Market study on the intensive animal production chain (pigs & poultry) in the Czech Republic Prepared by: Martin Sedláček Director Profi Press ltd. Prague, March 2006 1 Contents Part 1: Pork production chain Page 1. Primary production sector – present situation and future developments 5 1.1. Core information 5 1.2. Pig numbers 6 1.3. Pig breeders 6 1.4. Genetics and breeding 8 1.5. Breeding economics 9 1.6. Future developments 11 1.7. Animal healt status 11 2. Slaughter/processing sector: present situation and future developments 12 2.1. Core information 12 2.2. Processing of pigs 12 2.3. Ownership structure of the main processing capacities 13 2.4. Outlook 13 3. Consumption: present situation and future developments 15 3.1. Present situation 15 3.2. Future developments 15 4. Foreign trade: present situation and future developments 16 4.1. Core information 16 4.2. Commodity trade 16 4.3. Outlook 18 5. Distribution/retail: present situation and future developments 19 5.1. Core information 19 5.2. Outlook 20 6. Supply sector: present situation and future developments 21 6.1. Genetics 21 6.2. Housing and housing equipment 21 6.3. Pig nutrition 21 6.4. Veterinary medicines 22 7. Foreign involvement/investment 23 8. Institutional sector 24 9. SWOT 26 10. Possibilities for Dutch agribusiness for trade/investment 27 Annex 1. Description of selected farms 28 Annex 2. List of contacts (addresses of major producers, slaughterhouses, 31 processors, importers, traders, distribution, supply companies, institutional sector) 2 Part 2: Poultry production chain Page 1. Primary production sector – present situation and future developments 48 1.1. Poultry numbers 48 1.2. Breeders 48 1.3. Genetics and breeding 49 1.4. Poultry management economics 52 1.5. Future developments 54 2. Slaughter/processing sector: present situation and future developments 56 2.1. Core information 56 2.2. Poultry slaughter facilities 56 2.3. Ownership structure of main processing capacities 57 2.4. Outlook 57 3. Consumption: present situation and future developments 58 3.1. Present situation 58 3.2. Future developments 58 4. Foreign trade: present situation and future developments 60 5. Distribution/retail: present situation and future developments 64 6. Supply sector: present situation and future developments 65 6.1. Genetics 65 6.2. Poultry housing and housing equipment 66 6.3. Poultry nutrition 66 6.4. Veterinary medicines 67 7. Foreign involvement/investment sector 68 8. Institutional sector 69 9. SWOT 70 10. Possibilities for Dutch agribusiness for trade/investment 71 Annex 1: Description of selected farms 72 Annex 2: List of contacts (addresses of major producers, slaughterhouses, 76 processors, importers, traders, distribution, supply companies, institutional sector) 3 Part 1: The Pig Production Chain 4 1) The primary production sector – present situation and future developments 1.1.) Core information Agriculture in the Czech Republic has gone through a period of fundamental restitution, privatisation and transformation since 1990. The objective and result of the process has been the revival of private ownership and introduction of market principles. During the recent years prior to the accession of the Czech Republic (CR) into the EU the main task of the entire sector was to introduce harmonised legislation and a system of agriculture working within the common agricultural policy (CAP) of the EU. A specific structure of the primary farm production has resulted from such a process. A considerable part of the primary farm production is now in the form of large-scale production by farm businesses – legal entities. They are mainly cooperatives, joint stock companies and companies with limited liability. Family farms have been predominantly the restituted and revived farms of original owners of the pre-collectivisation times in the 1950s. Farm business structure in CR in 2004 Legal form Number Agricultural land Arable land Average of farmed area farmed area firms ha % ha % ha % Physical entities total 51420 1019814 27,5 677090 24,5 20,7 13,2 (private farms) Legal entities total 3219 2684382 72,5 2090322 75,5 925,3 649,4 Of that trading 2361 1660531 44,8 1273611 46,0 796,0 539,4 companies total: of that Ltd. Co. 1662 810852 21,9 572242 20,7 559,6 344,3 of that joint stock 657 835078 22,5 692042 25,0 1394,1 1053,3 of that cooperatives 678 938470 25,3 768812 27,8 1424,1 1133,9 of that others 180 85381 2,3 47898 1,7 547,3 266,1 Total: 54639 3704196 100,0 2767412 100,0 71,0 50,6 Source: CR Agriculture 2004 General Report At that time, the farm sector was subject to a number of unfavourable effects. During the period of socialism there were no modern technologies, there was a shortage of feed components, and animal breeding was on low level thereby resulting in less productivity. Further problems appeared in the first half of 1990s having to do with the transition to the market economy. Privatisation, price liberalisation, high inflation, overemployment in the sector, and non-availability of capital credit were among the problems. Total farm production slumped by 30% in average. The Czech farm ministry established in the late 1990s a Support and Guaranteee Fund which guaranteed the loans provided by banks and subsidised a part of the loan interest. Investments into the pig sector could be observed only since mid 1990s. In the 1990s, the entire market with farm commodities, including pigmeat, was destabilised, and the farmers prices of pigs fluctuated during those years by as much as 100%. 5 1.2.) Pig numbers The data in the pig numbers table indicate that total pig numbers have decreased since 1990 by almost 30%. Nevertheless, the pig sector has been considered a very typical sector of the primary farm production, and with respect to economic attractivity the primary farm production can rapidly increase its current production of pigs. Pig numbers (000 head) 1989 1998 1999 2000 Pigs total 4685 4013 4001 3688 • of that sows 312 320 317 297 Source: Situation and Outlook Report, Ministry of Agriculture (MoA CR), december 2005 Pig numbers development in CR – as at end of quarter (Q) (000 head) Quarter Pigs total of that sows 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 QI. 3314 3457 3362 3126 2876 277 297 282 250 232 QII. 3286 3628 3440 x x 281 305 x x x QIII. 3475 3663 x 3053 2890 285 298 279 246 254 QIV. 3347 3428 3308 2914 x 282 295 265 237 x Source: Situation and Outlook Report, MoA CR, december 2005 Reasons of the decreasing in pig numbers were: • lower productivity of labour and lower animal yields at the beginning of the period of transformation in 1990 • substantial fluctuation of farmers prices often due to bumper imports of subsidised produce from EU still prior to the CR accession to EU • lacking willingness of the primary producers to associate in marketing organisations • privatisation and modernisation of meat plants and within the food sector as a whole, and very long payment periods for purchased animals, namely in the 1990s • unsatisfactory capability of meat producers and processors as well as traders to export on foreign markets • change of eating habits in favour of poultry meat. The post-accession period can be characterised as a step by step revival of the fall of the pig numbers, and on the other hand the increasing imports of pigmeat to the level around 15% of the domestic consumption. This development proved the lower rate of competitiveness of the pig and pigmeat sectors including the processing sector on the internal market. 1.3.) Pig breeders The pig breeders are mainly legal entities having emerged from the transformation and privatisation processes. Physical entities, i.e. the traditional family farms, keep a mere 10% of the total pig numbers a they are mixed farms. 6 Structure of pig numbers by legal forms of businesses Form of legal entity Year 2002 number % Physical entities total 365910 10,6 Legal entities total 3061948 89,4 • of that trading companies total 2166348 63,2 • of that limited liability companies 614272 17,9 • of that joint stock companies 1545564 45,1 • of that cooperatives 863672 25,2 • of that others 31928 0,9 Total 3425858 100 Source: CR Agriculture 2002 General Report The potential of the entire sector can be well estimated by the structure of the herds kept and by the housing capacities. The table indicates that businesses owned by legal entities have 8 to 10 – times larger housing capacities both for the sows and for fattening. Pig housing capacities in CR Subject CR Physical Legal entities entities Housing for Total House number 5659 2501 3114 sows head capacity 456148 59210 393282 house average 81 24 126 of that built or House number 1014 530 473 renovated after head capacity 91423 14519 76037 Jan 1, 1990 house average 90 27 161 Housing for Total House number 10969 7083 3596 fattening head capacity 2359522 315385 2014640 house average 215 45 560 of that built or House number 2135 1206 884 reconstructed head capacity 719110 95488 614337 after Jan 1, house average 337 79 695 1990 Source: Agrocensus 2000 Among the largest herds in CR specialised in pig fattening are those with housing capacity at 15 000 to 20 000 head. The average size is 3000 – 10 000 head. The number of such large pig producers in CR is not available but it is estimated at some 500 firms. The largest sow breeder in CR is the farm co. Plevnice by Pelhrimov with 2000 sow housing capacity.Among the largest pig fattening companies are Agpi Pisek a.s.