Summary
While the rate of growth in EU poultry meat exports is slowing down, the EC projects a continued expansion of EU exports up to 2030 on the back of a continued expansion of EU poultry production. While the December 2020 EU/UK trade deal will avert the imposition of standard MFN tariffs on EU/UK mutual trade in poultry products, the introduction of standard 3rd country import control requirements will generate some trade disruption. This will largely affect UK poultry meat exports to the EU27. The trade in value added food products containing poultry meat is also likely to be complicated by new rules of origin requirements for EU/UK trade, given no agreement has been reached on ‘diagonal cumulation’ arrangements. These issues are likely to lead to some level of trade displacement of mutual EU/UK trade in poultry products to 3rd country markets. This is most likely to result in increased UK exports of poultry parts to non-EU27 markets.
At the beginning of December 2020, the latest EU Agricultural Outlook report was released. As well as providing data since 2005 it also projects market developments over the 2020-30 period. This is the first EU report to cover projections for an EU of 27 member states (1).
According to the EC analysis, the poultry meat sector was the only meat sector where production grew during the Covid-19 pandemic (1), with domestic EU producers benefitting from an increase in home consumption of poultry meat. The Covid-19 lock-down measures mainly impacted adversely on imports of poultry meat, given the extent to which imports serve the out-of-home consumption component of the market for poultry meat in the EU.
This growth in EU poultry production occurred despite the closure of a range of export markets to EU poultry meat following Avian Influenza outbreaks in major EU poultry producers such as Poland (see companion epamonitoring.net article, ‘EU27 Poultry Sector Surprisingly Resilient in Face of Covid-19 Challenges, But Brexit Challenges Could See Expanded Export Drive to ACP Markets’, 26 November 2020).
This EU production growth is being driven by the ‘significant investments’ in countries such as Poland, which seek to ‘capitalise on lower costs in eastern European countries.’ This investment process will be further supported by a projected increase in EU poultry meat prices (1).
EU27 gross indigenous poultry meat production will increase 4.5% between 2019 and 2030. This is an increase of 605,000 tonnes in EU27 poultry meat production over the 2019-2030 period. This compares to an increase of 3,247,000 tonnes in EU27 meat production over the 2009-2019 period (2).
This needs to be seen against the background of a growing EU27 consumer preference for poultry meat. This is linked to the perception of poultry meat as a healthier alternative to beef and pigmeat.
Poultry meat is the only meat category where a growth in consumption is projected over the 2020-2030 period. While overall per capita meat consumption is projected to fall by 1.1 kg to 67.6 kg (-1.6%) (2), EU per capita poultry meat production is projected to increase 1.2 kg between 2020 and 2030 (+5.1%) (1). This will see overall EU poultry meat consumption increase 5.2% between 2019 and 2030 (+620,000 tonnes) (2).
The higher consumption growth relative to production growth means EU imports are projected to increase between 2020 and 2030 by 28.3% (+212,000 tonnes). This high rate of growth reflects the depressed level of poultry meat imports in the base year of 2020 (2).
Despite an expansion of the poultry meat TRQs made available for Ukraine, since 2017 as a result of the phytosanitary issues faced by Brazilian poultry meat exporters, total EU poultry meat imports fell 166,000 tonnes between 2016 and 2020. The EU’s use of phytosanitary measures is a major determinant of specific trends in EU imports of poultry meat year on year.
More fundamental however, is the EU’s poultry meat import trade regime. The EU makes extensive use of tariff-rate-quotas (TRQs), to strictly regulate imports of poultry meat into the EU (with similar TRQs being used in the beef sector). This is an important conditioning factor for the functioning of the EU poultry meat market. These TRQs increasingly tend to be established under EU FTAs (2). By the end of the projection period EU imports of poultry meat are projected to be around the total volume of TRQ access opened up by the EU (900,000 tonnes).
While the growth in EU27 poultry meat consumption is higher than EU poultry meat production, the structure of EU27 poultry meat demand means that it is the growth in production which has the greatest impact on EU exports of poultry meat. This is linked to the fact that poultry parts are largely exported, while mostly white meat (breast) is consumed in the EU27. Thus, as EU poultry production increases, so does the volume of poultry parts for which export markets need to be found.
This being noted the impact of the recessionary effect of the Covid-19 pandemic on incomes of lower income families may see greater consumption of lower priced poultry parts and mechanically deboned meat across the EU27.
EU27 Poultry Sector Projections (‘000 tonnes)
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | +% | |
| Production | 13,605 | 13,695 | 13,726 | 13,766 | 13,806 | 13,846 | 13,883 | 13,925 | 13,972 | 14,022 | 14,076 | +3.5% |
| Consumption | 12,000 | 12,103 | 12,167 | 12;201 | 12;249 | 12;294 | 12,332 | 12,352 | 12,365 | 12,416 | 12,454 | +3.8% |
| Exports | 2,337 | 2,349 | 2,381 | 2,417 | 2,431 | 2,445 | 2,472 | 2,503 | 2,533 | 2,553 | 2,566 | +9.8% |
| Import | 748 | 810 | 829 | 846 | 861 | 880 | 897 | 914 | 928 | 944 | 960 | +28.3% |
| EU price | 1,881 | 1,843 | 1,864 | 1,905 | 1,942 | 1,986 | 2,013 | 2,024 | 2,034 | 2048 | 2,063 | +9.7% |
| World price | 1,321 | 1,310 | 1,322 | 1,350 | 1,388 | 1,417 | 1,434 | 1,440 | 1,446 | 1,454 | 1,463 | 10.7% |
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | +% | |
| Production | 10,224 | 10,586 | 10,824 | 11,109 | 11,143 | 11,620 | 12,099 | 12,703 | 12,746 | 13,295 | 13,471 | 31.8% |
| Consumption | 9,761 | 9,775 | 9,886 | 10,220 | 10,264 | 10,643 | 11,001 | 11,409 | 11,354 | 11,804 | 11,834 | +21.2% |
| Exports | 1,416 | 1,653 | 1,820 | 1,834 | 1,792 | 1,877 | 2,001 | 2,208 | 2,241 | 2,326 | 2,487 | +75.6% |
| Import | 953 | 841 | 882 | 945 | 913 | 900 | 903 | 914 | 849 | 836 | 850 | -10.8% |
| EU price | 1,855 | 1,824 | 2,018 | 2,038 | 2,084 | 2,018 | 1,942 | 1,857 | 1,895 | 1,922 | 1,907 | +2.8% |
| World price | 1,113 | 1,343 | 1,496 | 1,503 | 1,516 | 1,460 | 1,480 | 1,384 | 1,463 | 1,314 | 1,448 | +30.1% |
Within this export trend efforts are underway to maximise the value gained from the export of residual poultry parts. Wings are largely sold on Asian markets while chicken halves and quarters are reportedly largely exported to sub-Saharan Africa (2). This trade is expected to show a steady increase up to 2030.
This being noted demand in China and the Ukraine is expected to ‘soften’. However, this projection needs to be seen against the background of the uncertainties around the trajectory for the post-Covid-19 recovery across the global economy (2).
These EU production trends are projected to see EU27 poultry meat exports grow 9.8% between 2020 and 2030 (2019 saw an exceptionally high level of EU27 exports, with 2020 providing a more normal reference year for EU27 poultry meat exports). This represents an annual growth rate of exports of 0.7% over the 2020-2030 period, compared to an annual growth rate of 4.8% over the 2010-2020 period (+229,000 tonnes compared to +834,000 tonnes) (3).
Given the maintenance of the EC’s continued duty free-quota free access to the UK market (4) it is projected EU poultry meat exports to the UK will grow as poultry meat replaces ‘less abundant and more expensive pigmeat’ (2).
In terms of the EU’s overall position in the global poultry meat trade the EC projects the ‘EU’s share in global exports will decrease slightly from 16.2% in 2020 to 15% in 2030’, in the face of strong competition from Brazil.
| Comment and Analysis While the rate of growth in EU27 poultry meat exports is slowing down in both relative and absolute terms, important changes in the composition of these poultry meat exports and the markets targeted has taken place. The EU is increasingly exporting poultry parts, with the main destination markets being in sub-Saharan Africa.A notable feature of EU trade policy in both the poultry meat and beef sectors is the strict use of TRQs to regulate access to the EU27 market under free trade area agreements, rather than allowing simple duty free-quota free access under these FTAs. This ensures the growth in EU consumption of poultry meat (largely breast meat) is met almost exclusively from an expansion in EU poultry production, despite the higher average costs of EU poultry production (in 2020 average EU poultry meat prices were between 31.7% and 42.4% higher than average Brazilian poultry meat prices – the benchmark for world market prices of poultry meat). The protection this tightly controlled poultry meat import regime provides EU poultry producers, means domestic EU poultry meat prices can be sustained at higher levels than would otherwise be the case in the absence of such EU trade protection. This in turn means residual poultry parts can be sold at extremely low prices, since the revenue generated from these sales are not central to the overall commercial position of EU poultry producers. The EU’s strictly managed trade regime in the poultry sector, which hinges around the application of quantitative restrictions is noteworthy, since the EU prohibits the use of similar such quantitative controls on imports of poultry meat from the EU under free trade area agreements concluded with ACP countries. While to date these provisions of EU trade agreement with ACP countries have largely remained unenforced, the appointment of the new EU Chief Trade Enforcement Officer, who took up his position in October 2020, could well see an intensification of pressures to more rigorously enforce these trade agreement commitments (see companion epamonitoring.net article, ‘Appointment of Chief Trade Enforcement Officer Could Signal a Push More Rigorous Enforcement of EPA Commitments Made by ACP Governments’, 11 December 2020). The EU’s poultry meat export trade needs to be seen in light of the relative lack of price competitiveness of EU poultry meat exporters compared to Brazil. This makes securing and effectively implementing agreed tariff and non-tariff preferences set out in EU trade agreements of considerable commercial significance to EU poultry meat exporters. This gives particular commercial significance to the ongoing EU-South Africa dispute over the application of safeguard measures under the EU-South Africa Trade, Development and Cooperation Agreement (see companion epamonitoring.net article ‘South Africa’s Poultry Sector on the Road to Recovery as Stricter Trade Regime Applied’, 3 December 2020). These pressures to fully implement agreed trade agreement commitments which provide EU exporters with significant market access preferences, are likely to intensify in the coming period. While the conclusion of the EU/UK trade deal on 24th December 2020 has averted an imposition of standard MFN tariffs on EU/UK mutual trade in poultry meat products, the new EU/UK trade arrangement will still see an increase in the application of non-tariff measures which could impact on trade flows. Despite agreements on mutual recognition of standard in the December 2020 EU/UK trade agreement, the new arrangement will still see the application of standard 3rd country import requirements on mutual EU/UK trade. A particular area of concern in the livestock products sector relates to export certification requirements which need to be complied with access for UK products to the EU market is to be granted. This is likely to be a problem for mainland EU poultry meat exporters. The poultry industry in Northern Ireland, which accounts for 1/3 of UK production, is in a different position. After the end of the transition period, Northern Ireland will remain a part of the EU customs union and single market and hence will not face these export certification requirements in trade with the EU. Problems are likely to arise for mainland UK poultry producers given the increase in demand for veterinary approved export certification which the imposition of such requirements on trade with the EU will generate for the UK veterinary service. According to the British Meat Processors Association the new demand for export certificates is likely to greatly exceed both current UK government estimates of new demands for veterinary certified export certificates and the capacity of the available cadre of UK vets to deal with these certification matters. In addition, serious doubts have been raised over the capacity of the UK governments new on-line application system for export certificates to cope with the new demand (5). It is estimated that across the livestock products sector where such export certification requirements arise a decline in UK exports to the EU of between 50% to 90% could arise, depending on the structure of the export trade of the UK livestock sector concerned (6). This issue is less severe on the EU side, given the smaller size of the UK market relative to overall EU livestock product exports. As a consequence, this will generate less severe constraints on the ability of the EU27 veterinary services to meet export certification requirements, compared to the situation in the UK (for the significance of the UK market to EU27 poultry meat producers see companion epamonitoring.net article, ‘EU Figure Highlights Importance of UK Market to EU27 Poultry Sector’, 7 July 2020). The continuation of EU/UK trade in value added products containing poultry meat will also be complicated by the new rules of origin requirements included in the EU/UK trade agreement. Significantly, the EU rejected UK proposals for ‘diagonal cumulation’. ‘Diagonal cumulation’ would have allowed inputs from third countries to which both the EU and UK grant duty free access, to be counted as ‘originating inputs’ when used in products subsequently exported between the EU and UK. This would then have allowed such products to more easily qualify for the duty-free access agreed between the EU and UK. As a consequence of the EU’s rejection of ‘diagonal cumulation’ provisions, these 3rd country inputs will be subject to various value and volume tolerance thresholds for the use of ‘non-originating’ inputs, in order for continued duty-free access to be allowed in UK/EU trade. This could mean UK or EU value added poultry meat containing products could face import tariffs depending on the origin of the poultry meat and other inputs used (e.g., for UK exports of prepared chicken tikka masala dishes to the EU). Potentially these rules of origin issues could provide a new outlet for UK production of poultry parts and mechanically de boned meat, as UK manufacturers switch to the use of domestically produced poultry meat to side-step rules of origin issues. While the conclusion of an EU/UK trade agreement which avoids the imposition of tariffs on EU/UK mutual trade in poultry products will reduce the level of trade displacement to 3rd country market, some level of trade displacement is still likely in the course of 2021. It should be noted these non-tariff dimensions were not taken on board in EU27 projections for the poultry meat sector. Projections were based on a continuation of the status quo for EU/UK trading conditions, given the incomplete nature of the EU/UK trade agreement negotiations at the time the projections report was under preparation. These ‘status quo’ assumptions have not been fully met under the agreement finally concluded between the EU and UK on 24th December 2020. |
Sources
(1) EC Executive Summary, EU Agricultural Outlook: For Markets, Income and Environment 2020-2030, December 2020
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/agricultural-outlook-executive-summary_en.pdf
(2) EC, EU Agricultural Outlook: For Markets, Income and Environment 2020-2030, December 2020
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/agricultural-outlook-2020-report_en.pdf
(3) EC, Poultry meat market balance in the EU, 2005-2030 (thousand tonnes c.w.e.)
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/medium-term-outlook-tables_en.pdf
(4) Official Journal of the European Union, ‘TRADE AND COOPERATION AGREEMENT BETWEEN THE EUROPEAN UNION AND THE EUROPEAN ATOMIC ENERGY COMMUNITY, OF THE ONE PART, AND THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND, OF THE OTHER PART, 31 December 2020
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22020A1231(01)&from=EN
(5) thepoultrysite.com, ‘British meat industry calls for an orientation phase after Brexit transition period ends’, 17 December 2020
https://www.thepoultrysite.com/news/2020/12/british-meat-industry-calls-for-an-orientation-phase-after-brexit-transition-period-ends
(6) britishmeatindustry.org, ‘Time has run out for a comprehensive free trade agreement’ 22 December 2020
https://britishmeatindustry.org/industry-news/time-has-run-out-for-a-comprehensive-free-trade-agreement/