this m1arkct. These countries ha\e gained marker share at the expense

of Eastern Europe.

Figure 5-5 eig.-Lux_

,A. ' 1? Afl;;;/},s (r;;;;l;tj,1%_ Po;;,/trr mit!,,,A, 199, D ; Denmark

France

Germany

Gteece U* 11ra-Et'

lFeland Th, ThD

Italy

Netherlands

Portugal

Spain

UK

1,000 Tons 700 600 500 400 300 200 100 0 100 200 300 400 500 600 700Imports Exports

In,/,,,,,a,,,,,olia in AmIl i',,/- .1bw,/S

lirkev mactr imports are simila r to chicken, wirt x irtoallv all himports in the last five years being frozen

debonied parts. Brazil is the majol supplier. growing from a 5 percenit market share in 1985 to

43 percent in 1993. IMost of these imports go to Germany tLinder the prefercntial 17 percent tariff

(prepared and preservcd torkeyn meat). The Llnited States has lost market share in this segment, bur

has come back recently wiith increased sales. particolakrIv to the ! K.

Figure 5-4f

GO YNY1 /1111 600 1,000 Tons

500

400

300f *

200

01988 1989 199O 1991 1992 I993 1994P

Figure 5-4g1,000 Tons

S',: 500 U

400 B oi'l

300

200

100 _-I,,,| - m

01988 1989 199O 1991 1992 I993 1994P

I F C G L O B A L A G R I B U S I N E SS S E E RS The World Poultry Industry

Table 5-4 it -,I //ti 1 I, l/n/un!' i? Kn 9/ ili/ Pr(o /,)4)/a

C.,,,,,,s, I'utu's I /9±5 /99 /9 /')99 .1,,,, (h,c, /,11f/,,,/ itt". /')±i9' '3

BrollerHungar\ 21.7 2.8 25.6 15.2 +fl.I(Orler baster n

FfLI[opc(in ( nunLtries 6.0 7.3; 4.9) 2.4 +4.0Brazil 7.3 271.6 - 1.o +24.2ThaiaiLnd 1.6 1'.1 - 12.1 +49.9C(hina1 - 9.0) - 9.( \AO)thers 33. .6 1 .9 1.3 ( 6 -43.7

Total Broiler 41.2 7 2.7 11.8 60.9) + 12.1?

Turkey ;.() 4. 5 0.4 4.1 -2.1

Other Poultry 3(1.9 42.4 21.8 21.1 +±6.8

Total Poultry 77.1 1211.1 34.() 86.1 +9.3

Stu,,,, t.,n,/ut1.

Russian F,derantion

Russia and the formier So-iet lnion hvxe long heen significant importers of poultry mcat. Soiet

imports traditionally wre supplied mainly from countries in the Ctouncil for Mutual Economic

Assistance (CMILA). essentially Hlungar\ (60 percent of the total in 1989), Bulgaria. and Romania.

Most of the trade stas conductcd in transferable rubles, w\hich basically us asan accOtLntinit s stem to

valie barter and counrertradc. Market reforms initiated in C(MEA counitries in 1989 and dissouItion of

tie (:NIEA in 1991 have chiangcd the pricing and financing of poultry trade drastically in Eastern

Europe. So ict economic difficulties has e shiftedl poultr\ imports trom Eastern European couLntries to

Western sources. In 1990 tl([he I nited Stares became che primarv supplier of poultry to the former

Soviet Union. exporting ciicken parts and turkes under favorable export credit conditions. Thle Eli

and Brazil also became significant suppliers of whole broilers. In 1994, the Russian Federation became

one of the largest iniporters. purchasing more thlian 410(,00(0( tolls.

Figure 5-4h

R/s utut 600 1,000 Tons

.... / S. . . 500

400

300

200

lOG ~~~~~~~~~~~~~~~~~~~~~~~~~Turknt

01988 1989 1990 1991 1992 1993 1994P

1,/, tiuuinottc/ hi,,,/, a 1'/,1i .11,, .i,

Main Poultry Exporters

A profile of the eight major exporting countries is preseited in Figure S-6.

Uni r] .S'tut,

The U.S. poultry indUstry historically has heen orietnted toward its doniestic marker, the largest and

most affluent in the world. l.S. exports of poultrx typically accounted for less thalin 5 percent of

production in the past. and U.S. producers had not beenv willing to adapt to the different reqoirensen1ts

of various export markets. In addition, competitiveness of U.S. exports in the 1980s was affected

adversel bhy a significant appreciatioti of che USS. w-hich had to be compenisated for vs export subsi-

dies to allow the Unlited States to compete in the NMiddle East.

In 1990(. howexer. the United States surpassed Franice as the \\orld's leading single country exporter.

Since thcn. U.S. poultry mear exports hase been increasing consistently. From 409,00)0 trons in 1988.

theN reached 986,00)0 tons in 1993 and 1.4 million ti-is in 1994. a 16 percenit al111I31 growth rate.

J.S. exporters have benefited froim a numher of favorable factors, including reneed econiomiic growth,

whfich stimulated domestic consuimption; increasing consumer preference for wlhire poultry mear: and

new marker opportunities in the Far East, NAFTA couL1tries, Eastemr Europe and the former Sov ict

Ulnhion. A significant depreciationi of the LISS also contrributed to ani overall improvement of comlipeti-

tiveness for U'S. poultrv exports. Poultr meiat exports consist mainlv of broiler me:at, with an increas-

it, trend awvaY from exports of frozen whole broilers toward broiler curs, particularly dark meat cuts. A

significant amouLnt of turkey meat is also exported. particularly turkey parts to NMexico.

Figure 5-6a

n/hitvlSlalrv 1,600 1,000 Tons

.A. a ,: I (I). I. 1,400

1,200

1,000 -

600

400 -

200 T

01988 1989 1990 1991 1992 1993 1994P

54 I F C G L O B A L A G R I B U S t E S S S E R E S The World Poultry lndusiry

Table 5-5 l i/wt!.S/anat 1111/i1r Poi/trit It.i,iti .lhuka (.ANd' Jois)

I "'Y./ 1994 /1994 1994 t ii,. (;iiiwih

(i/li/,,/r l/io4 I t,/ 1',, /.Y- t

BroilerRuss Id - 3 71.3 1.8 369.5 NAHOunIg RuIg 46.1 324.1 0.4 3 23. +.38.4jaIpan 114.5 115.5 0.8 114.7 -rO. lMexico 44.4 1(00.3 6.3 94.0 + 14.5Canada 24.0 35.8 2.7 33. 1 +6.9Pu.idid - 5'.2 (.2 52.0 NAOthcrs 118. 3,1)4.2 13.8 290.4 + 17.1

Total Broiler 347.2 1.31)3.4 26.1) 1,277.4 +24.7

TurkeyNIC\i.o 2.6 (6.7 3.9 ('2.8 + 71.7Othcrs 22.4 49. 6 .2 .37.7 + 14.2

Total Turkey 25 1111.6 1(1.1 1)1.5 +-28.1

Other Poultry 15 51.1 11.1 401.0) +22.7

Tetal Poultry 387.2 1,465. 1 47.2 1.417.9 +24.8

A",,111,{ / ,Dl)I

Aulope,, lU,iot,, (F U-12 )

France and the Netherlands were the second and third poultrs exportcers. respectively. in the w-orld in

1993. A significant portioni of Europeain exports is dirccted to\\ard intra-EL[ tradc.

Chickeii accoltints for the btulk of rhe Eli's poultgr exports. Trade solunie traditionally has been driven

blv \lolc hroiler exports to the Mliddle East. parricularlIv Saudi Arabia and the tUnited Arah Emirates.

Other maLrkers include Western Europc Russia. Hong Kong, Singapore. and South Africa. In recent

years exports of chicken parts have aCcoLinted for an increasing share of chicken exports. These are

gencralk loyer-\alole items. however, sucI as wings.

According to the terim.s of the recenitly concluded Uruguay Roimnd Agreement, sUhsidized exports have

been effecrivel constrained b!a a cciling decreasing b\ 21 percenit over a six-year period. France. the

Nleitcrlands, aid [)enmark arc the most exposed to this cutback given the volime of rheir exports to

Figure 5-6b 1,000 Tons

/+ (fib, t 1,600

,ir,.tz, t 51)1 1,400

1,200

1,000

800-

600

400 a _

200 _k_

1988 1989 1990 1991 1992 1993 1994P

li/{/,////i'ii/ibiri /,l /!' / /1 I// / \'. /,/ i

third countrics. Freinchi exporters seem to have anticipated the problem and have takci significant

stepS to redirect their exports rtoward the major Etli markets. mainil (Germany aiid, Lo a lesser extent,

the 19.K. and Spain.

Figure 5-6c1,000 Tons

1,600

A, 5/). I.ts 1,400

1,200

1,000

800

600

400 - -h-- -200

1988 1989 1990 1991 1992 1993 1994P

Figure 5-6d 1,000 Tons

|),'!im/a,t'k; 1,600

5,.,.,, t /u1 1,400

1,200

1,000

800

600

400

200 Tw1w v

._ _ _ _- - * - RrUi/ r1988 1989 1990 1991 1992 1993 1994P

F C G L O B A L A G R I B U S I N E S S S E R I E S The World Poultry Indusry

Table 5-6 Itt' -/2 I 1cm/kr (.os r½.lk?0 Io fo/rils.)po', 1/r/nix (IcAronsj

I9MN 1/99 / 9 ? IQ')J -,im. (foatr/i

(.;jrwro/Z-EX ~~~~~~ ~ ~ ~~~~~~ ~ ~~~~11 hol. Paris "S /yht93

BroilerNiddile East 182.1) 281.7 76.8 4.9 + 9.1ACP (CoLItnries .i50 51.9 35.4 16.5 -1.2Eaistern Etrope/FS (I .8 77.6 43. 9 33.7 + 149.7Asia 32.4 741.9 1 6.3 58.6 + 158.2Othtrs (1). 66.9 41.6 25.3 + 1.9

Total Broiler 331.1I 553. .) 414.0) 139.0) + 111.8

TurkeyNlidile East (1.6 (. 0 ((.3 (.6 r 8.4AXCV (:ountric Is8. 1 19.( I. 1 8.() + 1.)Eastern Europe/FSI.I - 21.2 (.8 71).4 NA

Others 3.3 46.9 2. 43..5 +

Total Turkey 5(f.) 87.1 4.6 82.5 + 11.7

Other Poultry 5.7 7.1 1.8 5.3 +4.5

Total Poultry 386.8 647.2 42(0.4 226.8 + I0.8

B', r K,, i

Brazilian exporrs have increased consistCInly over thc last fewv ears bvan average of 12 percenit ainIL-

all. E.xports represent 13 perccint of total broiler production, ancl consist of approximately two-thirds

whole broilers and otie-third parts. Whole broiler exports are largely concentrared in the' Middle East

(75 percent[) and Argentina (2) perceent). The export market for broiler parts is dominacd bv Japan.

which alone accounts for 4(0 percentr of sales. Other countries in the Fbr East accouLit for anothcr

18 percenlt.

Brazil depenids. therefore. oin a Iimi[ed noLllber of key markets in the Middle East. Argentina. and the Fhr

East. There is a concerin ithin the industrr rhat this concentration is excessivt. Thet' Asian markers are

increasingly competitive because of the etmiergenice of efficieint producers in (Chinla anid Thailand. \hich

hake the ad antage of proximit\ as well as financial relationislhips with japanest iitcrests. The \fiddle

Easteri commodit\ market remainsq d(OallV competitive dUo to the sLbsidy battle led by the EL] and the

I Jincd States.The Argentine market has developed spectacularly over the last few vears follosN big trade

liberalization betweci the t wo couLitries, hut there arc gro ing concerns in Argentina that increased

penetration of themarlitiaret hv Brziliai exporters might endanger the local indLstr

//l/'rlt,.iOyRl,t/ li,,./, iS I',/t( .11,,/ S,

Figure 5-6e 1,000 Tons

Brazi/ 1,600

*Sou;,: {)1 Al).!.1,400

1,200

1,000

800

600

400

1988 1989 1990 199! 1992 1993 1994P

Table 5-7 /N .Ml/aior 1½u/wr AxpenI lrk'yx (I,A 'th1)y

/I l /1994 1994 /094 .4nn. (Gyvht/i(.n,un/r) If h/oh Pare,, 1988-94

BroilersSAindi Arabia 1 05.6 142.9) 136.6 6.3 + S.?Oulher Mliddile Fast 36.8 5(0.9 4.3.8 7.1 + 5.6Japan 38.3 58.4 2.5 55.9 + 7.3It)1 11.8 45.6 2.3 43.3 + 25.3Argcntina li 44.0 42.0 2.1) NAOthers 43.8 139.2 56.6 82.6 +21 .3SUbtotal 236.3 481.0 283.8 197.2 + 12.6

Turkey 4 15 + ±4.6

Total Poultry 240.3 496.0 + 12.7

G.i :/n, .5 1)4 Ain, J-awl,o/,i,,,/0la l'/ni,t/,, /tx.//1/11190/.

'Ih/ /dii/lJ/(;kC/lin a

T'he growtch olfThailand's and China's poultrr meat exports is dircctl liniked to the Japanese market.

In 1994, Japan purchased aboot one-(quarter of its poultrv imports from Tbailaind. Thailand overtook

the l nired States as the major poultry exporter to Japan in 1990. and is still the largest broiler

exporter in Asia. It is also the largest exporter of higher-value poultry products. Japan purchases mainly

dehoned breast and thigh meat, bur continues to import an increasing number of Thai fancy cuts. It is

estimated that 98 percenit of Thaii exports are dcboned parts, with 30 percent ordinary deboned cuts,

68 percenit fancs cuts. and the balance as bone-in leg products.

Thailand has recetitiv lost market share in Japan, from 37 percent of total imports in 1991 to 26 percent

in 1994. hicil signals not onlN the emergencc of strong compctitioni from China, bur also an autonomous

loss of competitivelICss on the part of the Thai industry. The same factors that supported the grovwth of

thte idustry in the 1970s and 1980s-that is, availabilitv of low-cost labor and feed and concentration

on the Japanese market-now combine to put prcssurc on poultry integrators. The albility of Thai

exporters to overcome their current problems is not clear. Coing for increasingly labor-intensive, higher-

valued products for the Japancsc market hals a limiL, baCcause of likelv imitation by other lower-labor-

cost couLntrics such as China and other emcrging Asian producers. It appears, however, that the growth

iY F C G L O B A L A G R I B U S I N E S S S E R I E S The World Poultry Industry

of Chinese exports in the future mav be restricted by the growth of the country's own domestic market,

w hile the expected continued decrease in Japanese poultrs production will increase demand for im-

ports. One can also assume that Japanese importers will waant to maintain a diversified source of supply,

thus allowing Thai exporters to retaini a signifioant though declining share of the Japanese market.

Figure 5-6f 1,000 Tons

7,/am>s/(llle/ 1,600

A,,,Vt W) 1 1,400

1,200

1,000

800

600

400 OtJrer

200 lurkeg

m U U U * * U * Broi/er

1988 1989 1990 1991 1992 1993 1994P

Figure .6g 1,000 Tons

(/hia/ 1,600

A,w ( ').1 1,400

1,200

1,000

800

600

400

200 O EIther

1988 1989 1990 199 192 I9M3 I94P

Table 5-8T hlmnl/n 1 .I Pro Ir / I l,//-f,tv I/.dzeP

I9,9 /2 1994 1994 994 .4nan (iowthCoun/0t/try Brr1J/F, Pat-o/ 1981- 94

Japan 85.7 131.8 - 131.8 +7.4Hong Kong 61 h.4 - 6.4 + 13.5Singapore 4.1 4.7 - 4.7 +2.3EU 2.0 14.9 - 14.9 +39.8Others 1.0 4.2 - 4.2 +26.5

Total 95.8 161.9 - 161.9 +9.1

Sour, 1S .DA /5995.

I nlh'n/jsml/ i/in Pouillry ,IMal .59

Table 5-9 (Jhilawr /v,, i/er Axpwi t k / (1(41 twisi

/9.Y/J 1993 194' (Inn/. (;Gw/h

Co;,,/m/r 1 /M).9-) 9,1

Japan 30.2 74.3 1 27.4 +25.2Hong Kong 4.7 17.4 18.7 +38.7Singapore 1.8 1.6 NA -2.9Others 11.9 14.3 NA + 99.7

Total 37.6 107.6 164.9 +30.1

R1 R ,,,i /mm iml)oifig einfri.

Hungan, was a leading world exporter of poultry meat and products unltil che end of the 1980s. NLuch

of Huligary's poultry industrv was geared to the formier Soviet lUnioni marker, however. The collapse of

the CMLEN put an end to this trade, which has riot showni any sign of resumption. The industry had to

adjust nou only to the loss of the Soviet marker, but also to the transitioni process in Hungary, which

caused sharplv rising productioll costs, while diminishing the population's purchasing power. As a conl-

sequence. profit margins were reduced sharply at a time whlcn the industrv needed to make significant

investments to redirect its export toward more qualitV-conIscious markets such as thc EU and the

NMiddle East.

The association agreement signed with the ELt in 1992 has given the countrv breathing space for its

poultrv exports, albeit a limited one. A.though the natural cooditionis of Hungarv would indicate that

the poultry industrs wvill eventually recover from its current slump, export potential to the former

Soviet Linioni is still uncertain and access to other markets is limited.

Figure 5-6h 1,000 Tons

H1111,u r 1,600

S,,,l,,>,:X). 1,400

1,200

1,000

800

600

400

200too - -

0 1988 1989 1990 1991 1992 1993 1994P

(a' IFC GLOBAL AGRIBUSINESS SERIES TheWorldPoultryIndustry

GOVERNMENT INTERVENTION AND POLICY REFORM

Introduction

Although manx, agriculturail policies are not intendcd to interfere directlv with trade. virtually all affect

trade in some way [Tlicse policies differ from countr' to country but Can he grouped into six mrajor

categories:

1 th(ose influencin(g production a3nd conIsumptioni through output prices, suchi as administered

priccs

2. thosC influencing production through income payments and input subsidies:

3. those influencing consumlmer prices throUah subsidv or other domestic surpl).s disposal policies:

4. those influencing imports through tariffs or tQuotas;

5. those influencing exporrs throUg(h subsidies. export credits, rariffs. or licenses: and

6. those restricting imports through imposition of sanitary regulations.

Direct government intervention in the international poultry market is limited. This is indicited h)e

lo\ produccr and Consumer subsidy equikalents (PSIt and CSE) relative to other agricultural products

(Figures 6-1 anid 6-2). Be the average standard for agricultural commoditites, the programs appls ing di-

rectl\ to pioultr\ production are not regarded as excessively trade-distorting. One reason is that price-

support programs are rarely encouritered in poultry productioin, a consequenice of the supple elasticitv.

Production cycles are shorr, making it easier for sUipple to adjust to a market-clearing price level.

Becausc much of the cost of producing poultry can be attributed to purchasinig feed. svhich accounts for

ahout two-thirds of cashi expenses for pOLltre producers in the L nited States, pricc policies and protec-

tion applied to feed grains and proteins (particularls sobheans) are also important to the poultrr market.

Trade measures (tariff and nonitariff barriers, export subsidies), howexer. remaini the domiialit forill of

governmeiit intervenLtion in the poultrs sector. 'Irade restrictionis that are justified as barriers against the

spread of diseases sucIh as av-ian influenza and Ne's castle disease are still prevalent and contribute to a

segmeiltatioti of the \orld poultry market independent of the pure comrpetitivc position of each countrv.

61

Figure 6-1100%

Xci' /)/,u,/ul, a .S/b/y'i/.qw//aa1 tro IV,l/eu/ I

/'lau/l/a//o/ io n / 16() 80% 0

""U4. ~~~~60% Al

40%

20%

00/ Australia Canada Finland New Zealand Sweden United States OECD

Austria European Japan Norway Switzerland TurkeyUnion

Figure 6-2100%

lqi//- w /i i / l 80/Ob6(J) ('spuk 60% P _

.A,gunq 01(J() /9',] 40 I/

20%/

0%

-20%

-4D%/

-60%

-80%/

-l 0 /a Australia Canada Finland New Zealand Sweden United States OECD

Austria European Japan Norway Switzerland TurkeyUnion

Review of Selected Countries

Goxe to w rt LI p pOrt to do mesti paouitrt produtctio l0has been Ii anited raa miict r e'of pro gramts hat

aire niot sagiiciharix trad c-distorting. 'I'lhese aire (a) stubsidized loans to prod ocers froanl thc [arnmers

I lonici Adtainiismtration I FmHA): ill) federal and sta.re forancirin- of research atid inspectionl serNtees,

atIVd (c) spiecial taxation proN isions. ( )o r[ie othler hanld, suIpport for f'eed ingredients. feed grains, anfd

soaaxreas has indirectis affectedi tile p)ouitt\x sctor I1\ itlcreasitlg f-eed costs to aill lIkestiock prodUcers.

Tr:adie laalicies plasi, a greater role. hON%C\er. .\ dtatN aaf 1 I1 ci ./kg, applies taa iinlpaarts oaf pool trx othier

thanII trirkes, 0ilichl is taxe.\d at tlile level oaf t8&7 c/kg, (freshl, cliliieci) car 12.5 percetat (frozeal). Tile

specific tariff otcia rLIS and aaffals is 22 c/kgl. \\hile arLIII /sc dotit alf I(1 pereen applies to prepaired

aor preserccl poalI maart praaCats.

62 FC cGL0B A L A GR I BU SIN ESS S ER,I ES The WodrHPoulty lnoustry

The [I1S Expoirt Eohancemcn m Program ( EEP) anilouliced in 1985 hazd as its primar- goal enabling

1 .S. exporters to Sleet pre\ailihg xorld priccs for taigeted comrnmodities and destinations Applied to

pIol]Itr\ lihe programn was designed to Challen1ge sLubsidizing competitors in maLjor Nliiddle Eastern mar-

kets as x\ell as to protect 11.S. export izrkcrs threatcncd b sul)sidizing comipetritors. partiCulart the

1L T'[1his prl(graim \\;Sa p artietiarlx aerite in trhc mid-I9S()s \x hci trhc 11S. dollar appreciated relatke to

maiJor currencies. In IS7, 26 pcrcent ofall L.S. broiler exports x\cre subsidized througlhllle EEP

More recentlx, thc program has been less critical to l KS. cxports beCausc in 1993 onI about 2 pcrccit

ot broiler exports were coxcred hliI sobsidies.

Fw{/o''a/.' I's l//itos

Feed grain policies h c had a considerablc cffctc on poultry produCtio inl rthc Et as domestic prices

for cereals ha\e heen maintained at higher than x orld levels h\ thc Common AgriCLuIlrtal PolIe

(CAP). IPoultry trade polic\ in thc El cx olved from the need to eli mi nate negatixe ffecLtive

protectioni of the p0Ultrv secror. This led to establishment (of three miaini instrtLImnIts:

* Basic I01port Leies (HIL)-Thc hasiC imIport Icxv Calculated quarterk, had rt\o componenrt. The

first is an ani1onLit e(LUal to thc tliffererice in ElI cost and xorld market cost (f ffeccgrain to produec

a ultit of poultry meat. The sccond isa amolunt11LH cIIal to 7 pcrccin of the slIiCeCgate price (SiP) in

effect doiriig a pre\ oios tx else-mon th referenice period.

* SIuiee"iC te Price (SGN[ -'ihc S(GP \xas a thcoretical m1ilnil in i price at xx hieh third-countrr pouL trs

meat shoold reach an ElI port of enritr S(;P is CAletUlared (quarterly using xvorld cereal prices for

compoeien ts(f a preseribhed ration aLid theoretical tcecd lcoxersion ratios. SGiP also iludes a

StanildaLrd aninOllt tO eo\er thc costs of othcr1 feed i-grcdiCents arsd general productionl arid nIlarkerilng

costs. \When im riport pirices fall Islow\ the S(P a111 addition:rl lcx ma\ he ser to reflect the diff'fereiscc

betxveeni the toro prices. These additional l. ies are rexiewed risollnris.

* Export RefUnds-Export refuLids are dcsigned to ciiabile 1ll cxporters to Compete x\ith third

Cotru1trieS tlhilt iaxe loxxcr feed costs.

Impispnentatiors of this polic\ risade it n)LItr more Io roectrixC rCl ar xI otuld appear. ho\xexer. Theoretical

feecd conversion ratios used in thc CoMputatiri0 (f the I BI aMid SGP x erc actudlx li"isler than what xas

achieced xirhiln thL El . BccaLIse the feed ration uscd ir trhe CalCulation6 xxas made tIp of cereals oril

(811 perecust corn_ 20( pereeint barley for chickens), it rlso xerstated the actral cost disad\arirage for

Ell producers. As a result of rheI Ucr"l-trrV RoUird agreement. HIlLarid SUP \wcre replaced by tariff as

ofJulv 1. 1995.

./(I/) I/ i

PoIltry ii porLt are onlv sLJijectr to tariffs. Iariff rates c axe hcer redUced and ire Cul-tr tly 1() perce nc

for borse-ill chiicken legs and 12 pcrcenr for (tler chickeniparts. uogcther these rcprescit 96 perceuit

of japancse potIy inIIportS.

Japan alsoI subsidizcs its dorcstiC poulrl producers to maintair sonic level (If domestic produeCtion in

the face ofgro\(ixxin" inspIorts. This assistanie consists of expenditures on farm credit. rescarci and cx-

tension. disaster relief, and farmers pensions.

k/'JI;/oI Rn; /,;'-(,ot.;' /,// /y/i,y.ssn/;a!/ }6/1R /1,/o-e

The Canadian poultr miarket has bcen highly regulated by the Canadian Chicken M'arketing Agenc\

aid the Canadian 'Iirkev MarkctingAgencv; wN-hicih allocate production quotas to provincial marketing

boards. The objective of each national agcncv is to bring production in Iine with projected demand at

a pricc that cov ers estimated production costs As a ConSeCqueCnCC, the boards use strict import quotas

to limit av ailable market supply. 7ihesc imports of fresh, chilled, or frozen poultry meat are sobject to a

dutv rate of 12.5 percenit ad ca/eoem, bhit noit less thanL 11.02 cents Canadian or more thalL 22.1)5 cents

per kilogram.

Thc pool try sector has been allowed to decelop without any significant governmnent iltervenitio.

Assistance has bcen Iiimiited to provision of no-initerest loans to finance stockholdinig by broiler

processors aod to support domestic prices in times of oversuLppl. TI'he main policies that affect the

poUltr\ sector are. however, those that concern fced ingredients-that is, corn. fishmeal. andl soymeal

Goxernment iiterxenics to support domestic priccs essentially through its trade policies.

Tradditionail an importan r exporter of corn. Thailand has mostly retrcated from the inrernatiotnal market

as a result of al decline in productionl and rapidly gros\ingg local dcmaid. 'I'hai exports decreased from

3.6 miiillion tonls in 1985-86 to 1211000(1 tons in 1993-94. Uncompetitive prices and quality problems

have limi ired export c lientele to thc traditional sm.all calrgo markets: NMalavsia, Singapore. and Hong

Kong. I oports, o)l the other hand, have reccntl r averaged about 2(10.000 tols, thus making 'hailand a

inet importer of corn. Major suppliers are C(hinia and Argentina. Growing demandf for corn and constraillns

on diomICestic supply pIrOA)ly Will aLikc the country a strucruralI net iilporter in the future. Thailand

has also been a structural importer of soy bcans. \ ith imilports represcntinlg about 2(0 percenit of total

supplyli E'o protect local corn grow\ers and thc soybean processin,g industrx thc government imposed

import surcharges in addition to the rcgular import duties. These surcharges arc variable; Table 6-1

reports their level as of mid-1994. '[he cstimatcd nomiinial protection was 20 pcrceint for cori.

31) pcrcclt for fishmlieal, and 54 percent for sormcal, resulting il an aggregate nominiial protectioni of'

about 3() percenit for fced.

The additioni of duties and surcharges has increased feed COStS to poultrv growers and reduced their

competitivcnless onl the world market. In return, the pouItrv iidustrv lobbied for and obtained export

rebatcs that aIre updated quarterlI The government proidces a (.37 percenit sulbsidv for all exported

poultrx meat. In additioni, the International Tralde Promotion Fund Committee, a Thai goxerinimlelnt

body in charge of export promo)tion. agrecdl in latc 1993 to prov ide an additional refund to frozen

chickeni exporters to comipensate further for thc surcharge levied on the imported fecqd ingreielits.

This wvas set initially by thc Minhistry of (Commercc at (84 bag/ilt pcr toIn (about US$27) of exported

boneless chicken meat. Overall, these export subsidies are small relative to the FOB value of products

exported bx Thai exportcrs.

64 F C G L O B A L A G R I B U S I N E S S S E R I E S The World Poultry Industry

Table 6-1 I;/,i/ae/-Impoi wz I)sil:. ,t,! Sim, /h-,, 1w,, S /,,/ (.i,'ot,,i(i,S

94.5 e 1'.,S,,;, 1/9/ fi/i 'had! IAhd n- ion

Iqw-a1 aIr1/ /ln// 1i Ral fuola I RQ Amut TRO I),,,,

(-;5) 1 S w5, / /} (1,t .5X12'0a,, (IddO)pa,/// ('.5! ,

Soybean 5%, lw/,a!L',,'n >5% 1 25 1M) (117) 21) (5%) 89%

Soybean meal 6% 95 54'0 220 ((550) 20 (15) 148 (11')

Fishmeal 6) 8') 124 San,,,, ,,w

Corn 6% 15 201 21)10 50 (20(1) 20% (7.5') 81%

'Fh,,,, l parnilu- ai,,, A,wr ,anIdm'i, ,i/,,/i app',! in .

I Indcr the L rugu-1a' RClound AoreCment., CXport subsidies and surcharges \erc eliminated anid replaced

bh a tnriTf-ratc cquotaL (TRQ() thatr \\ ill iicrease annually. As inicial TRQs and dutiCs COImlllittCd by

Thailand here cii'mc( tO he excessively strict bv Thai feed producers, the government agreed to

res ise them tfor the year 1995. The future rmIainIs ulicertaini for 'I'hai feed producers. however, given

the stronig increase in demanid 'romii the a(luaCultUre, poultrv and likestock sectors.

B r .iiz /i

'[he Braziliain agriCultural economn\ recenrlxl experienced dramatic chaiges, from trade liberalization in

the 19901s to the ConIclusion1 of the \IerCOSur agreemrent and, si ice 1994. implementation of the Real-

based stabilizationi plan.

H isroricalik, Bra/il has used a large number of policy instruments, such as price supports, price

ceilings, interest rate subsidies, export iticertices, ancl export conitrols, to intervene on agricultural

markets. 'I'he poulutrv industrxv has bot heeni directIs affected bhs these \arious programs, ho\evcr

The industr\ has hcbiefited indirectlv fromii policies designed to support local sovsbean processing. A

system of uifferential export taxes on bheans, meial aid oil has protected the crushing acti\vity, but it

also has reduced the potential comipetirixeness of Brazilian soybean products. An 11.75 percent taX is

raised on so\hcmien meaLl exports, creating a wedge betxseen international aid domesuic prices. Its

impact is fari(table to the poultry sector becaUse it reuLIces the domestic cost of feed, which aCCounts

for 7() pc-cent of produetion costs.

International Trade Agreements

uay/ z ,) R ,o u1 ii d

After seven veatrs of negotiaitionls agreenien t was f bially reaiched in the I ruguLia Round of GATT

negoriarinis on)Dccemher 1 5 1993. The agreemient wet I itro ffect on julyv 1 1995, and s ill ContiLuC

Lutil Junle 30. 200'1. 'I'he agreeeiliit \ ill Ihe admlli Iistered bv a new and more powerful hoh(i the W'orld

Trade (Org;inization (MT()).

The \\T() agreemienrt on agriculture imposes disciplinie oii mcniher counitries in rhree separare areas:

market access. doniestic support, and export suhsidies. A sepairate prorocol contains an agreemcnt on a

foLurthi area relating to agricoitortal trade, nainel saintair's and phytosanitar' nieasures (that is, rules On

trade restrictions for rcasoins of animal and plant health).

Pwdo 1/. l- ;-(,- I,g,',/,',ja i,a',K Pa!,, P i I 'a 55

AGRICULTURE IN THE URUGUAY ROUND: A SUMMARY

Ir,,,- k, . 1,,, ".;

All import restrictions will have to be converted to taliff equivalents and reduced by oni average of 36 percent aver six years,with a minimum reduction of 15 percent for individual products (24 percent and 15 percent for developing countries) withrespect to a 1986-88 base period. In addition, member countries will have to take appropriate measures to ensure access toa minimum of 3 percent of their internal consumption, rising to 5 percent by the end of the six-year period. In cases where

mnarket access is currently guaranteed by an import quota or voluntary restraint agreement, these existing access opportunitiesmust be maintained at least at the average 1986-88 level.

I)r,u li, SV/;///or!

Domestic support will have to be reduced by 20 percent over six years. Calculationi is based an total Aggregate Measure

of Support (AMS). Base period: 1986-88.

It '/,r,i .V/r,/ri/s,>

GAPT participants have agreed to a dual comiimitmenit in the area of subsidized exports, based on the 1986-90reference period:

* budgetary expenditure an export subsidies is to be reduced by 36 percent over six years, and* the volume of subsidized exports is to be cut by 21 percent aver six years.

For developing countries expenditures nieed be reduced only by 24 percent and export volumes by 14 percent over the

sanie period.

I, , ittii, I , I / 0/

'I'he \\'I'() agreemeo t bri ngs to an end the ssterm of sluicegate prices an1d \variable le\ies that operated

folr t\wentL-li Cve rs to protect thc El' domestic market. Thc \were replaccd hl a fixed tariff or cns-

totms duty tLhat \ il I Ie reduced h\ 36 per cen t o\vcr six vcars. Because of the refcrenice period, ho\we\er.

the tariff \x i II still pro\ ide a high le\ cl (if prortctioni, ar leasr againist those impports that xv iII pay the full

tariff. In 1993 only abour 21) pcccnt of the FLl's imports actUall> did pa> the full xx. The rcst Came11C

from the concessionlal a greemiec nts wih Cenrili al l aInd Eastern EuLope:an1 coL1n rics or the (hiapter 1 6

Iho tind tariff of 17 lierceiet.

.1/ ri, ktk z a .rrs

The pool tr\ secto- csscn tiallv xvill IIe concerned \\ it h cooL 1tr comi tnicnts miade uLinder the market

access anLl cxport sUItsidies rulcs, l'nder thc marker access comm11itmllelnt, roamN cooLnrries xvill reduce

thicir tariff's and/or the taritff c(qu ixalil t of their notitariff barricrs. The ELI for instaniice, has agreed to

increase access for pool trx tlirough1 a tari f 1-Cluota of 1 8.f0 )O nt i1 1 99;5i itcreasi ng to 20(0 ())0 mr i1 the

xcar 200()(. In acddi tion. it sill rcduce the tari ff-rClui;alcn t of its inport lc\x s s stemi and the dotLi on

processed turkex from 17 pcrccent to 8.5 percent, \xhihl is expected to favor increaseLd imports from

Bra,ril and thae Lt liitd Statcs. The L nlited States \Xill redFuce its tariff for pool tr\ hv 210 percent in

cqltial anltial installlilments o\xr six x\ears beginning in 1995. Other significant conIsomiilg couo tries

suc ais Korca and the lPhilippines also hla\e agrccd to open their significant)> protected markets. Hong

Kong %\ ill hind its tariff for podltiA imports to zcrO.

6 6 I F C G L O B A L A G R I B U S I N E S S S E R I E S The World Poultry Industry

Table 6-2 R./ 1'- I.-.'/jc.ri/I. 5/u/ A,,/iu iu,o, (.owwj111,n'u/

/,l////+ /91453 /5')w /5, /55,! /551/

Volume (thousand tons) 44(0.1 410.2 3811.3 3511.4 32(.5 2911.oBudget (ECU million) 137.8 128.5 I 1 I. l .I. 111(.8 I 1.o

Table 6 - 3 1 /1/ .V/,i I-.o , /u/ 1. e /)/pol Roll o,,i ( lit s/ir//r ,/

/,,,,,/,,.§ /,v,25 ~~~/,5,55 /55'> /5,5,1 /51/5'-1,

Volume (thousand tons) 34.2 33.11) 31.7 31.5 2*'.2' 28.1Budget (USS million) 2 1.4 21.1 ] 8.6 I 7.3 1 S.q 4.6

.Su/SI/ (h z, (I /d r /1'I.s

Ckommioitminc ts regardi ng suhsid izcd c\x orts xxill conceri cssenrialix the Etl aind thet liiited States

('1 Thics 61 '2aid 6 '1 . BCL3ecait Stil0sidi/Cd p)Otiltr\ cxports aLre imiorc preva,flert in the EU. EuropeLan ex-

porters aLre likcl\ to he more constrailinLd h\ this CoMinli[Itmcnt. It is gencraiN cxpectcd thi l tht [olmc

ricluCitioll ill hc the mlaijor constraint, not the hudgert ( Iradniock 1994). This dcrix es fromilic thelct

hlat the agrcCd-1,lpol 'I perceint reduCtion in sulhsidi/ed exports oxmer six years refcrs to the 1991-92

period. Ell exports glteC significLinti aifter 19'1-'2 and xx(re cxpected to rchic (70,00(1(1 tons in 1994.

indicatilng rhalt the requir-ed reduction in 1995 wotuld hc athour 2'30()()0 tons or one-thiird of cturrenit

ex\ports. In efct'[C 1. FJ -Sulsihdized cxports \ili hanc to delcriase h 1)LhouIt 57 percent between 1494 and

2')()(. This :tdju]stmIeICIt is likcl\ to ClrCete serimis prolemCIs xithill the ELI pouir\ sector as nmjor

exporters Erx to redirect prodLuction iou ard the internal nmtrker or to export withour sulhsidies.

Regional Preferential Agreements

.\No /- / h .4 inS r I i, a/ nl hi/ i i Tr dr {/ I 1 2 t t /I/ r ///(.\.1/

TFradel flox txs hcmcci NMc\ico aid thc I ni ted Statcs domiinate in poul trx mcat trade amonig tie thrree

mcmhcr coluntriCS. ( alldil ha not moldified thC nalturr of its 1liitry polici signiticlntlx, so that

NAxFTA is cx\pectecl to h ave onvli miioor implicatiols. Furthileri or,r trLde liheraLi/iation1 in potitrx

het%%ccn e Iexico anid Ca il ad at is tOarialx cxc utided fro to NAFIA.

iolrimecr Nicxicaln il port policies xx cre dtei,gined to protect MIcica in producers from I AS. corlpeti tion

throuIl a S\stelil of HiCePses anmd a 1() pcrceit tariff. Foliox\ingu NAFIA, \Iexico otx certed its import

licen0siml! re ginmc for rexsh. chilled, anti fro/ien poirt\x import.el f'ro[it the ninite1 Stacts to a

tramsttiioilai tarif-r ite Cuota (TRQ). i'hte l'R(h is in effcct for ten scars aftcr xi hichi n rcstrictioIs

For thi l 'iited States. dtx\-frce acccss to thue Nlcxicail mairkect his hcen issurcd tor aLn initial 9500()

mr oftpotlrtr\ which \iii grrNx at a 3 pcr(ellt antlali tmrprrillndcd ratc oxer the tcn-sear tr,insition

period. l -S. uxports in excess of the 95,1(1 tl tn are assessel a tariff haLscd oil tic tariffcatrioll of

NM xico's import iiccilse. Scparate TRQs, tariffs. alnId milili itil ;tariffs ilaxc heen estahlisilecd for slecific

pittilrrx productts exiirrted to Mexico.

I/u -1/ '1 >/( , /i,1/ /)/'/'ftl//1/ 1/y,11 // / 'iw l R,!w//m 6

Table 6-4 li,si,/sot'yg/ flu itf-Raz, 0J//y Iti' I'o///ri

/',,,,(//i! .\: IFIA : TRA'Qs O, (a wi/ lit/, i Alinimtum lkriffton s 1USVi/,,n

Whole turkeys 2,(0( 133i 1,85(Other whole poultry 13.0001) h( 1.68)Turkey parts 218 I)(l) 260) 1,850Other poultry parts 25,0100 260 1,68(Mechanically deboned '7(000 260) 1,680

Total 95,01)

Signaiture of the AsuLicd6o1 treary formally activated the crealtion of the Mercosur free trade area,

allowving eliminiiationi of trade barr iers between its member coultlries (Argenlina, Brazil. Uruguay) and

adoprion of a common(i system of custom duties vis-a-vis third countries. Tht eliminiationi of duties on

poultry imiports has gix en a significanit commercial edge to the efficient Bra7ilian producers. Exports

from Brazil to Argentina increased from 4,000( mt in 1993 to an estimated 80,000 mr in 1994, stimu-

lated by elimination of duties and the real appreciation of the Argentine currency over recent years.

ItVopr,an Un ion a (/8 (I itI/i o Itia,,ret ,}Z emb tls

A number of counitries in Eastern and Central Europe aspire to become full-fledged members of thle

ELY A firsr stcp toward full membership is associate sratos, which carries a nuimber ofcommintments ro

facilitare trade between) the associart memicbers and the ELJ. Several of these agreements have beeni

signed since 199t2 witil the Czech Republic. Slovakia. Hungar; Poland, Romania, and Bulgaria. Prefer-

enti.al access was granted for exports of poultrx meat from these countries to the EL- The agreement

calls for a 60 percent reduction of tariffs aind levies (2t0 percent ta vear for three years) and a 51) percent

inciCasC in the qLuanitites allowed access ( )1 percenit a vear over base levels unitil 1996). The lcy-

reduced quora will increase in vear fiye of the agreemi-ent to 46.21)0 tons of broiler meat, 6,201 tolns of

turkcy mcat, and 40,520 tons of other poultry meats.

Trade Perspectives

Poultry me at trade currenitly accounts for 7 perccit of production (EI-I intratrade excluded). a

percentage that has been grox ing reccnitl. In viexx of the expected increalse in poultry consumption

arouLid the world, trade is also expected ro increase significantly due to productioll limitations in a

number of countrics. The degree to wxhich there will be increasinig separation of production and

consumption will depend on coLintry-specific parameters:

1. (Cons/imur /1/4ttt I'nS

Fressh products retquire local production, xxhile frozeni poultry is a wvidely traded itecn that can be

prodiuced anywhere. As indicared in Table 2-I, attitudes toward fresh/frozeni vary considerably

across COllUntries, even amog neighboring cluntries with similar inconie levxels. C onsumer prefer-

ences and habits are objviously (If mnajor importance, but the existeice if appropriate and cfficient

distributiolln systems is critical to devclopment of the fresh market for retail consumilers. On the

othcr hand, development of foodscrvicc and institutionial catering tends to faxor frozeni poultry as

thcse scctois generally re(quirc frozein parts. which have more flexible Uses.

68 F C GLOBAL AGRIBUSINJESS SERIES TheWorldPoultryIndustry

2. (Compertitftve miit'dNtt,,

Sustainable competitive advantage in the poultrx meat sector revolves around low -cost access to

cxtensive land, cleani water, favorable climate, suitable feed sopplies. and livestock manage1ment

expertise. Low labor cost can be a short-term advantage. In the lIng run. however, this advanrage

rcnds to he overcome as ecoonomies grow and the agricultural sector progressively loses its compara-

tive adv antage.

CoUintries that have developed their trade volumne over the past few years-that is, Brazil and C'hina-

appear Well placed cocontinue expanding over the next decade. It is likely that the! u ill be joh1ed bN

other couLntries in their respective regions. The emergence of these exporters will be facilitated by the

enforcemenit of roles agrecd on in rhe lruiguav Round, particularly the export subsidy and sanitary-

phyrosanitary (SP'S) components. As was mentiionied earler. the con1tinIued success of thcse cOLun1tries

will also depenid on tlhcir ability to pursue economic policies that are conducive to the development of

the poultry in(Lustry.

Pdr, nr.1w160 Ao-((6W/ /l nI INr-,IIion/ a/nPo i'o.) Ri/olw 69

ANNEX 1 110-,// /'ou//r/, (.o,/t?///u/g/oy, 19)(s' m /993 (l.P V 0)/H)

I,,a. 1',", /tu,,/v,r (.uuvuuv,,A/;vu.v /Sv,i,/,u/u/vuvv I ASP/,.,-i,v/,i,A

.I/9. rva/v (A.'u/vy/b /99.? /99.1li.,,,!n,,,,,! v,uu/vvi l;,r,,!//vZ 1/Pv>/v' /vvvv /958 9/fl. { ) I 1/App,,, a/uv 9ui//iv) (I .

World 36i.96)) 47)064 5.1) 8.6 5,5()

Africa 7.h(, 2,16h 5.I

Ig. 1 r 3.14 -S() -22 -2.3 4.9) 56 661)Nigerii 281) 415 . 15 )OlSonICt Vfrie., 5S 741(1 f627 5.4 1 7.3 410 2980

North-Central America 11.I 65 14.n91 5.6t ioire'l Staltes .Il,M107 11.43.1 9.( 2,1)'()) 5.I1 4.3; 258 24,740)( L1lI:)ll 71).i3 7911 (8 I 2l 2.4 28.6 2 1 9,971)

Nlc\ie,o h46 1.221 1j 17 77 13.6 12.9 9() 3,610)

South America 3.,3i I 5 .3.1 1)0.2

ArgenIri I:L 3i7 h.35 h s 11.2 19.2 34 7,2))Blazil 1.757 .8()i 272h 5(' 9.8 18.2 157 2,93))

(ile Ills 241) 17.4 14 3.,170)( .UI)TllIill 2.S 477 13.4 36 1,400)

Pe rL 297 .i() 13 2.4. I ,4(0V'vle'/L.ii.i .) 3I 32 6 -3. 156 I . S 1 2840

Asia 9,i3') 14,195 8.4(:hinL1 2.hi7 9.1) 2. .i3 13.4 4.3i 1,178 490

I lil)g Kong I l27 212 11.4 46.6 h 1 8,1,)1)I,.d i:l 2I 2 4" 1 <. ) < I X98 .3 )IIld r,lld ila 445 .5i / 3.) 87 740)rliri 25 5 5h1 2'.2 8.7 64

1:ipltii 1.,4.4 1 .7) 1,588 -11.4 I.;.7 15 1i.,49))

Kor,,. Re p. of 1 5,9 .i3 2().8 9.)) 44 7, 66))P ) ili p in> 232i331 7.4 5.1 6i 850)

S:aLcli ArdibiLi 4h7 .964 554 3.8 32.0) 17

Siigqlynore '7 1104 93 1.4 .1 3 1'.8.il'

T1ailIanL 41.-3 493 ...3 i .2 52 8 5 .11Li ke 228 .25 325 7-i 5. 7 h l) 2.971)

Western Europe 6.,3i5 ,,787 1.4, L1 2 5.771 I,.541 4,496 1 .2)1 2.5 18. 9) 347

It nrc 1.1)8.i 1.271 h h 9 .321 3.3 22.1 58 22.490

(Germara 845 1,1)70) (115 28) 4.8 13.3 8i 23.,561)Il\ 11M11 L.l)83 . 47 51, 1.3 18.7 57 19, 841)

Ncrhml;lid~~~~~~12 - I 0 47i).'541 )15 .5NethlerIlalds 22(24 21( 3. .9 9 .3 1. )19)

Slalill 8 '45 857 29) 1.5 4.2 4') 13,590

L 1. K. I J1.1)7. 1 2 Il,) 1,52 244 8. 27.5 58 18.1)h)

Eastern Europe I1 ,15 967 -6.1BuIlgajriaL 1I.9 17,9 2 .i7 20)1 1.140ILM-g:Lr 51 225 157 -2. 21.4 3_ 3.351)

Polanid 321 In 2 14 45 1.7 8.7 38 2,26'Ro,, anlial 25 7 2411 1 L9) -1.4 1) .62 1,140)

Oceania 4X.5 563 3.i:\ANrrlia .i39 4'13 413 . O h.) 2 18 17,50()

Former Soviet Union 3 i._ 2.4()8 -7.4

RLsua i1derLatin 2, 194 I .h57 848 .i9 -(.,X 5.( 14(1 2,340)I krjinu (93) S15 22 5 ) 1. 5 2.2 11

7t' I F r G L O B A. L A G R I B U S I N E S S S E P E 5 The World Poultry lndustry

ANNEX 2 flAw/i/Pt,/trvt4,/r i, 179 o 19941 (1,000/0d1n).t/ni. (,'i,mh t,,,,. G;l oa III

/97 _Y/ /Q'YNY /,994 /9Y1,,.(§1)

World 26,185 36,900 49.1().; 3.i5 4.9

Africa 1,13))) 1,537 2.00( 3.4 4.5Eg,pc 119 111 251 -0.6 14.4Nigcrial 12i 330 168 1(0.6 -10.(6SoutIL Africa 233 364 394 4.6 1.3

Norfh-Central America 7,789 11.348 15,652 3.8 5.5(:.'itlal: 532 7(1 831 2.8 2.9NMexico 443 8(2 1,125 6.1 5.8

liniiLd Sta:cs 6,713 9,48()0 13.076 3.5 5.S

South America 2,38(0 3,54 f,0134 4.1 '.2Argentina 321 392 651) .1) 8.8B3rj/iI 1,345 2,)1)4 3,487 4.1 9.7(bile 1()5 11 -13(() 0.6 17.8

(:oloGmbia 10)7 236 443 8.2 11. 1Pler 148 97 314 7.2 (.9

\VenlC/'iela 247 352 5.() 3.6 9.(

Asia 5, 1 74 8,7 74 13.,728 5.4 7. 7(Chlijm 1))1 2,..(9 6.(6.54 5.2 16.5

I niai III 2 5 440) 7.3 11.81Indloesiai 169 445 588 1().2 4.8

Irarn 198 155 547 2.6 13.6jatpani 1,1 15 1,471 I.32)) 2.8 -1.8Korea. Rep. of 9, 235 38)) 9.7 8.3I hilippinlc 28 24)) .49 ().5 6.4

Thailaan( 373 55.6 828 4.1 6.9IlUrke 21)7 29)) 365 3.4 3.(Eit Nam 131 159 171 2.( 1.2

Western Europe 57()4 U5/i 7,1.33 1.4 1.1EFl 1- ,1(18 6,119 0.829 1.7 2.1

France 1,131 1,377 1.851 2.() 5.1Grimanl'U 53.1 575 645 (1.8 1.9Itzlx 1,()04 1,)67 1.136 11.6 1.0\erherlacid 343 429 29 2.3 3.6

S.)/ia 798 828 8(11 11.4 -11.51R.K. 75 1 1,( 17) 1,185 3.97 (.I1

Eastern Europe 1 .357 1.6(67 972 2.1 -8.6

Ru1lgaiia 151 183 61 1.9 -16.7fluniganr\ 346 478 341 3.3 -5.5P1k land 417 347 33.i5 -1 .8; -(1.6R(onmal:,1ia 371 39)) 29 1 1.5 -6.0)

Oceania 338 468 586 3.3 3.8Au tralia 96 4(11 5).3 3.1 31.8

Former Soviet Union 2,142 3()93 2,336 3.7 -4.(6

RuSNi.an Federati)n 1,381)UIkraine 400Otlher Etuimpean Re1). 15()(:cntral A\simn Rcp. 3.16

-9,,n,,,,: il. F '.9/i.-).

. lon- 7/~

ANNEX 3 I/u/or /4h/,/w'-h7k,,,ki,,'(.'wY/unic:

UNITED STATESTop 10 Broiler Companies in the United States, 1994

(Qllili,n iw./ RTC'') Vl,,,,,hl.,- ho/Z, -h7I

()I,mpv,,i /,-,. hr,,h (m,.l!/ )2, /h,'1,AI,v/

1. Tyson Foods 2.08 29 18 72 78 94 88

2. Gold Kist, Inc. 1.)4 II - 'n) 10 75 25

3. Perdue Farms, Inc.* 1.)() 1 3 91 9

4. Conagra Poultry Company (.89 11 S 'il 1() 85 555. Pilgrim's Pride Corp. (.5() 8 1 77 23 71 80

6. Wayne Poultry Div. 0.48 8 7 5( 5( 1 107. Hudson Foods, Inc. (0.41 6 5 11 89 8X)

S. Seaboard Farms, Inc. 0.34 4 1 7( 3() 9(1 509. Foster Farms (0.29 4 1 ')) 1() 55 2

10. Townsends, Inc. 0)2D 4 - B() 2 95 6)

* h 61r,,//: h'o>^/fion,Z. hp/,

Top 10 Turkey Companies in the United States, 1992

P'no/u, ,/,,i

(ihoS,,.ifa;g ,,/ ,w. /i~c, vS ,{//

(.{)Ar/m,Jv//, /99{)12 1993EL/.

1. Butterball Turkey Co. 317 34)2. Rocco Turkeys Inc. 20() 21h3. Jennie-O Foods, Inc. 190 7'4

4. Carolina Turkeys 186 21085. Wampler Longacre Turkey, Inc. 1556 22 2 6. Cargill 154 1 707. Bil Mar Foods 1 4 159S. Louis Rich Co. 147 1 229. Norbest Inc. 12( 12 5

10. Jerome Foods 1 13 113

Sowi rc : II/I /9,/ h/i,,a,,/ I993.

EUROPETop 10 Poultry Processors in Europe, 1993

(.'vu,,flv ~ t',,;j RI '(.1 (.vuo/,jP, ,1/Pr,,do,no,(i,oIn,Az f.wint/ I, (Iliwts/.,ndloni R7( ) (;,,,nin,< ,I Prodful,/I,

1. Doux France 700' E SP, G. NL. B, (H2. Bourgoin France 370*i F SP l. K.

3. Hillsdown Holdings [ I. K.2 ) (1991 ) U.K.. NL

4. Agrovic Spain 14)) (199() SPS. Unicpa 1rance 1(I0 (199()) F

6. AIA-Sogema l[alv 120 (1991) 17. Lohmann-Weslohann G(rnnai1v 115 (1989) (GS. BP Nutrition- U.K. 110 (1991) SP, NL9. Arena Ita)1 95 (1989/90) 1

10. DB Marshall .K. 95 (1989/90) I.K.

I )n:,vth*/ im/uv /Z/: ,u:Ks/urw/it ,,/ iig/ : a,/- v /utvi/ivnv i/10/C / 9'J.1 (/ 'o{/hL{/)

' / C),) v ' !/K}I im/// (/gE/;uv//1 U { P!// , 10//C ql 2 9\//f/ /'J43 ( aI',m ,) .knc.yn \nt l'o i 7,, j .

SOwine: /,,/mlan,/k /I K , ,/ /j/j'ilji/,,ill, I/Hi//i)ll

7' IFC GLOBAL AGRIBUSINESS SERIES TheWorldPoultrylndustry

B RAZ I LTop 10 Poultry Processors in Brazil, 1994

1. Sadia 307 46h)2. Perdigee 14(1 21(13. CevalP 133 200(4. Frangosul 1(1 1525. AvIpal 8( 119

6. Pena Branca 71 1(77. Chapeco 67 1(1H8. DaGrania 55 829. Aurora 35

10. Minuano 33 49

' wlon,tliz ni z,7ae 1-5 ke l(' >{* it;' /m4' ' o v / /S</Zz -l7 t k oI( E/jian,

Source : 4 .z , /). s *zz //\.iet /sz1j .z/z '9

ASIA

Leading Broiler Companies in the ASEAN Countries

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1. Charoen Pokphand 1. Leong Hup 1. Char.en Pokphand2. Cipendawa 2. Charo.n Pokphand 2. Saha Farms3. Anwar Sierad 3. Slnmah 3. GFPT4. Jopfa Comfeed 4. Malayan Flour Mills 4. Centaco5. Manggis 5. KFC 5. Sun Valley

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