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Poultry industry, outbreak of avian influenza in the US, a boon for Brazil

Poultry, which is also known as white meat is the second most consumed meat in the world accounting for 42.3% of the consumption globally. The total world poultry production increased at a CAGR of 3.2% from 65.41 (million MT in 2006) to 89.55 (million MT in 2016) and the world poultry consumption also increased in tandem at a CAGR of 3% from 65.28 (million MT in 2006) to 87.64 (million MT in 2016).

     

The United States is the largest producer, consumer and second biggest exporter of poultry and its byproducts. The nation accounts for 20.4% of the global poultry production and 17.5% of the consumption respectively. Its production and consumption increased at a CAGR of 1.4% (2016) from 1.2% (2006). In spite of an outbreak of high pathogenic avian influenza (HPAI) in the United States in the latter part of 2014. There was an increase in consumption of poultry in the US as people switched to poultry meat due to health risks associated with the consumption of red meat. Moreover, as per the WHO guidelines, avian influenza viruses does not infect humans if the food is cooked properly. The per capita increase in poultry consumption in the US was 8% from 44.94 kg/capita (2014) to 48.51 kg/capita (2016). It was due to the outbreak of avian influenza, the United States major export destinations China, Hong Kong, Mexico and Canada banned poultry import from the nation. Thus, the United States exports declined significantly by 13.4% on a YOY basis from 3.31 (million MT in 2014) to 2.87 (million MT in 2015). This led to an increase in ending stock of poultry which further declined poultry prices in the United States. These declined by 16.6% (2015) and 10.7% (2016) on a YOY basis.

This development was beneficial for Brazil, where domestic demand was declining because of economic recession, high inflation rate and this resulted in reduced purchasing power for consumers. In addition, devaluation of Brazilian currency further decreased its poultry prices in the global market. This declined by 15.4% (2015) and 11.7% (2016) on a YOY basis. The low Brazilian poultry prices along with decreasing US exports (due to avian influenza) increased Brazil’s poultry exports by 15.5% from 3.56 (million MT in 2014) to 4.11 (million MT in 2016). This contributed 39% in the global poultry exports.

Avian influenza in the US opened new markets for Brazil. In China, where poultry production was declining as it relied on the US for imports of poultry grandparent breeding stock for domestic production. The country banned imports of poultry and its products from the US because of an avian influenza outbreak. While poultry demand reduced in China, the decline in poultry production was higher than the demand. This led to an increase in poultry imports by the nation. China’s poultry imports increased by 57.7% on a YOY basis from 0.26 (million MT in 2014) to 0.41 (million MT in 2016). Apart from China, Brazil was able to cater the demand from Mexico and Russia, where the imports of poultry and its byproducts were banned both from the US and EU. 

The European Union is one of the major exporters and also an importer of poultry products. But, despite a ban from the Russian market and Middle East nations excluding Saudi Arabia, there was an increase in exports by EU due to increase in demand of the poultry products sourced from the region, mainly in Sub-Saharan African countries (South Africa, Ghana and Benin) and Asian nations (Malaysia and Philippines).

     

Furthermore, Saudi Arabia, which is one of the major importers of poultry and its products continued to be the main export destination for EU’s poultry products because of its ability to cater the specific demand of poultry and its products. Although, there was a minor decline in poultry imports in Saudi Arabia, which was related to a decline in its GDP on account of weakening of oil prices.

According to the USDA, in the year 2018 global poultry production is projected to increase more than consumption. The United States, Brazil, China and the European Union will remain the leading producers and consumers of poultry and its products, global trade is also expected to increase. Brazil will remain the leading exporter followed by the US. 

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