Summary
A January 2017 report on the relative competitiveness of the EU poultry sector highlights the importance of continued tariff protection and managed trade (using TRQ access) to the future of the EU poultry sector. This EU policy practice contrasts markedly with EU policy advocacy in its dealings with ACP countries. Without trade protection competitive third country poultry producers would gain a strongly competitive position in the EU market, exporting far higher volumes of poultry meat to the EU. However, EU tariff protection cannot be justified on the basis of higher EU standards, which are small relative to the differences in price competitiveness between EU and major third country poultry exporters.
A report drafted by Wageningen Economic Research for the Association of Poultry Processors and Poultry Traders (AVEC) into the competitiveness of the EU poultry sector has found ‘the offer price of broiler breast fillet in 2015 of some third countries was already equal to or lower than the average EU price’. It found ‘despite the current import levy on breast fillet, Brazil and Ukraine can be competitive at the EU market’ (1).
Analysis of the cost components for breast fillet production found ‘import levies protect the EU from imports from the non-EU countries’ (1). However since 2013 the offer price of breast fillet of both EU and all non-EU suppliers had decreased, linked to lower production costs at farm level. It found offer prices are now being strongly influenced by exchange rate movements (i.e. factors extraneous to the poultry sector) (1).
The report noted ‘non-EU countries do not have any or have limited legislation on environmental protection, food safety, and animal welfare’, although in some countries notably the US ‘the standards for food safety and animal health are considered to be equivalent to those in the EU’. However the report estimated the additional costs for EU producers associated with higher EU environmental, animal welfare and food safety standards was around 5 euro cents per kg (some 5.8% of total production costs). Although it was noted EU legislation imposed additional costs on poultry meat processors a figure could not be calculated for these additional costs (1).
Average poultry production costs per 100 kg: EU and international competitors
| EU | Brazil | Ukraine | USA | Argentina | Thailand |
| €152.00 | €106.40 | €112.48 | €123.12 | €123.12 | €126.16/ |
Poultry production costs in the 9 EU member states surveyed in the study ranged from €1.39 to 1.59 per kg carcass weight, with an average of €1.52/kg. In comparison production costs after slaughter in Brazil are 70% of the EU average costs, 74% in Ukraine, 81% in the US and Argentina and 83% in Thailand. These lower production costs were attributed to ‘the domestic availability of large quantities of feed ingredients’ in Brazil, Ukraine, USA and Argentina and lower housing and labour costs in these non-EU countries (1).
Against this background the additional average costs arising from stricter higher EU environmental, animal welfare and food safety standards cannot be seen as commercially significant (1).
Summary table EU levies: EU Full Import Levy and In-quota levy
| Product | In-quota levy | Full levy |
| Salted breast fillet | 15.4% | €1.30 /kg |
| Cooked breast fillet | 8% | €1.02/kg |
| Natural breast fillet | €1.02 kg + safeguard levy from €0.10 to €0.20/kg |
Currently the EU market is protected by a complex system of tariff rate quotas which provide rebates on otherwise high import tariffs (see table above). This allows the EC to effectively manage the EU poultry market, with EU imports of poultry meat having stabilised ‘around 800,000 tonnes’ since 2008 (1). This broad stabilisation has occurred in the context of the introduction of new TRQ access for Ukraine.
EU Import of poultry meat (in 1,000 tonnes) from third countries
| 2011 | 2012 | 2013 | 2014 | 2015 | |
| Brazil | 615 | 583 | 514 | 501 | 499 |
| Thailand | 156 | 198 | 228 | 250 | 274 |
| Ukraine | 0 | 0 | 0 | 20 | 42 |
| Chile | 44 | 42 | 31 | 26 | 22 |
| China | 14 | 16 | 18 | 20 | 18 |
| Argentina | 16 | 14 | 11 | 11 | 9 |
| Other | 10 | 13 | 12 | 10 | 7 |
| TOTAL | 855 | 866 | 814 | 838 | 871 |
Source: European Commission, February 2016
The exception to this TRQ managed trade system is the trade in natural breast fillet, where despite high import levies ‘poultry meat imports are competitive, and in 2015, 96,000 tonnes of natural breast fillet was imported’ (1). Nevertheless overall the EU’s total imports of poultry meat have stabilised, as have total imports of the main product categories: natural chicken breast fillet, salted chicken breast fillet and cooked fillet (at around 600,000 tonnes) (1).
EU Import (in 1,000 tonnes) in 2013, 2014 and 2015 of the main poultry meat products
| Code | Product | 2013 | 2014 | 2015 |
| 16023219 | cooked, prepared, meat or meat offal >=57% | 232 | 233 | 241 |
| 02109939 | meat, salted, dried or smoked | 227 | 256 | 264 |
| 02071410 | frozen boneless cuts | 88 | 90 | 96 |
| 16023230 | prepared, meat or meat offal >=25% % but <=57% | 66 | 67 | 64 |
| 16023111 | preparations of turkey | 67 | 47 | 47 |
| TOTAL | 680 | 693 | 712 |
Source: AVEC annual report, October 2016.
The report was compiled in the context of ongoing EU trade agreement negotiations, with a view to assessing the impact of FTA negotiated tariff reductions on the poultry sector. The analysis found the scenario of ‘50% lower import levies and no additional levy’ would mean Brazil, Ukraine and also Thailand, Argentina, the USA, and Russia could all offer prices for breast fillet below those of EU poultry producers. Under certain exchange rate movement scenarios ‘all third countries obtain a competitive to strongly competitive position in the EU market for breast fillet’ and are consequently deemed ‘most likely to export large volumes of poultry meat to the EU’ (1).
Despite its lack of price competitiveness as a poultry producers, the EU maintains a high volume of poultry meat exports, hovering in recent years around 1.5 million tonnes. The average price of EU poultry meat exports is €142 per 100 kg while the average price of EU poultry meat imports is €267 per 100 kg. As the report points out ‘EU exports to third countries are lower value cuts of meat such as wings, feet and offal’. It is argued ‘these cuts are less popular on the EU market and export is a necessary outlet for the valuation of the whole bird’ (1).
| Comment and Analysis
This January 2017 report confirms an earlier analysis (2) on the lack of international price competitiveness of EU poultry producers and the continued need for trade protection, in the form of high MFN tariffs and a strictly managed TRQ regime. This allows imports to take place, but prevents imports increasing to such an extent that growth of the domestic EU poultry sector is compromised. Thus we find between 2008 and 2016 while EU poultry consumption grew 21.4% (from 11,311,000 tonnes to 13,730,000 tonnes) import broadly stabilised, with only a sudden 5% expansion from 2015 to 2016, resulting in an increase over the 2008-2016 period of a mere 2.6% (from 872,000 tonnes to 895,000 tonnes). This allowed EU poultry meat production to expand 26.1% from 11,311,000 tonnes to 13,730,000 tonnes (3). Without this trade protection EU producers enjoy far more of the increase in EU poultry meat consumption since 2008 would have been met from imports of lower priced poultry meat. There is a certain irony in the fact that while using trade policy tools to continue to protect EU poultry producers from more competitive third country poultry meat exporters, the EC should be insisting that ACP governments desist from the use of such trade policy tools in their own efforts to foster the expansion of their domestic poultry sectors. While it is commonly asserted this trade protection is necessary because of the cost increasing effects of higher EU environmental, animal welfare and food safety standards, the study shows these standards account for only a 5 cent per kg difference in costs, whereas an average EU producer has a cost disadvantage of between 25.84 cents per kg and 45.6 cents per kg. As the study highlights the better price competitiveness of the main poultry meat exporting nations is linked to the accessibility of lower priced animal feed. It should be recalled in this context that it was drought induced feed price increases which recently created such a crisis in the South African poultry sector, as imports of low priced EU poultry parts flooded the South African market (see companion articles, ‘EU frozen poultry meat exports to South Africa begin to bite’, 15 December 2016 and ‘EC rejects SAPA allegations of dumping of poultry parts’, 8 June 2017). The report also confirms the importance of export markets for poultry parts to the full valorisation of EU poultry production. In this context it should be recalled the USDA has argued it is the existence of the EU’s strictly managed poultry mean import regime which allows EU poultry producers to pass on cost increases to domestic consumers, without any fear of loss of markets. This ability to pass on cost increases to domestic consumers, it was argued, allows EU poultry producers to maintain low export prices, thereby enabling the EU to win markets from more competitive poultry meat exporters (3). Against this background there would appear to be strong case for ACP government retaining their right to use trade policy tools to manage imports of poultry from the EU in the interests of national poultry sector development. |
Source:
(1) Wageningen Economic Research, ‘Competitiveness of the EU poultry meat sector, base year 2015’, January 2017
http://www.avec-poultry.eu/system/files/archive/new-structure/Communications/Wageningen%20report%202017-005%20competitiveness%20EU%20poultry%20meat%20van_Horne_def….pdf
(2) LEI Wageningen UR, ‘Competitiveness of the EU poultry meat sector’, LEI Report 2013-068, December 2013
http://www.avec-poultry.eu/system/files/archive/new-structure/avec/Communication/Study%20final%20version.pdf
(3) EC, ‘EU Agricultural Outlook Prospects for EU agricultural markets and income 2016-2026
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2016/2016-tables.pdf
(4) Agritrade, ‘Lessons from EU poultry sector trade policy’, 4 September 2014
http://agritrade.cta.int/Agriculture/Commodities/Poultry/Lessons-from-EU-poultry-sector-trade-policy
| Key words: Poultry, managed trade TRQs Area for Posting: Poultry sector, EU trade policy, PCD |