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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 Public Disclosure Authorized

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The World Pou/try

Public Disclosure Authorized Industry

Richard Henry Graeme Rothwell Public Disclosure Authorized

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The World Po u/try Industry

RichardHenry Groeme Rothwell

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The Interna tional Finance Clorporanon (1FC) an aftfiliate ot''l'he World Basik. proiisote the econtomic development of its Itoerllher countitries through i uvestnment in the privatc sector. It is the wo rld's largest m Lltilateral orgaliizarion providing financial assistancedirectly it the forns of loatts and cquirt to private enterprises in developing counitries.

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ISBN 0-8213-3429-S

ISSN 11)20-3850

Riclsard Hen's is a senij(Srecononsist antd (:raenmeRotlwvell is a senior engi ieer, hoth iTsthse Agribusiness Departmenstof the IPFC. l.ibt-at of Congress C'ataloging-in-Pnblication Data llenrvs,Richard, 1950- The world poultry industtr' / Richard Hcnrv. Graeuit Rothw%ell. p. cm. -(IFC Global agribusiness scries) ISBN 0-82 I13-3429-8 1. IPoulir' industrry 1. Rothvwell,Graeme, 1941-11. Tirle. 111.Series. HD9437.A2H4 1995 338. 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 Versus 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 years his report is the first of a series to to come. The authors of this report estimate be published by the IFC Agribusi- that annual world consumption might grow ness Department. The series will by another 15 million tons by the end of the comprise sectoral presentations of industry decade, thus making poultry meat the trends with specific emphasis on developing second most popular meat in the world after countries. The objective is to make this pork. This growth should support additional information available and highlight the investments of about US$2 billion annually increasing importance of emerging countries during this period, including LUS$0.7to $0.9 in the world economy,not only as quickly ex- billion for grower production facilities and panding markets, but also as competitive US$I to $1.2 billion for integrators' produc- production bases. It is hoped that the Global tionifacilities. Most of these investments are Agribusiness Series will underline the strong expected to be undertaken in developing production assets of developing countries countries. and thus help to generate additional private investment in these countries. The information 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; AgribusinessDeparnet at an exceptional rate over the last decade, InternationalFinance 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. The poultry meat industry will clearlvgrow on a worldwide basis at 5 percent per Cost of production comparisons favor countries with annum for the foreseeable future. Variation ample low-cost rawnmaterial 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 increasingly 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 produced The 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 proportion of international trade in poultry meat products Technology 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 grower level. 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, generally 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

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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 processors 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 lowAerproduction 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 margin 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

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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 imiaterialinvariably supply stock that meets high standardsof 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/lateand 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-developedmarket are relatively high. The cost of establishing a I million birds-per-week integrated operation in the southern United States wasestimated at $75 mnillionin 1985 (Figure 1-2)(Barton 1985). Recent expansion 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 FC G LO BA L A G RI BU SI N E SS S E Rr 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 because 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 significant 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. alloxNsthe egg industr\ structure to he less concentrated than the poultry meat industrs

Figure 1-2

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The worldwide poultry meat industry has a tendency to concentrate in relatively large integrated busi- nesscs uSilngup-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 individual 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) arndThailanid (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 com11petev igorously and there is usually a third tier of small fai ilv-based comiipaniiesusing relatively low technology and generallv with a low-cost structure that supply a localized market.

TechnologySupply

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 wlheniexcess 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 lowNbody 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 worldwide 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 twxosections of the

,1 I F C G L O BA L A G R I B U SI N ESS 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 wviththe 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 wvillhave 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 industrvxThey 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 equipment, 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 Organizationand 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 sometimes prophylactic treatments, such as coccidiostat to prevent coccidiosis, a protozoan that causes mortality 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. Mlostoptimizing 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, whiichihas branches worldwide and sponsors regional meetings as well as a major internationial meeting every four vears.

General techt 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 thohrepose, theterm integration"has been iflioe toefir to the tVpiceIlorgi,7si.atwo of the pouldtry industrl in rfrrenre lo its widespread ,wifsin te industry Rtsoaiips pro essrsge.neral/doss not own ryoierarms. rnoonusstsprf/S r to speako,f rertiMal mardination throughpro/u.- lion ontra, /X.

2 . d/ivts uwonol0 thi .wt of food-bolrneillnesses, antis on1993 is oga/i.ptrl} poultryindustry Ispravisled ini Jordan I.init'. /993.'ht

Industry Organizationaiel 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.

RegionalDemand

WVorldconsumption 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 WVesternEurope, 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 consumption 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 NVesternEurope has grown moderately, while the transition from a planned to a market 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 2-1 Potilli-i-o1( CI/t,,l/i//plioll/- 16 MillionTons KG/Capita

Pou/wv 1,lea! l wR,eu;/i' 1 _ £ ,,sumpp,mi . 14 _ numnptionI QQ3 30 ,,,(.,/,,,/ /",/ITh/ F1( 41()ae. 12 . PetP(pi,, (onsurnIp11 25 10 20 8~~~~~ 15 6

4 10

A00 0 Africa North South Asia Eastern Western Oceania Former America America Europe Europe SovietUnion

Figure 2-2a

148 Mn,00Tons KG/Capita 20

600 -15

400 10

200 Bo ie

* OtherPoul,r(

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

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

Not Jn I) (l 12 so

40 10

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

20 *Broiler

Tiurkey l0

2 oth~~~~~~~~~~~~~~~~~~~~~erPan/tn

Canada Mexico UnitedStates -osmtn

9I Figure 2-2c

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

. ,:r,is/ XIZ are3000 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

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

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

2 10

0 0 China Hong Japan Korea, PhilippinesSaudi SingaporeTaiwan. Thailand Turkey Kong Rep.of Arabia China

Figure 2-2e IM/('f -iA)(' i/~ 800 1,000Tans KG/Capita-25

1600

1400

1000

800 Union 400600 FLrkTy 5 Piultr 200 itili_ _ _ _ _ Pe__

Bulgaria Hungary Poland Romnania Former Ukraine SovietUnion

F C G LOB A L A G RI BU SIN E SS SELRkIES Th.eWorld PoultrylIndustry Figure 2-2f 1,000Tons KG/Capita lh,:t,/, 1.W{/tv/), 14000 I 25

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

6000800 5 R ,9s p

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 LUnitedStates in the late 1930s.It -rew substan- tiallv in the 194()sand 195f(tsmost broilers were thclnsold asxlhole birds, originally Nexwiork dressed (only feathersand blood removed),and later as readv-to-cook(legs, head. and visceraremoved). In the 1960sand 1970s,increasinig numbers of broilers were cut up and sold with all the parts in a tra' pack. or as individual parts (breastsor legs).The shareof whole birds dropped below 50 percent in the 1980sand fell rapidly to 19 percen1tbx the 1990s (Figure 2-3). Many ne\uproducts were developedby the industry,such asfrozen prepareddinners, frozen breadedchickenl entrees. poultr' frankfurters, andpoultry-meat frankfurters.

Figure 2-3 f)'.'1'/-o ( rV. ~~ 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,eriew 1974 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- nieniccof 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 boneless, skinless breasts cost about the same as the better cuts of beefsteak. Because of this bias in the domestic market, newvoutlets 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' a5it s dj matidi for mrcats

Nleat consumption in devclopcd economies has clhanigeddramatically over the last decades. Nowvherehas this change beein more striking thanll 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

f100

40 _imb & |I. tton

Pork 20 Totil f r'olly

E F,hA 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 producLtshaex 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 increoasefor beef.

Figure 2-6 U S. Broil/eI Pro( //j),n 1994US S/KG It hlsik Pri (,r's/r 1955m,o 1994 6 -r

.\5 Proreo'ssi7

(i/herGi ower

* Feed

1955 1960 1965 1970 1975 1980 1985 1990 1994

(,'/,,/,,/ I',,,,/tr /,1 I,,,', / Figure 2-7 1994US 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

0 1950 1955 1960 1965 1970 1975 1980 1985 199O 1994

The suciden shift observed in U1S. meat conlsumiiptioniover 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 consen1susestimiates of about -0.2 and 0.4, respectively. It also appears that price andLincome 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. conisunmersarc becomningless sensitive to price changes. The remarkable attractivencss of poultry meat mav be dLueto 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 LO BA L A G RI B USI N ES S S ER I ES TheWord Poultry Industry Figure 2-8 '.S. RPaul!Ik/a PH/i lhu/\ 140 - 1960=100 (,w//'/,1/1/1994), l '.S'.,' JfW,=/L1i 120

Sn''.I'Al) I - Broie

80 _

60 -.. -Pork

40-

20-

0 1960 1965 1970 1975 1980 1985 1990 1994

Distribution

'rhe developmenr stage of the wvholesaledistribution and the retail sector in most countries is an im- portanitcatalyst of structural chiange in the poultry industr, In most cases,development and concentration 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) institutionial 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 Iichh other countries cani be compared. Major broiler marketing 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 becauseof product freshness anidfood 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 losverlosses 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 cxeveif 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 IhSkv 15 Figure 2-9

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

*S -

*@ S t 6** o -

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 wector 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 comimonimethod 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 normazllyhave a shielf life of ten to fouirteeni days when

niainitaincedat 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 thecLI.S. m-rarket,which may re(luire colder chiing.ii

Simiiar iniformatiion for airanige of countries is shiown in Tahle 2-I. Not aillfiguires are strictly comparahl)e hecause thie leg,al definiition of termis such as freshi mnavdiffer across counitries.

/6 i~~~~~~~~~~1FC G LOB A LA GR I BOUSI NtESS StER EtS The Worid Poultry Indus"r Table 2-1 I4ztrryts ol'Rroio/ro / Cmsunpiioil/A le (aedCoiwlriik

rn, I ( p,//;,y[/ Aw-,/es 1-ColliIIIII)II'n Ln.ii- 4;'/ bGi"" P//r,Par" Itp11ob, Biplz

Argentina 2(1.0 95 5 15-'2( 8()-85 Brazil (domestic) 18.1) 21) 80 10-72( 80-9)0 Brazil (export) 11(11 37 03 China (domestic) 21 1(00 - China (export) I )() IN11 France 1().8 90 1( 30 70 Hungary (domestic) 15.6 100 75 25 Hungary (export) - 1(10 1()0 () Philippines 4.7 40 Poland 5.8 85 15 53 47 South Africa 14.4 .37 63 58 42 Thailand (domestic) 9.1 >7i 2( 1(1) <20 >8(0 Thailand (expert) 100(5 5 Turkey 5.3 8(1 21) 2 78 United States 36.01 92 8 8 1(7 Zimbabwe NAk - 0 5 95

The information reflects, to a large extentt, the degree of development of the xslolesalinig/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(0pcrcent 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)sumptionand the rrenidin 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 consumptioni. 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 consuL11ptiolnon 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 demnandstudies 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 kilograms 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 KGPer Capita

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

20 - U - _ _ ff f f *~~~~~~~~~~~~~~~~~~~~~~~~Po'l*

CESES:_ fLDzeT;S; _ _ * ~~~~~~~~~~~~~Bovine. 0 Low LoweF-Mid Upper-Mid High IncomeGroups

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 numsberswith 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 meartwill 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.

00 Table 2-2 I'/f/i/)/mairr //ir /r IK/artirfirt I)naaniti/ ir l/r

F,r,nlI[/,in; f/it m (;r1op 1 ./annr RuNfal

Beef 1 1.99 .1 8 2 1.35 1.91 3 I.00 1.82 4 (0.68 1.(2

Perk 1 141 - 2 1.18 2.30, 3 0(1.76 1.40 4 (1.35 1.04

Poultry 1 2.08 (.55 2 1.35 0.57 3 0.96 (1.35 4 0.69 0.38

SIrrr.. tRow /99.L

itt ~~~~~~~~~~~IFC 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)Pgrowth 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 expected to comc from developing countries in Asia, South America, Eastern Europe. and the former So- viet Ufnioni.

Poultry cOnISsumnptioniis expectcd to increasc by ahout 15 million tons, or about 2.5 million tons annually. 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

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

(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) 6.6 Suh-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 2.8 Other 3.5 1.8 1.7

South America 4.667 .)0 3.5 1.8 1.7 4.1

Asia 1 ,343 1.( 11.6 East Asia 7.7 6.3 1.4 South 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,oI/i,,/,/ . /Ik /V9i,,h /iQ/,.

FigFure2-1 1 MillionTons ff0/in/I[oul/1 / I 1ha/ 25 (CoZnsumption /o )V/r 2 00I

NVorth- (.rntrals 15 4ineiwa | * .~~~~~~~~~~~~~~~~~~~~~~south.4nxzI ri,-f

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

S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1| _ |* v| riu7tEtirope

1994 2000Forecsts

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 ES The Wrsrld Poultry Industry Figure 2-12

J6,1/t, Alesi. (w;J/l/in/o /:Pfi 100% VY'dSCI/f' Rt,',,,,j ...... 1994-200t

80% * 1om-.Vovtstoiu ('/zionZ

60% _Eurpe

E tweviEurope 40%

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

2000 Forecast

Figure 2-13

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

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

60%

IGF m rmope.

40%

20% Ar;,,awE,a/A,tam_ *

0% 1994 2000Forecast

N o t e s

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

2 I/h, f/oeli, t,oorNle, oo/ ll 1 a',o,o/,nr to/Nf 9 (/'A Pp, '- p/1a ,s,v The WXorld Bon k Arlas znutlhlou.i o rr ao',. ba -w, m,n,.N59P or letr: /owle-m,//,-, on,, ,mOQ6-X?.7.o S op/or-o -ml on,SN oNn, .r! T'-r6 h.o 0h-in,i: moer9. 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

WVorldpoultrv meat production in 1994was estimated at 49 million tons carcass-weight-equivalent (cw.e.), or approximately2(6 percent of total world meat production. Poultry meat thus ranksthird amongmajor meat sources,behind pig meat (40 percent) and beef (28 percent). Chicken is the dominant sourceof poultry meat (86 pcrcenti) turkey accountsfor only 10 percent.

Figure 3-1 ihEl200 MillionTons 150

100_v s;

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

mEPB,

0 1965 1975 1985 1994

As indicated in Table 3-1. growth of world productioll hasbeen sharedunequally among major meats over the last ctwenty-fiveyears. Over this period, pig meat and poultry meat production have been the main sourcesof growth. Over the past decade,84 percent of the increasein world production hasactu- ally beenaccounted for and sharedequally by growth in pig and poultry production.Whilepig production seemsto haveslowed dow n recently,it appearsthat poultry production will keep its momentum and remain the majorsource 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 ih.t'C'oa/h'af,.1/ ht'o//6IrV Al,a To/al 1970-1980 1.6 4.0 5.6 0.7 3.1 1980-199O 1.o 3.0 4.7 '.8 2.8 1990-1994 -In 1.8 4.6 0.3 1.5

.Sau,, : (.,,/ ,,/,,/ Iranim (J ,/at. Figure 3-2 MillionTons Percentage 1fl , /&,~/j/ zJ/f >///to 20 r10l%D/ .1,,,A,,.:110R_ 1 1 _ 1%

15 ~~~~~~~~~~~~~~~~~5%

Prod/a/lon/988

10 0% P,odwfion1994

* .I111ua/(,'rsth/

5 .50

0 Africa North South Asia Western Eastern OceaniaFarmer Soviet lOg America America Europe Europe Union

Approximately 6)0percent 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 production 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 dominated by backyard operations xvith a fex integrated operations emerging from the supplyVof 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 developmenit 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 distribution. including a cold chain from processor to consumer, has not provided a natural outlet for volumes produced bv integrators.

.Srouth/ Af,-it,i

Sooth Africa is clearl' theliargest producer in the region, wyithan 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 somietfeatures of middle-income countries: frozen poultrv and parts account for twvo-thirds of the total market and portions for about 601percent 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 industrv is the largestin the world. In 1994 U.S. productioll totaled 13.1 millionitons-about 27 percent of world output. The sizeof U.S. comlipaniiesalso reflects the dominanceof the U1S. poultry sector: Tyson, the undisputed leaderof the IT.S,market, processesmore than 2 million tons of poultry annu- all: that exceedsall of Africa's production. Tysoncurrently accountsfor more than 4 percentof world poultry production. A list of the major U.S. poultry companiesis provided in Annex 3.

The broiler sector is generallyconcentrated in the South-C.entralregion, wvhichaccounts for abour half of total U1S.commercial production. The secondleading region is the SOuthAtlantic, which accounts for another 40 percentof IThS,production. The concentrationin these regionsresults from relatively low land and labor costs.favorable climate. ability to ship in ample feed supplies. proximiitv to major metropolitan consumllptioncenters, and historical development in each regionof a vertically integrated broiler production and support network.

The turkey sector is lessregionally 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 1980shas been increasingat a 10 percent annualrate, spurred by increasing domestic demand and competitiveness on world export markets. Competitive advantage of the country is derived from easyaccess to low-cost feed, relatively cheap labor,and a strongrivalry amongthe major integrators that has brought technical performanceto a level comparableto European and 1T.S.producers. Sadia, Perdigao, Ceval. and Frangosuldominate Brazilian production and account for 40 percent of national outpu.c The first two companiesaccount for a substantial shareof exports: 35 percentand 25 percent, respectivelxyThis performancehas been accomplisheddespite a very unstableeconomic environment characterizedby mediocreeconomic groxvrh (1.5 percentannual GDP growth over the 1980-1993period), high unlemployment,and inflation rates that often exceeded20 percent per month. The scabilizationprogram initiated in 1994has had a dramatic impact on inflation and has provided for a significanitdevelopment of the domestic consumermarket.

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 concentrated in Santa Catarina and dominated by Sadia, Brazil's largest company in the animal products sector.Turkey consumptionremainis highly seasonal;85 percent of salesoccur during the pre-Christ- masperiod. Sadiahas attempted to overcomethis situation through developmentof further-processed products (ham, nuggets.etc.) supported by intensive promotional campaigns.A list of the major Brazilian poultry companiesis 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 PoultryIndusiry China

Marker liberalizationhas transfornmedChina's poulrVxindustry into onc of the most d\ynamicagricul- tural industries in Asia.Annual production growtthover the past five xearshas exceeded 16 percenit

(Annex 2): mostestimares point to a 15 percent increasein 1995.This growvrlthas heenfacilitated hv a largeinflux of foreign crapital,technolog, aLidhrccding stock. The dexelopimientof large-scaleinte- grated broiler opcrations is increasinglyaltering the landscapeof the sector and transformingChina into a pownerhouse)on the exporr market. NIumerous Japanese and U.S. compaLnies,the Thai CP group, andother Asiai conicrinsare insolved in thesedcveclopments. In 1991 anestimated tsentv processing plants in Chilia wecrethouglht to bc producinigexclusively for the Japanesemarket. Tyson Foods aninounicedrecently that it had enterecdinto agreementsw ith two companiesfrom 'Ibiwan (China) and Hong Kongto develop fully intcgrated poultr production operationsin two pro\liices of China. Lo- cated in Shanlghai.Tianjin. Guan-gdolngand Shandongprox incts. joint \ enture plants are exporting mainly cut-up and debonedportions.

China is competing directlI sxith Thailand for exports of thesefrozen products.and hasthe adv-antage of lower feed and lahorcosts. Some experts also helieve that Chinia maxtarget Japan's chilled fresh market.xvhich is currently supplied by Japan's(domestic broiler industry. Port-to-port transportation betweenChina and Japantakes oiilv two to thrcc days,no more than thectransportation of products from the most distant production location s\ithin Japan.Although these investmiienitswere based on plans to supplNthe lucratixe Japancsemarker, expccted increasesin domestic consumptionxvill provide an additionial boost to poultry productioni in the future.

While joint-' encure operationsare setting the paceof technologicalcdevelopmicnit and tecrhinicalperfor- man(c, the bulk of poultry meat production remainsin the handsof small-sCaleullits. This segmentof the ioduostr remainsexposed to fundamental weaknessesin the production process:poor-quality feedsfrom local feedimiills;lack of quality animal health products;annd inefficient managementprac- tices. whicb result in high mortality arid poor feed conxersioniefficiency. 'I'he level of biosecurity is geeicrallklos. with poultry production facilities locatedclose togtcher,feed transferred from one farm to another.and lirtle disinfecting of anilml transportationcrates.

Despite these problems,China's poulrmxsector hasshow%n that it can produce high-quality broilers and, becauseof its losvwages. further-processed products. (China's broiler sector is expandingat a rapid pace.hut dhe indust' is facing ello\Oobstacles SUChas the rising COSt of feed that followeda partial market liberalizationand stronger competition for laborand laLicin t[hefast-dcleeloping coastal pro inces. In addition, central and provincialgovernmncits are beginning to expressconicerns about [he effect of high-Volume production on the enviroonment.

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

Japanis one ot thle rareeXCeptiOlls in :\sia in that its poultry production decreasedin 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 ccoinomilicperformnance. the conmpet-

itiveness of lapanesepoultr1 pro luctinni is heingeroded 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 aninuatlrate. Linder this scenario domestic productionl \tould supplyIess than 50 percenit ot the Japanese market in the Nlear2()(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 rhaicompanies aLid dedLicateti to exports to the Japanese market. Similar investments and alliances. although on a smaller scale. hate beenarranged in a numher of othlr Countries, includiig China, Indoniesia, Nlala\ sia. Brazil, and ( hile.

'I;iiei/e,/X,

PoLuir\r prodLIction tecIM11101Vand 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 abOCutten 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 processinggplalints. Farimcapacity ran"gesfromll 1(() (0(H)to

.50,(100( birds.

Exploiting its competiti\e advantage deri\cd fromilto\ sages, IThailanid halsbeen particularly successftul in exportiing broilcr meaLtduring the 1X980s. Japanese investmenit in joinlt \entures (Better FoocdsSri

Thai Plnolt; Ccniiragro)stas instrruienItal iii supporting induscrr development antI facilit ating access to the Japanesc market. ProdtiuCtionem phasis has bcen on carving alid furthier processing of broiler

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

wirth an increasing demand for fancvcLutS ()iakitori, tulip Wilgstick, skylarkl. blioless leg steak. and boneles.s leg block).

Recentnl\ ho\ve\cr. Thailand has fouinLIlit more diffiCuIlt to iilcrevaseits broiler exports because ot a

dcclitie in its competitise advantage in produictiiol costs (labor and feed) and the emnerlne oChinao,f as a strong comilpctitor. 'rhis is forcinggm)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 aduICeuincentive for sOilm of thesc groups to relocatc il neig ug1bori countries (Indonesia.

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

2 I F C G LO BA L A G R I B U S I N E SS S E R I E S The Word Pouliry Industry 'G/s/e t1/ ht"111''Pf

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

The Europetan I 'nioni (EHL) is the world's second leadinlg poultrv prodIcer, and the leading poultr- exporter, In 1994El I poultrn production totaled 6.8 million mnt,or about 14 perce-ntof the world's total. \ithin the El.tl Franceis thc leadingpoultr- producer (27 percent) and exporter (54 percent). followed b1 Italv (I 0percent). thle Ul t (I6 percent). and Italx (12 percenit). 'rhe Frenichlpoultr\ industrymhas becomicincreasingly conccitrateL. geographicallyand in terms of market shlre. The major firms are xerticallv integratedLas in the I nited Statesand increasinglyhave located their facilitics in the xcestcrn region of the country, hich accoulnts for 711perce'tu of national productioll. Tlherc hasbeci limited cross-horderinvestment so far xxithin the ELJ,Nx ith notableexceptiolis such as I)ouX (Germanx,Spain). Bourgoin(Spain), HillsduovnHoldings (Netherlands). and BP Nutrition (Spaill. Netherlands). Production in ealchicounltr is usualkl dominated by a local company.The only companiesto excecdl 5 perceit of Europeanproduction are Dotix (12 percenit)anid Boorgoin (6 percelnt) in Fnranceand Hlillsdown Holdings (6 perceit) in the L.K. Recent acqluisitionIs by I)oux and BoUrgoin

xill strengthen the Europcanileadership of theseto io ompalies fLirtier.

Specificitv of European poultrx productioll stems frolnl the dix ersit\ of mea.tssupplied Althou'gh broiler meat is dominant (7(1percent). turkex, duck. pheasant,quail. etc.,accouIt for a significanlit sharc of total production.

t Grosstli of the European pooltry inodustri in theI I 80s, particularly in Francet1)eD mark, alid the Netherlands.is alsoIlinked to increatsedexports to third counitries,particuLlarl thc Nliddle Eastmlalrkct. BecaIse of thteCommon AgricUlturoal Iolicv ((CAIP, hich increasedElI cereal pricesabove other world prices. theseexports werteconditional onicxport suLbsidies.WVil tIte World Trade ()rganization

(WTG) agreementiriilerneited in Jol\ 1999 the Europeanirndustrv stands to losei itnmediately an otilet for 230,1)00torts of poul try mcat-that is. ont-third of cirrenit exports. A 1-mber of producers havercduced their prodUctioll targets. hxlbilethose thatt are most exposedto third-coUoIrn exports have atttemptedto 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)crof imt stlrents comttingon boardrecently. To the extent that the surpILIs cannot be exported \xithouo subsidies, hoer cr, a severe consolidationi of the iodustr has to

he expected ill cominiigvears as domtestit con1suImptiongrtoX Li \ ill not accotitimtodateadditioial supplies. In addition, there xxill be increasingpressure otin tc maijorcompanies to lcerage their indUstrial

CeXperietlce aiu1dexlpanid iln otler eottititriCs, CsseLi iall, emiergingcconiu tie-s xwhere prospects for

consuImptioll grossth 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 ungarCexporte__d 225.(0 trlts Otfpoutl rt meat-almotstone-half of total production-and xxas thicreforc

5 1I '/uI / /d /u', _,2i/ a Ieadingexportcr. FromI 1989o, 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 malrkctswhilc facing con)siderablc inlstability in its ccoiiomiiccnvironment. AgriCuli- turallanid nona,.gricultura:linpur markcts were liberalized: cooperatives anid statre farms, vhicM stipplied

the bulk of the broilers, were uLiFiergoinigtransformation 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 sector 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 nesituation. Poultr production has decliined by about a thir(i and exports bky4ff 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 vagesremaini signiificanlrlv lo certhan) 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 ton1sin year one of the agreement.

Russian1½-/meamon

Producrioni in the tormier So iet I iiion w as dominated bw Ptiscprom (Indusrrial-scientific corporation fiir poultry prodtction). vhich accounlted in 1991 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 productioin 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 Unliionlcomes 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 arndthey 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 h1asalso been seriouslysNdisruptled by a deterioration in its terms of trade. stemminig fro(m the abandonment of the planned ccoirimy and its producer arid consumisersubsidies, which resulted in fallinlg consLimer demand. Animali inventories anil output have fallen markedh over the past four years.

28y I FC G L 0 BA. L A G RI B U S I NE SS S E R E S TheWord PoultryIndustry To compensatefor fallinigdomnestic production. poulrry imports havebeen increasingsignificantly, both from the tUlited Statesand the Et'. The state continiuesto play a significant role in the sector as its survival dependson direct and indirect subsidies: for example, feed is sold to poultrv complexesat 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 anlefficient 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 production 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 (Costdifferences, 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 COStitcm; all other costs are relatively small in comp,rison

There arc substantial dLifferenicesamong 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 industry 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 rawvmaterial 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 rawrmaterial supply position and labor costs is not realized because of poor techinical efficienicies.

30' Table 4-1 Poll//i I'/9a-/iO// (.r,x/x2,, .S'/rtu/(.;///c

I',,/z,,z,,,,(~~~ s ~~~~ 1f4)1IR 11/, l11 1, ,,P,, ,azd, , (/,,,ki I-,,, ;o,,/; §, F,,,, 1haj,/irr;n,, T,ik/t 1' S I A 104,vJ /,,,/, 199,4l /QQ 1,),14 /f99)l I'9'9z ///9Q /'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 12.1 f&edcost 46.7 35. 9 42.9 57.1 55.6 55.2 76.() 65.6 51.5 47.7 36.8 52.4 groWer paymnCt 13.8 5.3 5.8 19.2 20.3 25.8 5.0 15.2 6.3 21.4 8.8 9.9 xet & medicauioni .3.3 (.1 2.0 i.3 (0.8 1.5 0.9 1.7 1.5 1.1 1.3 service & 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 79.1 lirehaUl 15 I.() 1.8 1.() 2.0 1.() 2.8 3.9 like 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 94.2 110.5 77.4 103.7 conidcmnations I.() offal ctredit -2.2 -1.7 net 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 10.1 packagirig 3.3 4.3 4.0 4.6 5.7 LitilitieS 1.7 2.6 5.3 office. 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 3.1 nonlabor 1H1.1 11.4 13.1( 4.1 8.3 13.4 total nondisaggreg. 22.1) 11.8 35.0 33.51 21.11 total 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 1.4 152.3 152.2 106.5 126.6 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 15 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\;eightat slaughter(kg) 2.41 1.91 2.6) 1.9 1.9 1.8 2. 1.8 1.9 1.9 1.9 RT(Cwcight (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)) *sks Furopean Broiler Index 21)9 227 21)1 225 182 2 L 1)4 1 211 229 2311L()

Feed cost (USS/Ton) 01)4 181 186 '91 4)1 '98 353 27) 258 245 184 176

Farm cost/index'100 42 _ 30) 41 49 42 51 03 33 36 24

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

I'able 4-1 also shows a ratio of total operating cost and theltroiler-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 Franiceand 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

LiveBird ProductionCosts

The cost of a live bird delivered to a slaughter plant can be determiniedby the cost m-odeldepicted in Figure 4-1.

The relativeimportance of variouIScomiponients of the live broilercost variesacross the countriesstudied, although feed cost is alwaysrhc most imiportantsingle cost item. Figure4-2 sumimarizes1994 broiler costsin the Uniited StaresRUSDA ERS broiler model), and the relative imiportanceof the variouscost componecnts.

3.?1 IFC GL0B A L A GR I BU SI NtESS StEtRItESThe World PoultrylIndustry Figure 4-2 'S't11,wu( / [i'Boiroz ogr In lt// Un/ilevISlaete s 19())

* Feed

-9 9 rower Payent

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

1 S7r,me 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 conversion 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 countries because penetration of the modern breeding companies is virtually universal (with the exception of the former Soviet Ulnionwhere relationships are still being developed). Therefore, variations among countries in feed cost per kilogram of liveweight are influenced by differences in feed costs and efficiency 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 Feedconversion 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 10.000 feed 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 position 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,nlnsonzsol ('ompdihir.4dta,;taee 33 Figure 4-3

,;,Coullil,C;)zomp9a/iiurlirvsv 400 (USS/Ton) Fr,,,, (.,,sz

350U

300 Fr-ance AiSther/an/tS Po/and FeedCost U ThIailal 250 Hunigan- Tur-kr-

200 ~~~~~~~~~ChinaB /aSi:

150 140 160 180 200 220 240 BroilerIndex

competitivc rawvmaterial cost, whereas Thailand's competi[ive position is lowverbecause of its reliance on imported soybean meal. Both counitries, however, are competitive enIoughIoverall 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 conmparedwvith other countries. 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 expected to improve their competitive position markedly when bird performance improves to international 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 amonigcounitries 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 SucIhas 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 COtlintrywhere 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 lotwergrower 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 componentof growercost and it helps to explain the situation in countrieswhere growcr cost per kilogramis high despite lowvlabor and living costs(Turkey, Hungary, and Poland)and alsoexplains relatively low grower cost wlherethe cost structure would be expected to be relatively high (UIlited States). It also mitigates to someextent the cost in somevery high-cost countries (the Netherlands). Broiler grower productivity is a function of the rate of throughput of a hroiler farm, of averagefarml size,and the hasisof the negotiatedgrowing fee that is paid to a grower bv the incegraror.

A study of the U.S. broiler industrxvshows a steadyincrease in farm throughput during the 1970sand early 1980swhen the farm output reached116,844 birds per year,but farms averaging237.000 birds per year output produced 89 percent of the broilers produced in 1982.At around5.5 batchesa year. that representsan averagefarmi size of 43,000birds. The trend toward largerfarm sizes most likely has continued sincethen.

In the Netilerlanidsaverage annual farm throughIputis around 300,000birds, with an averagefarm size of about 60.000 birds. In Turkey averagefarm sizeis 4,000-5,000birds-a function of the nature of the development of the industry, which has beenlheavily influenced by a rural development orientation.

In EasternEurope farm size variesaccording to ownership.There are many privately owned single- and two-shed farms in Polandwith a capacityof around 15.000birds a shed.These coexistwith large former state farms withi between twelve and twenitysheds of similar capacity.Hungary's structure is similar to Poland's.

Brazil andThailand aresimilar in that farmersw ith one shed of broilers with a capacitvof 10,000- 12.000birds predomiiinateas part of a diversified farminigoperation that may include cropsand other products.

In genieral,broiler growercontracts are estahlishedbetween the growersand the processorgenerally on a per bird basiswithi incentives for goodperforrmance. The integrator providesthe day-old chicks, feed, and serviceand support. The grower provideslabor, shedding litter, and utilities. The fee is negotiated and both sidesdevelop an expectation basedto someextent on industry structure and local conditions.There is a difference in EasternEurope; this will he discussedlater.

Therefore, the issuethat is more important than)farm sizeor annualthroughput in determining the growingcost is. in fact, the negotiatedfee. Implicit in the fee structure is the expectationthat it will be basedon full-time activity, and the definition of full-time activity seeminsto vary.In the Netherlands, where the averageannual throughput is 150,000,it is recognizedthat one farmercan handle50,000 birds a cycle so the fee is basedon a throughiputper aninumof 30,0000birds (six cyclesa year) before outside labor is employedon hileftarimi. Farms smaller than chestandard in faccwould be classifiedas part-time and the farmer would recluire incomefrom another sourceto maintain a reasonablestandard of living. A similar view on part- or full-time farming applies in the UIniitedStates.

Dit)le ujonsol (Comlipefitizzi 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 integrated 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 lowvestcommon 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- mianmcewvill 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 \xell 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 cansJingvariation 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%idetransport 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 LO B A L A G R I B U S IN ESS S E R I E S The WordPouliry Industry Figure 4-4 I'/)} siux Ink,zP (o ICo / IM- costof birdat = livebird cost/plant yield

socialcosts of labor

Laborcosts wagesrates

numberof employees

flexiblefilms and trays SLAUGHTER PLANTCOSTS Packagingcosts cUrtonsand crates

Supplies/Misc. electricity

Utilities gas/fueloil

watertreatment

supervision

FixedFactory Costs maintenance

depreciation

Coinparisons among countries in plaint processing costs are COnIfo-nclded1h 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 halvelittle labor input other than the- standard lahor re(luired for the siaughlter and autom10aticcot-up process. Brazil is in hetueent %zithi essentiallv man ual cLiir-up. deskinninig, and dicing.

Fiangre4-5 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 somnetimesare included in fixeci costs, o) packaging is included in supplies.

Figure 4-5 USc/kgRTC

( /"o///ll) C(Illp/l//){j//.J'/,yg~ ~ ~// ~ ~ ~~~~~Uck40_ RTC0/

30 Plant(.' '

P/lan (.isgs- * * ~~~~~~~~~~~~~~~~~~Toi/t/

0 Argentina China Hungary Peru Thailand UnitedStates Brazil France Netherlands Poland Turkey

/)i//, / I/I.\,,, a,/lnpil," &,1/,,?7,(.,.j/ The major cost of operatiniga pojultrvSlaughter plant is labor,but for the reasonsmenrioned, the cost of laborper kilogramof final product does not totally reflect the differencesin unit costsof laboror labor productivity, although it is apparent that the cost of labor per kilogramis lower in low-labor-cost countries.The information svstemsencountered did not tend to separatelabor costs between primary and fiurthcr-processing.

Labor as a percentageof total processingcost variesfrom 38.2 percent in Brazil to 66.6 percent in Thailand. Both the 'T'haiand Chinesefigures representthe export industry and reflect tbe cost of a largevalue-added product rangewith virtually all of the output handcut, deboned.and diced. The Brazilianiproduct mix is made tip of whole frozen birds for the Nliddle Eastand local markets,hand- portioned and debonedproduct for Japanand Europe, andconventional portions for the local market. The mix is aligned more closelywith Hungarv and Poland,witlh the majordifference being the balance betNveenfresh and frozen product, becauseof the largepart of Brazilian production that is frozen for export and for distribution within areasof Brazil where freshdistribution is difficult.

The costsin the Netherlands and Francehave not been itemized. but the total processingcost is consistent with a laborcost per kilo slightly higher thani that of the tillited States.The product mix would he similar to the U,nited Statesexcept that both countries-the Netherlandsand more particularly France-are majorexporters of wlholefrozen birds.

Other costsdo not showxas big a variationamong couLntries because the cost structureof other inputs, suchas capital equipnment. packaging, fuel, and utilities, tends to be tied more closelyto world norms.

The weight of birds at slaughterdoes infliueice processingcosts per kilogramas most of the costsin plant are incurred on a per bird basis.The difference betwelenthe averageslaughter weights wasnot great,w-ith the exception of rhe C'hineseexporters, who processa largebird becausea large part of the output is deboned,and Argentina, where the market prefersa largewhole bird. There is likelv to be more intracountrvvariation in slaughterweights due to local marketsegmenitation than amongcountries. To someextent. the savingsin cost of slaughterare overcomebv inefficiencies in live-bird cost when birds are taken to heavysWeights such as the 2.6 kilogramsseen in China.Thlere is alwavsa trade-off between marker requiremenitsfor bird sizeand the efficiencies that can be gainedby optimizing biologicalefficiency and processingcost.

For purposesof this study the yield of processedproduct per kilogramof live bird delivered to the plant wasstandardized bv using the tlSDA standard.The use of a standardyield will affect meatcost where the vield is different from the standardbecause of product mix. The other processingcosts are all on an actualbasis so there will be no effect on them becauseof yield standardization.

Economies of Scale

I i - I's tS0 / k

Thle steadv supplyof live broilers to a processingplant requires carefulcoordination of placementof multiplication flocksand balancingof capacitiesat all levelsof the ftarmingoperations. A tvpical flow is summarizedin Figure 4-6. 1v'picallv, unit shed sizesfor broiler and breedersheds are around 1,000 sqLiaremeters holding 4.500breeders or 20.000 broilers.Farms are made up of multiples of theseunits and the maximum farm sizeis a functioni of placing livestock of the sameage.

AV IFC GL OBAL AGRIBUSINESS SER ES TheWorldPoultryIndustry Figure 4-6

li'/ it! / /s'Ha//hI! I 1/?"/l/ f///l 0/f/1/ I'ou/irt' IoS/th//tWi 1 O7dr=' Flockt117M!I (.ifs's,; /15-w2c.t

p,,,, ,,,itFaro

ParentStock Form 4I.ScC)I'(32'1/; /k/rn/JLt ,sradaaioc)N'vw

Frr/,II45

Hatchery I I)t( /ri /,rk

BroilerGrowing l,AV000.ii /r 'cr6 a,7p/lant prus /5k

LiveBroilers

In the example shiNs%n in FigUrc 4-6 thc plalcenmcntof brccdcrs is likeix to he every seven wceks, which

w%oitltirc(luire foLurrearing ftarimisand eight breeder farimisi)f 501)(00hirds (levecn sheds cach). 'I'his

\ould ensture aIgeseregation, \which has animial halth benefits and a conisistent floss of t'ertile eggs to

thtehroiler 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 randa rdizarion in panlnllli[Iganld lIavouLroft arris so rhat performianceCis 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 nCedsof agesepar;rion or befire) niocierindevelopmicnt of thc indLstr

SheLd designi isarics according to climatc, \ith \sarmerclitLates having opcn. lo\s-cost shcddilng and

coldcr climates ha\ ing closcd. rentilated shedding ssi th heating and artificial light. A nLmlibcr of locations \sshcr opetn lo\\ -costShe'd(.ding iS nlorimlalarc converting hreeder-rearingsheds 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 conrinual. technical progress the ind str\ mIaikes.

BeCaIusChroiler gro\singis toftcn clIntracted to indepcendentoperators. farmi size.sare 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 integrator in relatiott to gro\er maningeicit. anid sonic historical farim structIUrc issucs.

torcxample. fOr des\clopmiental reasons shed sizes in Turkev reyid to he small. \\ith an average shcd size arto 0nd4.i)()) to 6,1)0))hirds. T 'his has allo\scd mani people \s ho \would othersiise have had to opereC alt a stlhsistenc1Lcagricul 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 %%withpcr hird costs at thc equivaIlentit[o rtv cciitsCe-rsst a hird. s\hiil could caiSe problieis as trLI tpesoade and Com11petitioll

strenigthicis. it alstt alli\\ss a niargin fttr nr\e cottran;tsto enter \iith a moire Optillal structure sometime in the futurc.

I/}/i l/b/ i // ( r.l/P/f/// C In Brazil, it is common for integratorsto restrict individual farmersto onc shed,which is nearly always run in conjunction with other farming activities. Shedsize tends to be scandardizedaround 10,000-12,000birds per batch, and bccauseof the other ftirnmingactivities, per bird feesare relatively low (ten cents a bird). Generally,broiler growing is associatedwith corn and other cropsand the manure from the broiler farm becomesa valuableinput for the cropping farm.

141atcherycapacity is basedon standard-sizesetters and hatchers that arecommon worldwide, and hatcheryvolume is a function of multiples of machineunits. Scaleis significant in terms of overhead recoveryand, to a certain extent, laborefficiency. There is little difference in technologyused in all of the countries in the study.

Pr o ress in g

The product flow in a poultry-processingplant is shownin Figure 4-7.

'I'here are differencesamong countries in automation in both the primary whole hird processing (slaughter,defeathering, evisceration) and secondarvprocessing (cut up, deskinning, deboning).The demarcationwas not universalhut, in areaswhere plantswere moderatein size and laborcosts were low, there wasmanual evisceration, whereas in large plants, regardlessof laborrates, automatic primary processingwas the norm. In low-lahor-costcountries the degreeof automation in secondaryprocessing is miniimal with manualcutting, deskinning,and deboning.In high-labor-costcountries the degreeof automatioii is verv high in primary and seconidaryprocessing, packing, labeling, and distribution.

The throughputof a plant tendsto beset by the speedof the primary processingline. A standardline specdis 8,000birds an hour,which has increased slowly from 7.200an hourover the lastfew years.In the earlystages of automationin poultry plantsin the mid to late 1970splant lines werecommonly 3,600 birds

an hourbecause line speedwas governedby the speedof manualevisceration. Throughput increases wvere first attainedby separatinigthe Iinesprior to eviscerationand matchingone primary line from live hanging throughto dcfeatheringwith two eviscerationlines to doublecapacity to 7,200an hour. Later, with the refiniemicenitof the designof aLutomaticevisceration e(luipmecnt the capacityof a singleevisceration Ii ne was increasedto matchthe primary line. D)esignimprovements have increased line speedsto 8,000an hour.

Figure 4-7

I/au)it/I)i v}/rn{I I/roaiiea

v va

a _-

A'f} I F C G L O BA 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 amonogcountries in the technol- ogv inside a slaugh1terand 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 developed. 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)00bird-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 transfornmationifrom 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 reqjuirecdto 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 It

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 environmental conitrol arc n0o as great as in other climates. Shed costs for commercial broilers were compared in the tUnitedStates and comentional housilng costs in the South wNere70 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 mainLfeed ravsmaecrial 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\iailaililiry of land is not geicrally a problemifor intenisivepooltrs productioll but there is anecdotal evidencethatr tIhe valuc of laid halsconstrained 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

CxpnLIIsiOIIof Ii\Cestocknomibers (for examplI. in the ietherlands). In Japan the land CeSo issue is

coupled \\ ith a high cost structure becatisCof the need to import feed iniredients and gencral lahor

and other costs, so it is difficult to ascrihea h1altii indUsrrv expansion and(the consequent growtth in

imiports to land cost alone.

Spcciallized farms pracricing inteCSivC livestock hUsbandixvprodUCe a surplusof minerals such as

phosphloros. potassiulm1.SodiuIn, aLid nitrogen. In additioni. the' contribtute tO rhe emissioll of almlllmollia durin"gthc housilng of pigs or pooltry. Increasingregional 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 productioni produceci ah)out 115 kilogramils phosphate and 2X80kilogramns nitrogen per hectare of agricultural

land in the earls 199C)s(PouIrrv International 19941) . As a conseciCnccC the tt tUci government passedlegislation to sirictlv lit tht- amotint of pho.spilate per hecrare and fixed a target for reduction of ammonia eimissioiis h)v thc a"ricUc-iural incLiustrvThis affects the piiUcltrI inidcistrvinidirectly. The I )utchI pocUltrx iicUstr is highly specialized and thus occupies hardly any land area. \Wetmanure syas pre' ioIsly collected b\ crop ftarimiers\s ith(Lit cost to poultr' farmers: cir'sma1 cire could evenbe sold. Because losscr aLmIountsci' m iUrc are allo\\cd. there is nosya surplus of mIanUrc,shichiii must be disposed of at a cost of USS5 to SIOllpel ton. 'lih reductioll of ammonia emissioin hibroiler farms is

also Cxpected to haLIesignificant implications as the curreint housilngsysteIm maakcs it difficcult to control amrmoniacimission 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-conurrolcOsts is presenited in WVestenhargerand Letson 1995.

Standalrdiz-ation of techniology througi"cIIL the \orld meLiansthat svastc disposalichallenges 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 indcstryrends to lead to rhe installation of appropriatc treattment facilities, svhercassmall-scale an(i backyard operations generall do nor complv \svirhmoderin standards.

.11 i I,'ik,, 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 pcompleteproductioin svsictis aLid diffcrentiating their products to rarget specific market iiiches. So-called /lw-/chickens airc aLnexample i)f thlis in France. With an accrage grossing period of

ninety dacsfor a livc\seiliht of .7 kiiograms and a fecd conversion ratio hi-her than three, the I/u!b/

chickein \\ oricd not comiipare favorably ssith stancdaLrdor 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 demmandrenids 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 CxolUoion of consume_rdemand, aLid provide high-qual irv service ro the distributio ln srtem. In countrics wihrha 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 hasxectcrual\l becomepioneCers in the aIppIcaCtion 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 environmeniti1ris a key factor in the dceelopmenCItof a competirive industr\. Experie[nce indicates tihat tLheeconomiic, 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 equtalklimportant 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. BecaLuseits main prodinets, thar is frozci broilers and parts. are internarionally traded prOdUCtS, the pOUltry indusrym is palrtiCuLIlrlV Sen`SitiVe to realexchainge 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 maLrketfrom the- xorld mazrket.xhich leasesthe poultry industry extrensels exposedto real exhange rate ILuctuLalions.This situation is certainilv niot limited to dexeloping couLntrics.BecaLuse their macroeconomiiic policies tend to ben morevolatile, the latter arc however more suscCptibIl to stiffer fromil macroeconoomicshocks.

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 meatwsas about 4.5 million tons in 1994. includin*gintra-ELI trade. This representsabout 9.2 percent of total estimated world production, 7 percent wheniintra-EIC trade is excluded.This percentagehas been increa.sinigover rhe past few yearsbecause trade accountedfor only 6.3 percenitof world production in 1988.4.8 perccnt wlheniintra-EIJ tradc W,asexcludled. Broiler

nmealtdominates the poultry trade: it accOunlitsfor more than 83 percent of the total. comparedwith 12 pcrcenitfor turkey.

The international market is domniatcd by a fewscounltries: the U1nitedStates, France, the Netherlands, Brazil,China, andTliailanid onithc exporter sidc (Figure 5-1), and Germanv,Hong Kong,Japan, SaudiArabia, Mlexico. and RussiaLon the importer side (Figure 5-2). Trade grew%at about 6 percent a yearover the 1985-1994period. slightly faster than world production, xhich inhcreasedannually b1 5 percentover the sameperiod.

Trade VersusLocal Production

'I'he exampleof Tliailaid. Brazil, and China indicates that developingcountries can compete effectively on the vorld market. Proprietarytechnologies are limited in this sector and, svhenthe) exist, thev arc not appropriated by poultrx processorsbut by geneticsand etluipMCnltsuppliers whose interest lics in thc expanideduse of technology.not in their restriction to a particular companivor countrv. Given that the main inputs il poultry productioll (energy- anid protein-rich materials) are traded widely an(davailahle to most producersin the xworld, it may be debated whether local production or trade is more likely to expand iri the fturre.

The economicsof transportationgcnerallv favorlocal poultry production becauseit is usually less expensis to ship feed and(iconvcrt on arrival into grin-llased animal production, such aspoultry and pig meat. than to ship equivalent volumesof meat (Fable 5-1). Becauseof its efficient conversionof feed into meat, the poultryvsector is evc'nmore predcterminiedto be essentiallylocal production. W'orldtrade in poultry and poultry products is effectively a marginalbusiness in world terms as onIv 9 pcrceit of world productioll is traded. In addition, trade is extremnelyconlcenitratcd in a limited number of major markets-thte MNiddleEast, the Far East (mrainlyJapan). Russia, and, to a lesser extenit,Europe. (Figure 5-3).

*44 Figure 5-1 Figure/ )F 5-11/,// \-/)zstv 5 _ MillionTons Pol/ i/f(l? A NI(/f/li

3 - 2 ~ ~ ~ ~ ~ - -~ EQ/ h>a

I~ - _ * fThai/ands

Fran,

0 1988 1989 1990 1991 1992 1"3 1994P

Figure 5-2 Psn////glurefw/5 /-2/wo/ts 5 MillionTons

4 - - * Foint-,Soea 1 'nron

(him:

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.5,7l,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() 390 Pork (4.5:1)* 112 135 135 Poultry (2.7:1)* 167 81 81

This analvsis, howcver, mlakesa number of implicit assuImptiOnsal)out cOulntries that dconot necessarilv hold, particularb (a) biological and econiomilicefficiencyi ofconversion 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

China34 =:t 1 - Io / ( /DO lope 125 C'*/ ~~ ~iiin,~niir 72 127 jap, Ho/CKong 346 r-I /J 1las i1'K) I/ I /-9 Singapore 31 / 2' * '¶6

.Al .i, o ,ob/k * l 04 16S 29\ 439* i/a d oIagKo jg AI (.an-/beanl 8 71(

Japan 74

horn Kong 3 ' a~'

' K,

tI , f/to,-, c .h-d.Th 1h, -,o .4flflfl'g.

onr0,00/of)rq. a}ono rnaorawoz.ol,:s of /.93 oAt7/a

oYtpiofP(/oa' k,rno..00,0* - Incluc Rk/C qairurantof/ire imiports

Determinants of Trade Flows

Exceptions to these assumptionis actualls 'alidate currcit trade paltterns.

* I ligh ilptI prices (feed, lahor) incrcasingly constrain poultr\ prodUCtionin high-income countries, such as japan and the ElI. despite a high level of technical efficiencv in these countrics.

* Enrxironmental considerationis and rclatcivc scarcity of land increasinlgv constraini poultrx productioln in highi-ilIcom1lecouLtLries (Nctlichrlands, Japan, I long Koong,etc.).

* (Conisumerpreferences in the tJnited States havc gcnierarcd a loca1surplus of dark menatpoulIrr

paLrtsand large export VolUmICS to other coLnotries whiere consuniers ha\e different preferenices.

* (!ouintries \kith a well-deceloped, miauturepoultrv processing sector are able to reap the advantage prov ided bx economies of scale. Expanding tradc from 3Brazilto 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- samnetime, foreign producers should be

cncoUragedto scr tip local integrarcdproduction systems, a patterm clcarly observable in Asia.

* Finallyv.OneC SholdOCI nlOtuliderescstimate the magnitudeof protection providcd by tariff and nolitariff barriers, partiCUlarlv those that teind to insulate domestic markets from trade competition because

of hlial ti anldsanitarv rcgolIltiolis. Limiting the spread of diseaisessuch as a ian influenza and Ne\'castlc diseaise is al miajor conicern aniong- producilng countrics. (Concerins have allsobeen

expressed about clchniical residues and microbial contamination in a num11berof 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 demaLndfor piUltry products, these

conisiderations tend to create local supply/dcmiand imbalanices that can be filled hv exports fromilthe

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 . tie/ 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 economilicg)ro\rth. an1dcasicr 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 operatinggcosts ancl scarcit\ of land and labor It is expected that dolicstic prodUCtiOnl

% ill dccrease steadils over the comlina wars torcL-ovr on nI 5() peceCIt of eCnI)SLIl) onll in 20))03.As a col1secluence. imlports are expectedto 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 \\ AiiAs a COInseLoenlce. bonlClessleg meat in Japan

is sold ait a ighcr price thaln boneless breastmCet. Thbis situation pro\ ides opportunities for counitries

like [hethe Iited States. riici export hoIne-inlergs. arild cooUntriCssuch as l3razil.(lihi La,and Thalilarid.

\whichi export dchoned leg mneatand brerast macat-and faCne cuts in tlie caLseof 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 Thaimlandhad supplied about half of Japan'sprocessed parts imports. CssCIltially debonred prod(Cs aSndfalnc\ cuts. Recentls ho\wcer. China has emerged as he leadinrigexporter to the japan1- cse mariket. gaining signi beaicr market share at t[hc expeniseof Thailand and B3razil. lon\er labor and

feed costs, contiwnLoIsimpros-enient in processiig anlidproximi it\ ha\e all w\orked in China's f:r\or.

Figure 5-4a

JelpkIln 600 1,000Tons .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/I//I//)(i1f r lIt .Sun t (ro/Ii/i, (/I Pk' ojI.)

/11/o /IWO 094/92 roci/9v9-41,.

Processed Parts China 20.5 58.8 127.2 + 35.5 Thailand 71.8 134.9 ] 1(.(0 +-7.4 B3razil 26.4 60.9 67.9 + 17.1 l nired Stares 31..; 38.3 47.0 + 7.0 Otilers 6.7 12.4 5.0 -4.9 Suh-lToala 156.7 305.3 357.1 + 14.7

Bone-in-Leg l 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 +5.3 Suh-otoal 10)4.1 88.6 87.0) -2.9

Total 260.8 393.9 444.1 +9.'

.S/,v:,' ,iltbm it 1fi/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 regulation1simposed in thc late 1980OS.As a consequence.local production is expected to be phased

Out in this decade. On the othcr hand, per capita consuLImptionof 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 eachyear. The hulk of frozen products imported by

I lo1ngKonIg 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 5-4b 1,000Tons 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 RI B U S I N ESS S ER I E S The World Pouliry Industry Table 5-3 Ht,/Z] I'/,)kf/! //t/ I 1/1//,1m/p/f / /,' .A'o/,, ud h/h (p. 1e1,) /n

/N9Y l 1991 .994, (9,4A//m I/cm l¼rholit '98Y-W

U.S. 74.2 334.1 2. 6 331.5 + 28.5'ic China (.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 1,000Tons

500

400 Brol/,r

300

200 100_ * i.iI

0 1988 1989 1990 1991 1992 1993 1994P

hit/,wim,zr,,,n,/li had/, m/ 1',,/,/, Ihi1 , 9tu Ploultry coosumilptioni has been iocreasinig rapidly in NMexico suLpportedby strong economic growth andl

rising icomies. [)omestic turkey supplies are inadequLatehit broiler productioll has been grow-ing at a highi rate over the past fewU ens-s.t Tndcr NAFTA pouirr- producers .willgain better access to cheaper

fccd resotirces fromilthe lioitre(l States. thtis enabling them to support development of a well-integrated and more efficicit industlry. MIexico hasbecome 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 consumliersgenerally prefer fresh whole broilers ovcr frozen prodlucrs. How%evcr,contrary to I .S. consuLImptionpatters Nlexico has a strong demand for parts such as legs Icg quarters. and uxings. and the price gap between breast meaJtand 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,OOOTons

AIY, (I5/)! 500 _

st#/iZi,:~ t I) ~ ~~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~I Ti djki 400

300

200

200_ml

0 1988 1989 1990 1991 1992 1993 1994P

Ali/ c/c//v l Aasc

'ble Mliddlc East remailin ofpoultr\ mcar.Anmanori ntiilercofcointrieseilortc[- 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

essenLtialklfor 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 5-4e 1,000 Tons .S;,/a,. 1,,a/, 600 *Orlml- I,,,.Ms) 1. 500 -,,k

* Rr,Z/, 400 -Bwe

300

200

100

0 1988 1989 1990 1991 1992 1993 19941'

E u ro p ea Un_it; ( U" - 12

GermanV is the single largestimportCr of poultrv meLlt irh a Volum11eof 5)00000 to1nsitn 199;3iNMost of

;ermanv'.S imports, howeXer. coImlefrom oitherEUl 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 (Chinahave 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;;,/trrmit!,,,A, 199, Denmark D; France

Germany Gteece U*11ra-Et' lFeland Th,ThD

Italy

Netherlands

Portugal

Spain

1,000Tons 700 600 500 400 300 200 100 0 100 200 300 400 500 600 700 Imports 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. IMostof 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 1,000Tons

500

400

300f *

200

0 1988 1989 199O 1991 1992 I993 1994P

Figure 5-4g 1,000Tons

S',: 500 U

400 B oi'l

300

200 100_-I,,,| - m 0 1988 1989 199O 1991 1992 I993 1994P

I F C G L O B A L A G RI B U S I N ESS SE E RS The World Poultry Industry Table 5-4 it -,I Pr(o//ti 1I, l/n/un!' i?Kn 9/ ili/ /,)4)/a

C.,,,,,,s,I I'utu's/9±5 /99 /9 /')99 .1,,,, (h,c, /, 11f/,,,/ itt". /')±i9' '3

Broller Hungar\ 25.621.7 2.8 15.2 +fl.I (Orler baster n FfLI[opc(in ( nunLtries 6.0 7.3; 4.9) 2.4 +4.0 Brazil 7.3 271.6 - 1.o +24.2 ThaiaiLnd 1.6 1'.1 - 12.1 +49.9 C(hina1 - 9.0) - 9.( \A O)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 usasan 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([heI 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 1,000Tons

.... . / S. . 500

400

300

200

lOG ~~~~~~~~~~~~~~~~~~~~~~~~~Turknt

0 1988 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 thalin5 percent of

production in the past. and U.S. producers had not beenvwilling to adapt to the different reqoirensen1ts of various export markets. In addition, competitiveness of U.S. exports in the 1980s was affected adversel bhya significant appreciatioti of che USS. w-hich had to be compenisated for vsexport subsidies to allow the Unlited States to compete in the NMiddleEast.

In 1990(.howexer. the United States surpassed Franiceas 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 al111I31growth 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 Sovict 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 awvaYfrom exports of frozen whole broilers toward broiler curs, particularly dark meat cuts. A significant amouLntof turkey meat is also exported. particularly turkey parts to NMexico.

Figure 5-6a n/hitvlSlalrv 1,600 1,000Tons

.A.a ,: I (I).I. 1,400

1,200

1,000 -

600

400 -

200 T

0 1988 1989 1990 1991 1992 1993 1994P

54 I F C G LO B A L A G R I B U S t E SS S E R E S The World Poultrylndusiry Table 5-5 l i/wt!.S/anat 1111/i1r Poi/trit It.i,iti .lhuka (.ANd' Jois)

I "'Y./ 1994 /1994 1994t ii,. (;iiiwih (i/li/,,/r l/io4I t,/ 1',,/.Y- t

Broiler RussId - 371.3 1.8 369.5 NA HOunIgRuIg 46.1 324.1 0.4 323. +.38.4 jaIpan 114.5 115.5 0.8 114.7 -rO.l Mexico 44.4 1(00.3 6.3 94.0 + 14.5 Canada 24.0 35.8 2.7 33.1 +6.9 Pu.idid - 5'.2 (.2 52.0 NA Othcrs 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

Turkey NIC\i.o 2.6 (6.7 3.9 ('2.8 + 71.7 Othcrs 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 maLrkersinclude WesternEuropc 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.sof the recenitly concluded Uruguay RoimndAgreement, sUhsidized exports have

been effecrivel constrained b!aa 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 1,000Tons

/+(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. Freinchiexporters 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 5-6c 1,000Tons 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 1,000Tons |),'!im/a,t'k; 1,600

5,.,.,, t /u1 1,400

1,200

1,000

800

600

400

200 Tw1wv ._ _ _ --_- * RrUi/r 1988 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 fo/rils.)po',Io 1/r/nix (IcAronsj

I9MN 1/99 / 9 ? IQ')J -,im.(foatr/i (.;jrwro/Z-EX ~~~~~~hol. ~ ~ ~~~~~~Paris ~ ~~~~11/yht93"S

Broiler Niddile East 182.1) 281.7 76.8 4.9 + 9.1 ACP (CoLItnries .i50 51.9 35.4 16.5 -1.2 EaisternEtrope/FS (I .8 77.6 43.9 33.7 + 149.7 Asia 32.4 741.9 16.3 58.6 + 158.2 Othtrs (1). 66.9 41.6 25.3 + 1.9

Total Broiler 331.1I 553..) 414.0) 139.0) + 111.8

Turkey Nlidile East (1.6 (. ((.30 (.6 r 8.4 AXCV(:ountric Is8.1 19.( I. 18.() + 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 iK,,

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(0percentr 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 etmiergeniceof efficieint producers in (Chinlaanid Thailand. \hich hake the ad antage of proximit\ as well as financial relationislhips with japanest iitcrests. The \fiddle

Easteri commodit\ market remainsqd(OallV competitive dUo to thesLbsidy battle led by the EL] and the I Jincd States.The Argentine market has developed spectacularly over the last few vears follosNbig trade

liberalization betweci the t wo couLitries, hut there arc gro ing concerns in Argentina that increased penetration of themarlitiarethv Brziliai exporters might endanger the local indLstr

//l/'rlt,.iOyRl,t/ li,,./, iS I',/t( .11,,/ S, Figure 5-6e 1,000Tons

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/wrAxpenI lrk'yx (I,A'th1)y /I l /1994 1994 /094 .4nn. (Gyvht/i (.n,un/r) If h/oh Pare,, 1988-94

Broilers SAindiArabia 105.6 142.9) 136.6 6.3 + S.? OulherMliddile Fast 36.8 5(0.9 4.3.8 7.1 + 5.6 Japan 38.3 58.4 2.5 55.9 + 7.3 It)1 11.8 45.6 2.3 43.3 +25.3 Argcntina li 44.0 42.0 2.1) NA Others 43.8 139.2 56.6 82.6 +21 .3 SUbtotal 236.3 481.0 283.8 197.2 + 12.6

Turkey 4 15 +±4.6

TotalPoultry 240.3 496.0 + 12.7

G.i :/n, .51)4 Ain, J-awl,o/,i,,,/0la l'/ni,t/,, /tx.//1/11190/.

'Ih/ /dii/lJ/(;kC/lin a

T'he growtcholfThailand'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 factorsthat supported the grovwthof thteidustry 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 halsa limiL, baCcauseof likelv imitation by other lower-laborcost couLntrics such as China and other emcrging Asian producers. It appears, however, that the growth

iY F C G LO BA L A G R I B U S I N E S S S ER I ES The World Poultry Industry of Chinese exports in the future mav be restricted by the growth of the country's own domestic market, while the expected continued decrease in Japanese poultrs production will increase demand for imports. One can also assume that Japanese importers will waantto maintain a diversified source of supply, thus allowing Thai exporters to retaini a signifioant though declining share of the Japanese market.

Figure 5-6f 1,000Tons 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 1,000Tons (/hia/ 1,600

A,w ( ').1 1,400

1,200

1,000

800

600

400

200 EIther O

1988 1989 1990 199 192 I9M3 I94P

Table 5-8T hlmnl/n .I1 Pro Ir / I l,//-f,tv I/.dzeP

I9,9 /21994 1994 994 .4nan(iowth Coun/0t/try Brr1J/F, Pat-o/ 1981- 94 Japan 85.7 131.8 - 131.8 +7.4 HongKong 61h.4 - 6.4 + 13.5 Singapore 4.1 4.7 - 4.7 +2.3 EU 2.0 14.9 - 14.9 +39.8 Others 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/erAxpwi 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 +25.2 Hong Kong 4.7 17.4 18.7 +38.7 Singapore 1.8 1.6 NA -2.9 Others 11.9 14.3 NA + 99.7

Total 37.6 107.6 164.9 +30.1

R1R ,,,i /mmiml)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 1,000Tons

H1111,ur 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, agriculturailpolicies 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 a3ndconIsumptioni through output prices, suchi as administered priccs

2. thosCinfluencing production through income payments and input subsidies:

3. those influencing consumlmerprices throUah subsidv or other domestic surpl).s disposal policies:

4. those influencing imports through tariffs or tQuotas; 5. thoseinfluencing exporrs throUg(hsubsidies. export credits, rariffs. or licenses:and 6. those restricting imports through imposition of sanitary regulations.

Direct governmentintervention in the international poultry market is limited. This is indicited h)e lo\ produccr and Consumersubsidy equikalents (PSIt and CSE) relative to other agricultural products (Figures6-1 anid6-2). Be the averagestandard for agriculturalcommoditites, the programsappls ing di- rectl\ to pioultr\ production are not regarded as excessively trade-distorting. One reason is that price- support programsare rarely encouriteredin poultry productioin,a consequeniceof the supple elasticitv. Productioncycles are shorr, making it easier for sUipple to adjust to a market-clearingprice level.

Becauscmuch of the cost of producingpoultry canbe attributed to purchasinigfeed. svhich accounts for ahout two-thirdsof cashiexpenses for pOLltre producers in the L nited States,pricc policies and protection applied to feed grains and proteins (particularls sobheans) are also important to the poultrr market. Trade measures(tariff and nonitariffbarriers, export subsidies),howexer. remaini the domiialit forill of governmeiit intervenLtionin the poultrs sector.'Irade restrictionisthat arejustified as barriersagainst the spreadof diseasessucIh as av-ian influenza and Ne'scastle disease are still prevalentand contribute to a segmeiltatiotiof the \orld poultry market independent of the pure comrpetitivcposition of eachcountrv.

61 Figure 6-1 100% 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%

0 0/ Australia Canada Finland NewZealand Sweden UnitedStates OECD Austria European Japan Norway Switzerland Turkey Union

Figure 6-2 100%

lqi//- w/i i / l 80/ Ob6(J) ('spuk 60% _ P

.A,gunq01(J() /9',] 40 I/

20%/

-20%

-4D%/

-60%

-80%/

0 -l /a Australia Canada Finland NewZealand Sweden UnitedStates OECD

Austria European Japan Norway Switzerland Turkey Union

Review of Selected Countries

Goxe to w rt LI ppOrt to do mesti paouitrt produtctio l0hasbeen Ii anited raa miict e'ofr pro gramts hat aire niot sagiiciharix trad c-distorting. 'I'lhese aire (a) stubsidized loans to prod ocers froanlthc [arnmers

I lonici AdtainiismtrationI FmHA): ill) federal and sta.reforancirin- of research atid inspectionl serNtees, atIVd(c) spiecial taxation proNisions. ( )o r[ie othler hanld,suIpport for f'eed ingredients. feed grains, anfd

soaaxreashas indirectis affectedi tile p)ouitt\x sctor I1\ itlcreasitlgf-eed costs to ailllIkestiock prodUcers.

Tr:adielaalicies plasi,a greater role. hON%C\er. .\ dtatNaaf 1 I1 ci./kg, applies taaiinlpaarts oaf pool trx othier

thanIItrirkes, 0ilichl is taxe.\dat tlile level oaft8&7 c/kg, (freshl, cliliieci) car12.5 percetat (frozeal). Tile

specific tariff otcia rLISand aaffalsis 22 c/kgl. \\hile arLIII /sc dotit alf I(1 pereen appliesto prepaired

aor preserccl poalI maartpraaCats.

62 FC cGL0B A L A GR I BU SIN ESS S ER,IES TheWodrHPoulty lnoustry The [I1SExpoirt Eohancemcnm Program ( EEP) anilouliced in 1985 hazdas its primar- goal enabling 1 .S. exporters to Sleetpre\ailihg xorld priccs for taigeted comrnmoditiesand destinations Applied to pIol]Itr\ liheprogramn was designed to Challen1ge sLubsidizingcompetitors in maLjorNliiddle Eastern markets as x\ell as to protect 11.S.export izrkcrs threatcncd b sul)sidizing comipetritors. partiCulart the 1L T'[1hisprl(graim \\;Sap artietiarlx aerite in trhc mid-I9S()s \xhci 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 lesscritical to l KS. cxports beCausc in 1993 onI about 2 pcrccit ot broiler exports were coxcred hliI sobsidies.

Fw{/o''a/.' l//itosI's

Feedgrain policies h c had a considerablccffctc on poultry produCtio inl rthcEt as domestic prices for cereals ha\e heen maintained at higher than x orld levels h\ thc Common AgriCLuIlrtal PolIe (CAP). IPoultry tradepolic\ in thc El cxolved from the need to eli mi nate negatixe ffecLtive

protectioni of the p0Ultrv secror. This led to establishment (of three miaini instrtLImnIts:

* BasicI01port Leies (HIL)-Thc hasiC imIport Icxv Calculated quarterk, had rt\o componenrt.The

first is an ani1onLite(LUal to thc tlifferericeinElI cost and xorld market cost (f ffeccgrain to produec a ultit of poultry meat. The sccond isa amolunt11LHcIIal to7 pcrccin of the slIiCeCgateprice (SiP) in effect doiriig a pre\ oios tx else-mon th referenice period.

* SIuiee"iCte Price (SGN[ -'ihc S(GP\xas a thcoretical m1ilnil in i price at xxhieh third-countrr pouLtrs meat shoold reach an ElI port of enritr S(;P is CAletUlared (quarterlyusing xvorld cereal prices for compoeients(f a preseribhedration aLid theoretical tcecd lcoxersion ratios. SGiP also iludes a

StanildaLrd aninOllt tO eo\erthc costsof othcr1feed i-grcdiCentsarsd general productionl arid nIlarkerilng

costs. \When imriport piricesfall Islow\ the S(P a111addition: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

Cotru1trieStlhilt iaxe loxxcr feed costs.

Impispnentatiors of this polic\ risade itn)LItr moreIo roectrixC rClar xI otuld appear. ho\xexer. Theoretical

feecdconversion ratios used in thc CoMputatiri0 (f the IBI aMidSGP x erc actudlx li"isler than what xas achieced xirhiln thL El . BccaLIse the feed ration uscd ir trheCalCulation6 xxas made tIpof cereals oril (811perecust corn_20( pereeint barley for chickens), it rlso xerstated the actral cost disad\arirage for Ell producers. As a result of rheI Ucr"l-trrVRoUird agreement. HIlLarid SUP \wcre replaced by tariff as ofJulv 1. 1995.

./(I/) I/ i

PoIltryii porLt are onlv sLJijectrto tariffs. Iariff rates axec hcer redUced and ire Cul-tr tly 1() perce nc

for borse-ill chiicken legs and 12 pcrcenr for (tler chickeniparts. uogctherthese rcprescit 96 perceuit

of japancse potIy inIIportS.

Japan alsoI subsidizcs itsdorcstiC poulrl producers to maintair sonic level (If domestic produeCtionin 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 /,;'-(,ot.;' /,// /y/i,y.ssn/;a!/ }6/1R Rn;/1,/o-e The Canadian poultr miarket has bcen highly regulated by the Canadian Chicken M'arketing Agenc\ aid the Canadian 'Iirkev MarkctingAgencv; wN-hicihallocate 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 covers estimated production costs As a ConSeCqueCnCC, the boards use strict import quotas to limit available 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 thanL11.02 cents Canadian or more thalL 22.1)5cents 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 aldecline in productionl and rapidly gros\ingglocal dcmaid. 'I'hai exports decreased from

3.6 miiillion tonls in 1985-86 to 1211000(1tons 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 r o)loports, the other hand, have reccntl averagedabout 2(10.000 tols, thus making'hailand a inet importer of corn. Major suppliers are C(hiniaand Argentina. Growing demandf for corn and constraillns

on diomICestic supply pIrOA)ly Will aLikcthe country a strucruralI net iilporter in the future. Thailand hasalso been a structural importer of soybcans. \ ith imilports represcntinlg about 2(0 percenit of total supplyli E'oprotect 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 COStSto poultrv growers and reduced their competitivcnless onl the world market. In return, the pouItrv iidustrv lobbied for and obtained export rebatcs that aIreupdated 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 fecqdingreielits.

This wvasset initially by thc Minhistry of (Commercc at (84 bag/iltpcr toIn (about US$27) of exported boneless chicken meat. Overall, theseexport subsidiesare 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 ES 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! IAhdn- ion Iqw-a1aIr1/ /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' RCloundAoreCment., 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 cii'mc( tO hehere excessively strict bv Thai feed producers,the governmentagreed to resise them tfor the year 1995. The future rmIainIs ulicertaini for 'I'hai feed producers. however, given the stronig increase in demanid 'romiithe a(luaCultUre, poultrv and likestock sectors.

B r iiz. /i

'[he Braziliain agriCultural economn\ recenrlxl experienced dramatic chaiges, from trade liberalization in 99 the 1 01s to the ConIclusion1 of the \IerCOSuragreemrent 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 botheeni directIs affected bhsthese \arious programs, ho\evcr

The industr\ has hcbiefited indirectlv fromii policies designed to support local sovsbeanprocessing. 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\hcmienmeaLl 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 u1ii d

After seven veatrsof negotiaitionls agreenien t was fbially reaiched in the I ruguLia Round of GATT negoriarinis on)Dccemher 15 1993. The agreemient wetI itro ffect on julyv 1 1995, and s ill ContiLuC

Lutil Junle30. 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() agreemienrton 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 foLurthiarea relating to agricoitortal trade, nainel saintair'sand phytosanitar' nieasures (that is, rules On trade restrictions for rcasoinsof animal and plant health).

Pwdo 1/. l- ;-(,- I,g,',/,',ja i,a',K Pa!,,i PI '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 oniaverage of 36 percent aver six years, with a minimum reduction of 15 percent for individual products (24 percent and 15 percent for developing countries) with respect to a 1986-88 base period. In addition, member countries will have to take appropriate measuresto ensure access to a minimum of 3 percent of their internal consumption, rising to 5 percent by the end of the six-year period. In caseswhere mnarketaccess is currently guaranteed by an import quota or voluntary restraint agreement, these existing accessopportunities must be maintained at least at the average 1986-88 level.

I)r,u li, SV/;///or!

Domesticsupport 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,>

GAPTparticipants have agreed to a dual comiimitmenitin the area of subsidized exports, based on the 1986-90 reference period: * budgetary expenditure an export subsidiesis 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 expendituresnieed be reduced only by 24 percent and export volumes by 14 percent over the sanie period.

I,, ittii, I I / ,0/

'I'he \\'I'() agreemeot 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 xviII 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 agreemiec nts wih Cenrilial l aInd Eastern EuLope:an1coL1n rics or the (hiapter 16

Ihotind tariff of 17 lierceiet.

.1/ri, ktkz a rrs .

The pool tr\ secto- csscn tiallv xvill IIe concerned \\ it h cooL1tr comi tnicnts miade uLinderthe market

access anLl cxport sUItsidies rulcs, l'nder thc marker access comm11itmllelnt,roamN cooLnrries xvill reduce

thicir tariff's and/or the taritff c(quixalil t of their notitariff barricrs. The ELI for instaniice, has agreed to

increase access for pool trx tlirough1 a tari f -Cluota1 of 18.f0 )O nt i1 199;5i itcreasing to 20(0())0 mr i1 the xcar 200()(.In acddition. it sill rcduce the tari ff-rClui;alcn t of its inport lc\x s stemis and the dotLi on processed turkex from 17 pcrccent to 8.5 percent, \xhihl is expected to favor increaseLdimports from t Bra,ril and thaeL liitd Statcs. The L nlited States \Xill redFuceits tariff for pool tr\ hv 210percent in cqltial anltial installlilments o\xr six x\ears beginning in 1995. Other significant conIsomiilg couo tries suc aisKorca and the lPhilippines also hla\eagrccd 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 ES S S E RI E S The World PoultryIndustry Table 6-2 I.-.'/jc.ri/I.1'- 5/u/ A,,/iuR./ 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.o Budget (ECUmillion) 137.8 128.5 I 1I. l I. . 111(.8 I 1.o

Table 6 - 3 1 /1/ .V/,i I-.o, /u/ e 1. /)/pol Roll o,,ilit ( 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' 28.1 Budget (USS million) 21.4 21.1 ] 8.6 I 7.3 1S.q 4.6

.Su/SI/ (h z, (I /dr /1'I.s

Ckommioitminctsregardi ng suhsid izcd c\x orts xxill conceri cssenrialix the Etl aind thet liiited States

('1Thics 61 '2aid 6 '1 . BCL3ecait Stil0sidi/Cd p)Otiltr\ cxports aLreimiorc preva,flert in the EU. EuropeLanex- porters aLrelikcl\ to he more constrailinLd h\ this CoMinli[Itmcnt. It is gencraiN cxpectcd thi thtl [olmc ricluCitioll ill hc the mlaijor constraint, not the hudgert ( Iradniock 1994). This dcrix es fromilicthelct

hlat the agrcCd-1,lpol 'I perceint reduCtion in sulhsidi/ed exports oxmersix years refcrs to the 1991-92 period. Ell exports glteC significLinti aifter 19'1-'2 and xx(re cxpected to rchic (70,00(1(1tons 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)LhouIt57 percent between 1494and

2')()(. This :tdju]stmIeICItis likcl\ to ClrCeteserimis 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 inSr I i, a/ nl hi/ i i Tr {/ dr I 21 t t /I/ r ///(.\.1/

TFradelflox hcmccitxs 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/iation1in potitrx het%%ccne Iexico anidCa il ad at is tOarialx cxc utided fro to NAFIA. iolrimecrNicxicaln il port policies xxcre dtei,ginedto protect MIcicain producers from IAS. corlpeti tion throuIl a S\stelil ofHiCePses anmda 1() pcrceit tariff. Foliox\inguNAFIA, \Iexico otxcerted its import licen0siml!re ginmc for rexsh.chilled, anti fro/ien poirt\x import.el f'ro[it the ninite1Stacts to a tramsttiioilai tarif-r iteCuota (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 thueNlcxicail mairkecthis hcen issurcd tor aLninitial 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(1tl tnare assessel a tariff haLscdoil tic tariffcatrioll of

NMxico's import iiccilse. Scparate TRQs, tariffs. alnId milili itil ;tariffsilaxc heen estahlisilecd for slecific pittilrrx productts exiirrted to Mexico.

I/u -1/ '1, >/( /i,1/ /)/'/'ftl//1/ 1/y,11// / l 'iw R,!w//m 6 Table 6-4 li,si,/sot'yg/ fluitf-Raz, 0J//y Iti' I'o///ri

/',,,,(//i! .\: IFIA: TRA'Qs O, (awi/ lit/,i Alinimtumlkriff ton s 1USVi/,,n Whole turkeys 2,(0( 133i 1,85( Other whole poultry 13.0001) h( 1.68) Turkey parts 218I)(l) 260) 1,850 Other poultry parts 25,0100 260 1,68( Mechanically deboned '7(000 260) 1,680

Total 95,01)

Signaiture of the AsuLicd6o1treary 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(isystem 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, stimulated 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 embtls

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 memicbersand the ELJ. Several of these agreements have beeni signed since 199t2witil 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

Fresshproducts 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 (Ifmnajor importance, but the existeice ifappropriate 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. (Compertitftvemiit'dNtt,, Sustainablecompetitive advantagein the poultrx meat sector revolvesaround low-cost accessto cxtensive land, cleaniwater, favorableclimate, suitable feed sopplies.and livestock manage1ment expertise.Low laborcost can be a short-term advantage.In the lIng run. however,this advanrage rcnds to he overcomeas ecoonomiesgrow and the agriculturalsector progressivelyloses its comparative advantage.

CoUintriesthat have developedtheir trade volumneover the past few years-that is, Brazil and C'hina- appearWell placed cocontinue expandingover the next decade.It is likely that the! u ill be joh1edbN other couLntriesin their respectiveregions. The emergenceof these exporterswill be facilitated by the enforcemenitof roles agrecdon in rhe lruiguav Round,particularly the export subsidyand sanitary- phyrosanitary(SP'S) components. As wasmentiionied earler. the con1tinIuedsuccess of thcse cOLun1tries will alsodepenid on tlhcir ability to pursueeconomic policies that are conduciveto the developmentof the poultry in(Lustry.

Pdr, Ao-((6W//l nI INr-,IIion/nr.1w160 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)

t I,,a. 1',", / u,,/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.? /99.1 li.,,,!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 . )Ol 15

SonICt Vfrie., 5S 741(1 f627 5.4 17.3 410 2980

North-Central America 11.I 65 14.n91 5.6 t 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 19,971) Nlc\ie,o h46 1.221 1j 17 77 13.6 12.9 9() 3,610)

South America 3.,3iI 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(0 V'vle'/L.ii.i .) 3I 32 6 -3. 156I . 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 18,1,)1) I,.di:l 2I2 4" 1 ) <<. I X98 .3)I Ildr,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 15,9 .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 .2 528 5 .11 Li ke 228 .25 325 7-i 5. 7 h l) 2.971)

Western Europe 6.,3i5 ,,787 1.4 , L1 2 5.771I,.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) NethlerIlalds Ncrhml;lid~~~~~~1222(24 - I 21( 0 47i).'5413. .9 )15 9 .3 1. .5 )19) Slalill 8 '45 857 29) 1.5 4.2 4') 13,590 L1. K. I J1.1)7. 1 2 Il,)1,52 244 8. 27.5 58 18.1)h)

Eastern Europe I1,15 967 -6.1 BuIlgajriaL 1I.9 17,9 2 .i7 20)1 1.140 ILM-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 257 2411 1 L9) -1.4 1).62 1,140)

Oceania 4X.5 563 3.i :\ANrrlia.i39 4'13 413 . O 2 h.) 18 17,50()

Former Soviet Union 3i._ 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 rF G L O BA. L A G RI B U S I N ES S S EP 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 4.5 Eg,pc 119 111 251 -0.6 14.4 Nigcrial 12i 330 168 1(0.6 -10.(6 SoutIL 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 2.9 NMexico 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 '.2 Argentina 321 392 651) .1) 8.8 B3rj/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. 1 Pler 148 97 314 7.2 (.9 \VenlC/'iela 247 352 5.() 3.6 9.(

Asia 5, 174 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 11.8 1Indloesiai 169 445 588 1().2 4.8 Irarn 198 155 547 2.6 13.6 jatpani 1,115 1,471 I.32)) 2.8 -1.8 Korea. Rep. of 9, 235 38)) 9.7 8.3 I hilippinlc 28 24)) .49 ().5 6.4 Thailaan( 373 55.6 828 4.1 6.9 IlUrke 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 1.1 EFl 1- ,1(18 6,119 0.829 1.7 2.1 France 1,131 1,377 1.851 2.() 5.1 Grimanl'U 53.1 575 645 (1.8 1.9 Itzlx 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 -11.5 1R.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 -16.7 fluniganr\ 346 478 341 3.3 -5.5 P1kland 417 347 33.i5 -1 .8; -(1.6 R(onmal:,1ia 371 39)) 29 11.5 -6.0)

Oceania 338 468 586 3.3 3.8 Au tralia 96 4(11 5).3 3.1 31.8

Former Soviet Union 2,142 3()93 2,336 3.7 -4.(6 RuSNi.anFederati)n 1,381) UIkraine 400

Otlher Etuimpean Re1). 15() (:cntral A\simnRcp. 3.16

-9,,n,,,,: il. F'.9/i.-).

.lon- 7/~ ANNEX 3 I/u/or /4h/,/w'-h7k,,,ki,,'(.'wY/unic:

UNITED STATES Top 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 55 5. Pilgrim's Pride Corp. (.5() 8 1 77 23 71 80 6. Wayne Poultry Div. 0.48 8 7 5( 5( 1 10 7. Hudson Foods, Inc. (0.41 6 5 11 89 8X) S. Seaboard Farms, Inc. 0.34 4 1 7( 3() 9(1 50 9. 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() 21h 3. Jennie-O Foods, Inc. 190 7'4 4. Carolina Turkeys 186 2108 5. Wampler Longacre Turkey, Inc. 1556 222 6. Cargill 154 170 7. Bil Mar Foods 1 4 159 S. Louis Rich Co. 147 122 9. Norbest Inc. 12( 125 10. Jerome Foods 113 113

Sowirc : II/I /9,/ h/i,,a,,/ I993.

EUROPE Top 10 Poultry Processors in Europe, 1993

(.'vu,,flv ~ ,1/Pr,,do,no,t',,;j RI '(.1 (.vuo/,jP, (i,oIn,Az f.wint/ I, (Iliwts/.,ndloni R7( ) (;,,,nin,<,I Prodful,/I,

1. Doux France 700' E SP, G. NL. B, (H 2. Bourgoin France 370*i F SP l. K. 3. Hillsdown Holdings [ I. K.2 ) (1991 ) U.K.. NL 4. Agrovic Spain 14)) (199() SP S. Unicpa 1rance 1(I0 (199()) F 6. AIA-Sogema l[alv 120 (1991) 1 7. Lohmann-Weslohann G(rnnai1v 115 (1989) (G S. BP Nutrition- U.K. 110 (1991) SP, NL 9. 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 ' im///!/K}I (/gE/;uv//1U P!// { , 10//Cql 2 /'J439\//f/( aI',m,) . knc.yn \nt i l'o 7,,j .

SOwine:/,,/mlan,/k /IK , ,/ /j/j'ilji/,,ill, I/Hi//i)ll

7' IFC GLOBAL AGRIBUSINESS SERIES TheWorldPoultrylndustry B RAZ I L Top 10 Poultry Processors in Brazil, 1994

1. Sadia 307 46h) 2. Perdigee 14(1 21(1 3. CevalP 133 200( 4. Frangosul 1(1 152 5. AvIpal 8( 119 6. Pena Branca 71 1(7 7. Chapeco 67 1(1H 8. DaGrania 55 82 9. Aurora 35 10. Minuano 33 49

' wlon,tliz z,7aeni 1-5ke l(' >{ *it;' /m4'' vo / /S

Source: 4 .z , /). s *zz //\.iet /sz1j .z/z '9

ASIA Leading Broiler Companies in the ASEAN Countries

/ss,/owsosz,.11,,/e,,.s,,, //,,,,/eulwid

1. Charoen Pokphand 1. Leong Hup 1. Char.en Pokphand 2. Cipendawa 2. Charo.n Pokphand 2. Saha Farms 3. Anwar Sierad 3. Slnmah 3. GFPT 4. Jopfa Comfeed 4. Malayan Flour Mills 4. Centaco 5. Manggis 5. KFC 5. Sun Valley

Sourt e: Ra,b/oh,k /9 1 1../J

A//Z// .\_7; B I B I 0 6G R A P H Y

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Bishop. R. V\ and 1-. A. ChrisLenscil. 1989. AImCriJa's Poultry Indistrv." NVational Food Reviewz 12(1): 9-12.

Bisheop R.V, 1.. A. ChhriNtewscn.S. \Iercier. and L. W-itucki. 1990). The Ifiv?rdPotn .llarket-Governmnent Iter- vention and1Multilater-al Policv RefreIa. AGiES9(019. LS. f)epartmcnt ofAgriculture. Washington. D.C.

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Bradnock. P 1994. Evaluating thie Mawket Pi-ospects1tr, the 'Main leat Products-Poultry. Agra- F Urope (:on('crcincc, London LI. K

(:hlaul. .\. 1995. `Proposed POL1ltrr Lab els Define F`rcshvs. Frozen." Agriculturlal Outlook. (April): I(-1 1.

Lales J. S.. and I.. J. LInecithr. 19'ii. "Sinultaneit and StruCtrUral Change ill ..S. NIeat L)emrand."' Ainei'ican Journal of'Ag-icultural Fconomnics.75 (TFcbruarv): 259-2o8.

FA(I) (Food and AgriCLl Urr (iOrganizma(rionof the Ll]iitcd Narions). Various IssLies. Production1 Y-ear-book.Romi e.

. \'arious Issues. Tradle )'aibook. Rome.

JordanI Lin, (C.T '1 RIoherts. and NA.Nladisoni. 1993. "Proiutinig Safcr PoulItrx: NModern iz ing the Mecthiods." .jgriicltural Outlook. 3uH:33-38.

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Mladison. NI. I 995. "Broiler ShilpIcmnts Longcst to \Vcst Ciost." Poultry Oulftlook. I!D.S Deparriment fAgricul tUire WAashinIIgtonII D).C.

M1anchestcr. \. 1992. Rearianging the EconomuicLandscape-The Food Marketing Revolution. 19.i5-91. AER-,i0. L'.S. Departmen rf A''rieu IurC. Washi)grtoll, ).D(.

Nlitrlcell, [). O.. anid I. F). lIngllo. 1993. hllewrlddFood Outlook. WashingtoIn D.(C: Ih WVorli Batk.

NIO((Scliii G.. ald K. 1.). Nl eilkc. 1989. 'NIodclino tlie Pattern f Structrural Change inl [IS Nelar L)emand." .Americun .lourual olf. griiultural ERconomics.71 (Nlas): 253-269.

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. 199 4a. IProspects Facing Southi Adrica.(M\archB:54-37.

1994h. Environimental Legislation Impact. (Septemhcr): 30-34.

Rabobank. 1993. Tlhe Wfiv'dPoulti' Mlarket.

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74/ F C G LO B A L A G RI B U S I N ES S S ER I E S The Word PouIly Irld,stry

I~~~~~~~~~~~~ b 1i

_ ' r I

_ 3 ~~~~~~~II