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LIVESTOCK AND POULTRY
World Markets and Trade
March 1998
Poultry Meat and Products: Price Developments
Abundant supplies in many of the major poultry producing countries in 1997 and slow gains in export opportunities has led to lower broiler meat prices going into 1998. Economic upheaval in many Asian markets and currency devaluations have put additional downward pressure on prices, portending a scramble for market share in Asia.
Suffering from the double-edged sword of record-high per capita meat supplies in the United States and constrained international market opportunities in 1998, the U.S. poultry industry is looking at a 5 percent decline in whole bird prices to $.55/pound. Leg quarters prices, meanwhile, constrained by more rigorous customs collection in Russia, continue to hover at a low $.30/pound, down 35 percent from the record levels of October 1996. Similarly, abundant supplies in the Brazilian broiler market held down prices in 1997, with frozen whole chickens averaging $.45/pound.
The impact of developments in the Russia poultry market on U.S. prices is evidenced by a close look at changes in per unit export values for U.S. broiler parts. The per unit export price of U.S. leg quarters shipped to Russia in 1997 averaged $781/ton, down 20 percent from the previous year. This price decline to this critical market which absorbed 44 percent of total broiler meat exports prompted an 8-percent decline in the total value of broiler meat exports in 1997 to $1.88 billion, down from $2.03 billion in 1996.
U.S. competitors are facing a similar price situation. In Brazil, the average per unit price of broiler exports, 58 percent of which are whole birds shipped to the Middle East, dropped 9 percent to $1,349/ton in 1997. However, stronger demand from Europe for white meat products allowed the overall value of total exports to rise 4 percent to $876 million. Much of the price decline is attributed to increased competition in Asian markets from Thai product, the offer prices of which are reportedly $250/ton lower than Brazilian prices.
While only 4 percent of total U.S. broiler meat exports in 1997 were destined to Japan, a look at changing prices for imported product in Japan reveals the extent of the battle for market share in Asian markets. The price impact of the slowdown in Japanese demand for imported broiler meat, combined with the devaluation of the Thai baht, is evidenced in the following graph. The higher prices for Thai product results from Thailand sending only 10 percent of exports out as just deboned leg quarters. Rather they debone the legs and export cut-up specialty cuts.
The average price for imported deboned leg meat dropped nearly $500/ton since early 1997, with Chinese product bearing the brunt of the decline. This is undoubtedly due to the fact that China's major competitor in the Japanese market for deboned product is Thailand. Both Brazil and the United States export mainly bone-in leg quarters that do not compete directly with Thai product. However, demand for both U.S. and Brazilian product drops as labor prices increase in Japan and importers find it more convenient to bring in further processed product.
Strong competition in Japan will continue to erode the U.S. share of the Japanese poultry import market which has fallen from 38 percent in the early 1990's to its present 18 percent. Continued market penetration by chilled Chinese product since the early 1990's, combined with very competitively priced Thai product will lead to even slower demand for U.S. product in 1998.
In summary, 1998 portends to be a difficult year for U.S. broiler meat exporters. Stiff competition in Asia from Thai product and constrained demand are likely to stifle major export gains, either in quantity or value. U.S. broiler meat products, especially leg quarters, continue, however, to be competitive in Russia, both against local and other imported product. Continued prospects for low prices, however, may result in the total value of 1998 exports slipping below that of 1997.
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