Latest EC Projections Show Growing Export Orientation of EU Poultry Sector

Summary

The EU poultry sector trade is composed of low value exports and high value imports, with the EU being a net exporter in volume terms but a net importer in value terms. In recent years the export of frozen poultry parts has risen dramatically, with the importance of sub-Saharan African markets to EU exporters growing significantly. In the coming years continued growth in EU production, in the context of a slowing down of consumption growth, will see the importance of export markets to the EU poultry sector grow significantly. This will see greater importance being attached to maximising revenue flows from the export of residual poultry parts. In the context of EPA implementation this could see increased pressure on African governments to remove all forms of trade barriers to EU poultry meat exports. This could then carry serious consequences not only for domestic ACP poultry producers but grain producers who supply feed to the poultry industry.

EU Poultry Meat Production Trends
According to the EC ‘Poultry meat is the only meat for which both production and consumption are expected to expand between 2017 and 2030, by 4.6 % and 4.2 % respectively’. However this needs to be seen in a context where the EU poultry sector is increasingly export focused, with external markets being needed to ensure full valorisation of the whole of the carcass, in a context where different markets require different poultry cuts (1).

EU poultry meat production is expected to continue to grow in the period to 2030 but at a slower rate than in the previous ten years (+0.3% per annum compared to 2.7% per annum). According to the EC analysis ‘the strongest increase in production (+1.1 % a year) is expected in the EU-N13, due largely to sustained productivity gains and investments in Hungary, Poland and Romania’ (1). Total EU poultry production is expected to reach 15,349,000 tonnes in 2030 up from 14,669,000 tonnes in 2017, an increase of 680,000 tonnes (2).

Projected EU28 Poultry Meat Production 2018-2030 (million tonnes)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Production 14,823 14,909 14,975 15,030 15,104 15,158 15,186 15,204 15,239 15,255 15,297 15,329 15,349

Past EU28 Poultry Meat Production 2005-2017 (million tonnes)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Production 11,279 10,900 11,279 11,380 11,660 12,134 12,371 12,706 12,793 13,271 13,790 14,477 14,669

Source: EC, ‘EU Agricultural outlook for the agricultural markets and income 2017-2030’, tables, December 2017: https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf

EU Poultry Meat Consumption Trends
According to the EC’s analysis ‘poultry meat is the only meat for which consumption is expected to increase in both the EU-15 and the EU-N13, with an annual growth of 0.2 %, reaching almost 25 kg per capita by 2030’. This represents a slowing down of the growth rate in the EU-N13, which are now reaching a level of maturity in consumption similar to that of EU15 member states.

Projected EU28 Poultry Meat consumption 2018-2030 (million tonnes)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Consumption 14,172 14,298 14,380 14,452 14,519 14,557 14,565 14,547 14,546 14,535 14,569 14,589 14,597

Past EU28 Poultry Meat consumption 2005-2017 (million tonnes)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Consumption 11,140 10,758 11,306 11,349 11,584 11,771 11,904 12,214 12,264 12,721 13,266 13,866 14,013

Source: EC, ‘EU Agricultural outlook for the agricultural markets and income 2017-2030’, tables, December 2017: https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf

Between 2005 and 2017 EU poultry meat consumption grew 2,873,000 tonnes, while between 2018-2030 EU poultry meat consumption is projected to grow by only 425,000 tonnes.  Given the level of production growth projected between 2018 and 2030 this will make the EU poultry sector an increasingly export orientated sector.

EU Poultry Meat Export Trends
In 2016 EU poultry meat exports were valued at €1.5 billion on a volume of 1.4 million tonnes. A review of more detailed figures on the EC market access data base reveals an average export price of €0.99/kg (4), but with average prices ranging from €0.45/kg to €1.5/kg depending on the product. After three years of continuous growth in exports (+13.1% despite the August 2014 Russian import embargo), 2017 saw a stabilization of EU poultry meat exports, in the face of AI related SPS restrictions on exports in some major markets (notably South Africa) (1).

According to the EC’s Avian Influenza monitoring page highly pathogenic avian influenza (HPAI) was first discovered in Hungary in late October 2016, from where it spread to ‘wild birds, poultry farms and or captive bird holdings in 19 Member States (Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, France, Germany, Greece, Hungary, Italy, Luxembourg, the Netherlands, Poland, Slovakia, Spain, Sweden, Romania, and the United Kingdom) (3). All in all according to analysis from Rabobank between the 4th quarter of 2016 and the second quarter of 2017 there were over 1,000 cases of AI across Europe. While the number of outbreaks subsequently declined significantly, outbreaks were still be reported in the second half of 2017declined (6).

Export demand is expected to remain ‘very strong’ up to 2030, although growth will be ‘at a lower rate than during the previous 10 years’ (1.8 % per annum compared to 3.4 % per annum), ‘reaching 15.5 million t in 2030’. Global demand growth is seen as being shared equally between the Middle East, sub-Saharan Africa and Asia. By 2030 exports will account for 11.38% of total EU poultry meat production up from a mere 7.17% in 2007.

EU Poultry Meat Exports (‘000 tonnes) and as % EU Gross Indigenous Production 2018-2030

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Exports 1,518 1,536 1,555 1,564 1,577 1,598 1,617 1,651 1,685 1,712 1,723 1,734 1,747
Exports % Prod  

10.23%

 

10.30%

 

10.38%

 

10.41%

 

10.44%

 

10.54%

 

10.65%

 

10.86%

 

11.06%

 

11.22%

 

11.26%

 

11.31%

 

11.38%

EU Poultry Meat Exports (‘000 tonnes) and as % EU Gross Indigenous Production (2005-2017

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Exports 904 884 809 903 937 1,159 1,299 1,334 1,322 1,372 1,381 1,495 1,486
Exports % Prod  

8.01%

 

8.11%

 

7.17%

 

7.93%

 

8.04%

 

9.55%

 

10.50%

 

10.50%

 

10.41%

 

10.34%

 

10.01%

 

10.31%

 

10.13%

Source: EC, ‘EU Agricultural outlook for the agricultural markets and income 2017-2030’, tables, December 2017: https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf

The EU is facing intense competition from Brazil on international markets for whole birds.  This is already reflected in the recent decline in EU exports of frozen whole birds (-22% between 2011 and 2016). Nevertheless despite this strong competition the EC projects EU poultry meat exports to increase by an average of 1.3% per annum until 2030, placing an extra 261,000 tonnes of poultry meat on the international market by 2030 compared to 2017.

Composition of EU poultry meat exports total and % frozen cuts and offal 2007 to 2016 (tonnes)

  2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0207 755,989 856,436 885,289 1,124,301 1,266,244 1,275,365 1,268,967 1,330,487 1,331,858 1,443,167
Of which
020711 6,503 5,934 5,099 6,009 6,920 9,497 7,470 7,705 7,066 8,099
0.9% 0.7% 0.6% 0.5% 0.5% 0.7% 0.6% 0.6% 0.5% 0.6%
020712 218,097 267,793 274,421 302,361 339,370 314,917 310,679 274,819 290,426 265,289
28.8% 31.3% 31.0% 26.9% 26.8% 24.7% 24.5% 20.7% 21.8% 18.4%
020713 19,870 16,947 25,528 29,899 48,761 54,582 35,925 37,891 35,312 46,246
2.6% 2.0% 2.9% 2.7% 3.9% 4.3% 2.8% 2.8% 2.7% 3.2%
020714 362,015 419,411 446,134 621,499 689,257 712,401 741,533 840,949 839,857 950,183
  47.9% 49.0% 50.4% 55.3% 54.4% 55.9% 58.1% 63.2% 63.1% 65.8%
Of which                    
02071430 67,198 63,614 79,336 94,699 127,919 134,464 127,155 146,779 161,935 186,292
  8.9% 7.4% 9.0% 8.4% 10.1% 10.5% 10.0% 11.0% 12.1% 12.9%
02071460 20,344 18,704 22,252 49,019 59,189 54,055 72,729 93,049 97,013 97,244
  2.7% 2.2% 2.5% 4.4% 4.7% 4.2% 5.7% 7.0% 7.3% 6.7%
– fresh or chilled, Not cut in pieces (020711);-fresh or chilled cuts and offal (020713),

– frozen whole chickens (020712), – frozen cuts and offal (020714)

Source: EC, Market Access Data Base: http://madb.europa.eu/madb/statistical_form.htm

In recent years the composition of EU poultry meat exports has changed. While exports of fresh or chilled cuts and offal (020713) have doubled in volume terms these fresh exports still represent only 3.2% of total EU poultry meat exports (0207). Exports of whole fresh or chilled chicken (020711) meanwhile have fallen as a % of total poultry meat exports from 0.9% in 2007 to 0.6% in 2016. Exports of frozen whole chickens (020712) however have fallen most dramatically, from of 31.3% of total exports in 2008 to 18.4% in 2016, with the absolute tonnage of exports in decline on a generally consistent trend since 2011.

In contrast there has been a marked increase in exports of frozen cuts and offal (from 44.5% of total EU exports in 2003 to 65.8% in 2016). This increasingly consists of ‘frozen whole wings’ (02071430), ‘frozen legs and cuts thereof’ (0207146), mirroring a growing focus on sub-Saharan African markets for EU exports of frozen poultry parts.

EU Poultry Meat Import Trends
EU poultry meat imports need to be seen in the context of the structure of EU demand which favours the consumption of breast meat and prepared poultry meat products. EU imports also need to be seen in the context of the tightly controlled import regime which the EU operates through a complex system of tariff rate quotas (TRQs) (5).

Between 2005 and 2017 imports increased only 66,000 tonnes, despite a 2,873,000 tonne increase in EU poultry meat consumption.  New TRQs are however scheduled to come into effect in the coming years, leading to an increase in EU poultry meat imports from the low levels of 2013-2014 (average 819,333 tonnes) to close to the quota ceiling of 1 million tonnes by 2030. This expansion of quotas however will see only a 128,000 tonne increase in imports, despite the 425,000 tonne increase in EU poultry meat consumption projected for the 2018-30 period.

Growing EU poultry meat imports will mainly be sourced from Brazil and Thailand, although on the basis of newly opened TRQs there is a growing volume of imports of poultry meat from the Ukraine (see companion article, ‘Growing Role of Ukraine in EU Poultry Meat Imports Raises Rules of Origin and SPS issues in EU Poultry Meat Export Trade’, 18 January 2018).

EU Poultry Meat Imports (‘000 tonnes) 2018-2030

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Imports 867 925 960 986 993 996 996 994 992 992 994 994 995

EU Poultry Meat Imports (‘000 tonnes) 2018-2030

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Imports 765 742 836 873 860 797 832 842 793 823 856 884 831

Source: EC, ‘EU Agricultural outlook for the agricultural markets and income 2017-2030’, tables, December 2017: https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf

Brexit, the Poultry Meat Sector and the Dangers of Trade Diversion
Given the final post-Brexit trade arrangement remains unknown, the EC has not factored in the impact of the withdrawal of the UK from the EU on EU poultry sector development. The EC nevertheless makes some interesting observations in regard to the context and impact of Brexit in the poultry sector. It notes the UK both imports significantly more poultry meat from the EU27 than it does from the rest of the world (approximately 580,000 tonnes compared to 220,000) and exports significantly more poultry meat to EU27 markets than it exports to the rest of the world (approximately 250,000 compared to 80,000 tonnes). In addition to this mutual trade in poultry meat there is also an extensive mutual trade in live poultry.

Given the strictly managed TRQ based trade regime the EU operates for poultry meat, this suggests significant trade displacement effects could arise in the poultry sector if a hard Brexit were to occur. Given the importance of the EU’s TRQ based managed trade regime to the growth of the EU poultry sector, dividing up WTO agreed TRQ commitments in the poultry sector between the UK and EU27 could also prove a highly sensitive issue in the poultry sector.

 Comment and Analysis

The EU’s poultry meat trade regime has been very effective in ensuring that rising EU poultry meat consumption has been met by expanding domestic EU poultry meat production.  Scarcely any poultry meat imports take place outside of TRQ arrangements, with the imports which do take place out-of-quota generally occurring with a view to establishing a track record of exports to allow access to ergo omnes TRQs.

Given the relative lack of price competitiveness of EU poultry meat producers vis a vis other major poultry meat exporters, such as Brazil, Thailand and now Ukraine, this strictly managed poultry meat trade regime is essential to the growth of the EU poultry sector (see companion article ‘Report highlights vulnerability of EU poultry sector to liberalisation of trade in poultry meat’, 5 September 2017).

This dependence of the EU on a strictly managed TRQ trade regime for the continued growth of its domestic poultry sector is in sharp contrast to the current insistence of the EC on the removal of all barriers to EU poultry meat exports under newly concluded economic partnership agreements. It appears  an extensive use of trade policy measures to manage imports of poultry meat into the EU is seen as essential and appropriate for the development of the EU’s domestic poultry sector. However the use of comparable trade policy measures by ACP governments seeking to foster the development of their own poultry sectors is seen as inappropriate by the European Commission Trade Directorate.

This issue of the use of trade policy tools in defence of local poultry producers is becoming  a major issue under the SADC-EU EPA, with Agriculture Commissioner Hogan committing himself to working with member states governments and the EU poultry industry in minimising the South African governments’ use of trade policy tools in defence of its domestic poultry industry (see companion article ‘South Africa and Ghanaian Poultry Industries to Joint Forces Against EU Dumping of Poultry Parts’, 8 January 2018). As pressure on EU poultry meat exporters to find new markets increases , so the use of trade policy tools in defence of local poultry sector development could well become an issue in other ACP regions where the EC has negotiated EPAs in place (e.g. the CARIFORUM-EU EPA).

These pressures on EU poultry meat exporters to find new markets and expand exports to existing markets are only likely to intensify if a ‘hard’ Brexit displaces the existing EU27/UK mutual trade in poultry meat onto third country markets. Analysis undertaken by Lawless and Morgenroth at the Economic and Social Research Institute in Dublin suggests the imposition of MFN duties on mutual EU27/UK trade could see over 90% of the EU27-UK mutual trade in meat being halted (see companion article, ‘Agro-Food Sector Effects of the Application of MFN Duties on EU27-UK Trade: An Area of Potential ACP Concern and Opportunity’, 18 August 2017)

With EU production growing faster than consumption growth the export trade will become increasingly important to EU poultry meat producers in the coming years.  This is seeing a growing emphasis on maximising net revenues from the sale of all portions of the carcass, including residual poultry parts. With the main market for EU residual poultry parts lying in Africa, this generate additional pressure on the European Commission to more effectively utilise the commitments contained in EU trade agreements with African countries to remove all barriers to EU poultry meat exports.

EU poultry meat production is expanding most rapidly in the eastern EU member states, notably Poland, Hungary and Romania. Given the expanding poultry import trade in whole birds with non-EU members such as Ukraine, this raises important issues in regard to the SPS status of poultry meat imported and the rules of origin status of EU poultry parts exported to ACP markets  (see companion article, ‘Growing Role of Ukraine in EU Poultry Meat Imports Raises Rules of Origin and SPS issues in EU Poultry Meat Export Trade’, 18 January 2018) .

Sources:
(1) EC, ‘EU Agricultural outlook for the agricultural markets and income 2017-2030’, Full Text, December 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-fullrep_en.pdf
(2) EC, ‘EU Agricultural outlook for the agricultural markets and income 2017-2030’, Tables, December 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf
(3) EC, ‘Avian Influenza’
https://ec.europa.eu/food/animals/animal-diseases/control-measures/avian-influenza_en
(4) EC, Market Access Data Base,
http://madb.europa.eu/madb/statistical_form.htm
(5) EC, ‘Import quota Poultrymeat and eggs sectors Allocated and available quantities’, 22 December 2017
https://circabc.europa.eu/sd/a/3626bc17-8824-444c-9445-ef66733d4d31/POULTRYMEAT%20AND%20EGGS%20allocations%202017-2018%20(CIRCABC%20publ)(0).pdf
(6) Rabobank, ‘Poultry Quarterly Q3 2017’, September 2017
file:///C:/Users/GDC%20Partners/Downloads/1207712_Rabobank_Poultry_Quarterly_Q3_2017%20(1).pdf