Summary
Despite initial setbacks linked to Avian Influenza outbreaks and Covid-19 linked demand effects, EU poultry meat production is projected to increase in 2021, with this growth continuing through to 2031 (though be it at almost half the annual rate of the preceding decade). Despite average EU poultry meat prices being substantially above Brazilian prices, the EU continues to increase exports of frozen and fresh meat and offal from Gallus poultry to sub-Saharan Africa. This increase has continued despite a major slump in EU exports to other non-sub-Saharan African markets. While overall EU poultry meat exports are projected to stabilise up to 2031, the likely further collapse in exports to the UK will increase export pressures on sub-Saharan African markets. If African governments wish to boost local poultry production in response to growing consumer demand and Covid-19 supply chain disruptions, greater use will need to be made of non-tariff measures in regulating imports, including a more precautionary approach in response to AI outbreaks. This could then provide the market space for expanded local production if this forms part of comprehensive poultry sector development strategies.
- Developments in EU Broiler Production
In the first two months of 2021 EU broiler production was substantially below the levels of the corresponding period in both 2020 and 2021 (1). This was attributable to the impact on production of Avian Influenza (AI) outbreaks in the EU, higher feed costs, and subdued food service demand linked to Covid-19 restrictions. Throughout most of 2021 until the end of August, production remined below 2020 levels, with, by the of August, production down 3.4% (2) compared to the corresponding period in 2020.
However, while monthly production remained below 2020 levels, from May 2021 a recovery in EU boiler production was evident (1). This recovery in EU broiler production is projected to continue to the end of 2021, taking overall production levels by the end of 2021 to some 1% above production levels in 2020. This is equivalent to 2% above 2019 levels and fully 3.35% above 2018 levels (see table 1).
Table 1: Trends in EU Production, Consumption and Self-Sufficiency Ratio for Poultry Meat Production (‘000 tonnes) 2010-2021
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021° | |
| Production | 10,586 | 10,824 | 11,109 | 11,143 | 11,620 | 12,099 | 12,703 | 12,746 | 13,295 | 13,471 | 13,605 | 13,741 |
| Consumption | 9,775 | 9,886 | 10,220 | 10,264 | 10,643 | 11,001 | 11,409 | 11,354 | 11,804 | 11,834 | 12,016 | 12,174 |
| Self-Suff % | 108% | 110% | 109% | 109% | 109% | 110% | 111% | 112% | 113% | 114% | 113% | 113% |
Source: EC, DG Agri Dashboard: Poultry Meat, 1 December 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/poultry-meat-dashboard_en.pdf
° forecast
- EU Broiler Price Developments
The EU production decline in response to adverse market developments has helped support a recovery in broiler prices. Data posted on 1 December 2021, covering the period up to the end of November 2021 shows a renewed recovery in average EU broiler prices, following a dip at the end of June 2021. This has seen prices in 2021 equal to or well above, the Covid-19 related depressed price levels of 2020. By the end of November prices were 18.2% above prices in the corresponding period in 2020 and well above the five-year average (2016-2020), at times fully 20% above (1).
This placed average EU broiler prices 75% above Brazilian prices, at €208.57/100 kg compared to €118.59/100 kg and 4.2% below US prices, which stood at an average of €217.65/100 kg. The growing gap between EU and Brazilian broiler prices is in part linked to the decline in the value of the Brazilian Real against the Euro, which fell from under Real 4.5 to the Euro in October 2019 to almost Real 6.5 in October 2021 (1).
- The Longer-Term Production Trends and EU Exports to Sub-Saharan Africa
Taking the longer-term view, since 2010 EU poultry meat production has increased 3,155,000 tonnes, while EU poultry meat consumption increased 2,399,000 tonnes. This saw the EU’s self-sufficiency ratio increase from 108% to 113% (having peaked at 114% in 2019 prior to the impact of the Covid pandemic on both demand and production) (1).
This generated an additional surplus of poultry meat above EU requirements of 756,000 tonnes by the end of the period. A surplus which not only needed to be disposed of, but which also generated a corresponding increase in poultry parts for which there is only a limited demand in the EU, and for which the main market is sub-Saharan Africa.
This expansion of EU poultry meat production has occurred despite the on-going lack of price competitiveness relative to Brazilian and other major poultry exporters (see epamonitoring.net article, ‘Report highlights vulnerability of EU poultry sector to liberalisation of trade in poultry meat,’ 5 September 2017). What is more, despite EU cost disadvantages vis a vias Brazilian exporters, this expansion of EU production has driven a continuous expansion of EU chicken meat exports to sub-Saharan Africa. This trade is largely based on exports of frozen chicken parts and offal, for which there is little or no demand in the EU. These exports take place at extremely low prices and are effectively cross subsidised by the high domestic EU poultry meat prices for prime cuts, which can be maintained as a result of the tightly regulated import regime which the EU applies in the poultry meat sector.
The focus on sub-Saharan African markets is being compounded by the decline in EU poultry meat exports to the UK which is underway. Between January and July 2019 and January and July 2020 EU exports to the UK fell from 519,309 tonnes to 449,131 tonnes (a decline of 13.5%), with this decline continuing and accelerating slightly from January to July 2021 (falling to 377,221 tonnes) (3).
This decline in EU poultry meat exports to the UK of over 142,000 tonnes is leaving EU poultry meat exporters seeking out alternative markets, which, as a last resort, involve the export of frozen cuts to sub-Saharan African and other ACP markets.
This situation in regard to EU poultry meat exports to the UK could have been worse had the UK government not deferred the implementation of SPS controls on imports of poultry meat from the EU from October 2021 until July 2022 (2). However, this has merely deferred the further displacement of EU poultry meat exports from UK markets, until the second half of 2022, at which point EU traders will be looking for even more export markets in sub-Saharan Africa, especially for chicken meat.
While for 2022 EU poultry meat exports are projected to remain stable, the likely decline in exports to the UK in the second half of 2022, as new UK SPS controls are introduced on poultry meat entering from the EU, is likely to see a continued expansion of EU poultry meat exports to sub-Saharan African markets.
- Longer-Term Prospects for the EU Poultry Sector
According to the latest EU Agricultural Outlook Report which covers the period 2021 to 2031, EU gross indigenous poultry production is projected to increase 4% by 2031 compared to the average Eu production from 2019 to 2021. With an annual growth rate of 0.4%, this is a much lower rate of growth than over the 2011 to 2021 period, which amounted to 2.6% per annum. EU poultry consumption meanwhile is projected to increase 5.1% by 2031 compared to the average over the 2019-21 period (from 11,978,000 tonnes to 12,585,000 tonnes) (5).
Meanwhile EU exports of poultry meat are projected to reach 2,377,000 tonnes by 2031 up from an average of 2,355,000 tonnes over the 2019-2021 period, an increase of only 0.9%. However, with exports to the main export market, the UK, set to decline further after July 2021, the volume of exports to non-UK destinations is likely to increase far more substantially (5).
EU imports of poultry meat meanwhile are projected to increase to 826,000 tonnes by 2031, from an average of 756,000 tonnes over the 2019-2021 period, an increase of 9.3%.
EU Poultry Market Projections 2022-2031 (1’000 tonnes c.w.e.)
| Ave 19-21 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | |
| Gross Indigenous Prod. | 13,578 | 13,670 | 13,777 | 13,812 | 13,866 | 13,894 | 13,928 | 13,971 | 14,020 | 14,078 | 14,136 |
| Consumption | 11,978 | 12,240 | 12,303 | 12,360 | 12,421 | 12,461 | 12,486 | 12,503 | 12,545 | 12,557 | 12,585 |
| Exports | 2,355 | 2,206 | 2,231 | 2,220 | 2,222 | 2,243 | 2,268 | 2,296 | 2,321 | 3,248 | 2,377 |
| Imports | 756 | 722 | 762 | 795 | 800 | 806 | 813 | 820 | 822 | 824 | 826 |
Source: EC, EU Agricultural Outlook for Markets, Income and Environment 2021 – 2031
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/agricultural-outlook-2021-report_en.pdf
| Comment and Analysis Despite average EU broiler prices being 75% higher than Brazilian prices, the EU continues to expand exports of chicken meat (mainly chicken parts) to sub-Saharan African markets. From January to the end of September 2021 EU exports of frozen and fresh meat and offal from Gallus poultry breeds to sub-Saharan Africa (excluding South Africa) reached 460,256 tonnes, up from 398,963 tonnes in the corresponding period in 2020. This represented an increase of 15.4%. This occurred despite an overall decline in EU exports of these product categories of 13.9% over the same period and a decline of 26.2% to non-sub-Saharan African countries (excluding South Africa). Table 2: EU Exports of Fresh and Frozen Gallus Meat and Offal, January to September 2016 to 2021 (tonnes product weight)
Source: EC, Poultry Trade Data: https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html Of the top ten destinations for EU poultry meat exports from January to September 2021, three were in West Africa (Ghana, Benin, Guinea) and two in Central Africa (DRC and Gabon). On 1 December 2021, the EC reported a continued growth in poultry meat exports to Ghana, DRC and Benin, Gabon, and Guinea of +14.4%, +21.3%, +14.1%, +7.6% and +12.8% respectively. This occurred against the background of an overall decline in EU exports of poultry meat over the January to August period of -13.3% EU27 Exports of Poultry Meat to Selected Destinations (without UK)
Source: EC, ‘EU Market Situation for Poultry,’ Committee for the Common Organisation of the Agricultural Markets, 18 November 2021 https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf In the case of South Africa, EU exports of fresh and frozen gallus meat and offal, are driven by the South African governments policy response to the outbreak of Avian Influenza in the EU poultry industry. On animal health grounds this see’s import bans rapidly introduced on EU member states affected by AI outbreaks, with a precautionary approach to the lifting of these bans being adopted. EU export volumes to South Africa therefore vary greatly depending on AI situation in individual EU member states. EU exports to other sub-Saharan African countries are little affected by AI outbreaks in Europe. This has created a situation where South Africa is the only major sub-Saharan African poultry market where Brazil has gained market share in 2021, as EU exports of fresh and frozen gallus meat and offal fell a massive 56.9% from January to September 2021 (compared to the same period in 2020) (4), in the face of AI outbreaks across Europe. What is clear is that in dealing with rising imports of poultry meat from the EU, the only effective mechanism which sub-Saharan African governments can use is quantitative restrictions on imports. This can take the form of the kind of quantitative controls imposed by the Government of Cameroon, which maintains a tightly regulated poultry meat import regime or outright bans such as those introduced by the Government of South Africa as a result of Avian Influenza outbreak in the EU. EU exports of fresh and frozen gallus meat and offal, tend to be unresponsive to basic tariffs or even substantial tariff increases. This is a result of the adoption of a range of strategies to evade the effects of such tariff-based policy measure by EU exporters. These range from under invoicing to misclassification of the product being exported so as to minimise tariff liabilities. Most sub-Saharan African customs services are poorly placed to effectively deal with these tariff minimisation strategies. Against this background, for those sub-Saharan African governments seeking to promote local poultry production in response to growing consumer demand and Covid-19 linked global supply chain disruptions, consideration will need to be given to: a) The more active use of import restrictions linked to outbreaks of AI in the EU. b) The more active use of non-tariff trade policy measures in the poultry sector to regulate import volumes. For those sub-Saharan African governments which have concluded economic partnership agreements with the EU this could prove problematical, given commitments entered into under their EPAs which include a prohibition on the introduction of quantitative restrictions on imports from the EU. This needs to be seen in the context where the appointment in the EC of a Chief Trade Enforcement Officer is likely to signal a more rigorous enforcement of trade agreement commitments entered into by African governments (see 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). A flexible interpretation of these provisions will need to be sought where national poultry sector development strategies are being launched in sub-Saharan Africa. However, this will need to form part of more comprehensive poultry sector development strategies, with investments in overcoming supply constraints on the development of local production needing to be carefully sequenced with well-designed, and comprehensive trade measures, if the market space for expanded local production is to be created without generating consumer shortages or major consumer price increases. As the Namibian experience has demonstrated this is possible but requires a carefully formulated and comprehensive approach. |
Sources:
(1) EC, DG Agri Dashboard: Poultry Meat, 1 December 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/poultry-meat-dashboard_en.pdf
(2) EC, ‘Short term outlook – Meat Products’ Autumn 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/short-term-outlook-autumn-2021-chapter-meat_en.pdf
(3) EC, ‘EU Market Situation for Poultry’, Committee for the Common Organisation of the Agricultural Markets, 18 November 2021
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
(4) EC, ‘Poultry Trade Data’
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
(5) EC, ‘EU Agricultural Outlooks: Prospects for EU Agricultural Markets and Income 2021 -2031
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/agricultural-outlook-2021-report_en.pdf