The Philippine Broiler Industry

TRENDS &
PROSPECTS IN THE
BROILER INDUSTRY
JOVEN P. DY
Senior Vice President
Bounty Agro Ventures, Inc.
WORLD
BROILER
1
QUANTIFYING BROILER INPUTS
8.5 million GP - US$ 200 - 250 million
350 million PS - US$ 850 -950 million
100 Million MT live bird – >US$ 60 billion
200 million MT feed - > US$ 40 billion
130 million MT corn/wheat – US$ 15 – 18 billion
45 million ton SBM – US$ 9 – 12 billion
Animal health products – US$ 2 billion
> 8 billion kms. transport for feed and birds alone
Source: G. Butland, New Delhi
WORLD ANIMAL PROTEIN
CONSUMPTION IN 2005
120
100
80
Million MT
60
40
20
0
2005
Pork
Poultry
Beef
Eggs
103
81
63
64
Although there are no official figures yet for 2006, preliminary USDA
estimates show almost very small increase in consumption.
Source: FAOSTAT
2
PER CAPITA CONSUMPTION OF MEAT IN
SELECTED COUNTRIES, 2006
BROILER
Source: USDA – FAS, Livestock
and Poultry, October, 2006
PORK
UAE
60.3
US
46.3
Kuwait
43.0
Hong Kong
38.8
Malaysia
38.3
Saudi
36.0
Brazil
BEEF
29.0
42.9
65.7
15.3
36.0
11.7
36.9
Canada
29.8
28.1
32.2
Taiwan
29.5
42.0
4.5
Argentina
28.2
Mexico
28.0
14.8
23.1
EU - 25
16.2
43.9
18.0
7.5
13.9
4.0
Philippines
65.2
Poultry Production & Consumption
(in Million MT)
WORLD’S TOP
PRODUCERS
2005
US
15.9
2006
16.2
WORLD’S TOP
CONSUMERS
2005
2007(f)
2006
2007
16.4
US
13.5
13.8
13.9
10.2
10.4
10.6
China
10.2
10.4
10.5
China
Brazil
9.4
9.3
9.7
EU-25
7.4
7.4
7.5
EU-25
7.6
7.4
7.5
Brazil
6.6
6.8
7.1
Mexico
2.5
2.6
2.7
Mexico
2.9
3.0
3.1
India
1.9
1.2
1.3
India
1.9
2.0
2.2
Thailand
1.0
1.1
1.1
Russia
1.9
2.3
2.4
Japan
1.2
1.2
1.2
Japan
1.9
1.9
1.9
World
58.7
60.1
61.1
World
56.9
58.9
59.7
Source: USDA – FAS, Livestock and Poultry, October, 2006
3
IMPORTS & EXPORT
(in ‘000 MT)
WORLD’S TOP
EXPORTERS
WORLD’S TOP
IMPORTERS
2005
2007
2006
2007
2005
2006
Brazil
2,739
2,500
2,550
Russia
1,190
1,240
1,150
US
2,360
2,454
2,508
Japan
748
740
725
EU-25
755
620
685
EU – 25
522
600
645
China
331
350
365
Saudi
480
434
470
Thailand
240
280
280
Mexico
374
400
424
Canada
101
95
95
China
219
370
430
Argentina
84
90
110
HK
222
234
237
Total, World
6,791
6,470
6,737
5,063
5,168
5,337
Total, World
Source: USDA – FAS, Livestock and Poultry, October, 2006
AVIAN
INFLUENZA
4
PATH OF
MIGRATORY
BIRDS
AVIAN INFLUENZA
Nations with confirmed H5N1 cases
North
America
Asia
South
America
Africa
Source: USDA
5
AVIAN INFLUENZA TIMELINE
December
Thailand:
Zoo animals
die; start of
investigation
June
SE Asia:
Outbreaks
start but
unreported
January
Vietnam, Japan,
Thailand,
Cambodia, Laos
September
Korea
disease
free
August
Malaysia
October
Turkey,
Romania &
Croatia
affected
January
Malaysia
declared
disease
free
July
Russia
reports
H5N1
March
Switzerland,
Serbia, Poland,
Albania,
Cameroon,
Myanmar,
Denmark,
Sweden,
Afghanistan,
Israel,
Pakistan,
Jordan, Czech
Republic
December
Ukraine
and
Kuwait
report
2004
2003
December:
S.Korea reports
deaths in
poultry
WAVE 1
February
Indonesia
& China
June/July
recurrence
in China,
Indonesia,
Thailand
and
Vietnam
October
Brussels:
H5N1 in
eagles
from
Thailand
WAVE 2
Data from World Health Organization
2005
April
China
birds die
in Qinghai
Lake
August
Kazakhstan
and
Mongolia
report
H5N1
WAVE 3
2006
May
Sudan,
Cote
d’Ivoire
April
Burkina
Faso, UK
February
Iraq,
Nigeria,
Azerbaijan,
Bulgaria,
Greece,
Italy,
Slovenia,
Iran,
Austria,
Germany,
Egypt,
India,
France,
Hungary,
Malaysia.
Slovakia,
Bosnia,
Georgia,
Niger
July
Spain
EFFECTS OF AI FELT WORLDWIDE . . .
Principal transmission is still between animals and
between animals and humans; pandemic is feared and
countries are taking steps to prevent this
Around 200 people have died since 2003 due to
exposure to animals with the H5N1 virus
Source: Milan
Brambhatt, WB,
Conference of Avian
Influenza in Humans,
June 29, 2006
Economic and social costs felt only in poultry sectors of
the affected countries
6
EFFECTS OF AI FELT WORLDWIDE . . .
Economic and social costs felt only in poultry sectors of
the affected countries
East / Southeast Asian countries hit by AI have
thriving economies except Thailand where slowdown
was noted; 40% in drop in Exports of Thailand
Source: Milan Brambhatt, WB, Conference of
Avian Influenza in Humans, June 29, 2006
ECONOMIC COSTS OF AI . . .
Direct productions costs due to:
losses on poultry due to disease and culling – over
200 million poultry
15-20% decline in stocks in Vietnam and Thailand
(effects a 0.1 – 0.2% decline in GDP)
impact on poultry traders, feed mills (in EU, 40%
decline in demand for poultry feeds), breeders
additional losses due to lower egg production
Indirect effects due to:
shifts in market demands due to consumer fears
trade restrictions to limit spread of AI
Source: Milan Brambhatt, WB, Conference of Avian Influenza in Humans, June 29, 2006
7
ECONOMIC COSTS OF AI . . .
Prevention and control costs
purchase of poultry vaccines and medication
hiring workers for culling and clean – up
set – up of surveillance and diagnostic systems
compensation of poultry owners
Cost to the community affected by AI
unemployment
decline in labor productivity
cost of hospitalization and medical treatment
effect on travel and tourism
20% decline in tourism, transportation and key
services = decline in 2% world GDP = $800 B/year
Source: Milan Brambhatt, WB, Conference of Avian Influenza in Humans, June 29, 2006
ASIAN POULTRY
8
Future Regional Production
•
PRODUCTION
PRODUCTION
(million metric tons)
(million metric tons)
30.0
30.0
8.4m
45%
25.0
25.0
4.1m
26%
2.8m
17%
1.4m
13%
2.3m
43%
20.0
20.0
•
15.0
15.0
10.0
10.0
•
2004
2004
2013
2013
2013
2013
2004
2004
2013
2013
2004
2004
2013
2013
2013
2013
2004
2004
0.0
0.0
2004
2004
5.0
5.0
Asia is by far the greatest
opportunity for volume
growth
– China – 3.8 mmt (38%)
– India – 2.5 mmt (154%)
Latin America
– Brazil – 2.2 mmt (25%)
– Mexico – 0.7 mmt (34%)
Europe
– Western Europe – steady
or declining
– Russia – 0.7 mmt (68%)
Asia & Latin
USA & Europe Middle
Asia & Latin
USA & Europe Middle
Oceanic America Canada
East &
Oceanic America Canada
East &
Africa
Africa
Source: Gordon Butland
Poultry Production in Southeast Asia has been
growing consistently throughout the years.
9
Poultry Systems in Selected South East
Asian Countries, 2005
Country
Integrator
Cambodia
Indonesia
3.5%
Large
Small
Commercial Commercial
< 1%
< 1%
98%
21.2%
11.8%
63.4%
10%
90%
Lao PDR
Thailand
Vietnam
70%
Backyard
20%
10%
20%
15%
65%
PHILIPPINE
BROILER
10
CHICKEN PRODUCTION
IN THE PHILIPPINES
OTHERS - 3%
LAYERS -17%
COMMERCIAL–
35%
BROILER -67%
INTEGRATOR –
35%
NATIVE -13%
KEY INDUSTRY PLAYERS
(Ranked According to Production Volume)
Company
Brand
1. San Miguel Pure Foods
Magnolia, Supermanok
2. Tyson / Bounty Agro Ventures
Bounty Fresh
3. Swift Foods
Swift
4. Vitarich Corporation
Cook’s
5. Universal Robina Corp.
None
6. Foster Foods
Foster
11
“Small is Beautiful”
Critical Units:
1. Contract Growing
2. Dressing Plant
3. Sales
CHICKEN PRODUCTION IN
THE PHILIPPINES, ’02-’06
(BAI, PABI DATA)
1st Q
140
453
473
2nd Q
3rd Q
494
4th Q
482
438
120
100
80
60
40
20
0
2002
2003
2004
2005
2006
12
CHICKEN IMPORTS (in MT), 2002-2006
30,000
25,000
20,000
15,000
10,000
5,000
0
2002
2003
2004
2005
2006
In 2006, industry players were given the chance to import leg quarters
under a special importation agreement to alleviate short supply.
MINIMUM ACCESS VOLUMES (MAV)
continued implementation of Minimum Access
Volume (MAV) mechanism beyond June 30, 2005
DA expected to maintain its final year MAV
commitments until a new WTO agreement is
reached
volume under MAV (in-quota) shall continue to
be exempt from special safeguards which has
been in place since 2001.
HS Code
Product
Tariff Rates
Poultry
Final Year Volume: 23,490 MT
IN
0207
Frozen Chicken (Whole)
40%
40%
Frozen Chicken (Cuts)
40%
40%
35%
50%
Corn
Final Year Volume: 216,940 MT
1005
Corn
OUT
13
2006 COMPARATIVE LIVE & DRESSED CHICKEN PRICES
95
90
85
80
75
70
65
Live
60
Dressed
55
50
45
40
35
30
J
F
M
A
M
J
J
A
S
O
N
D
PHILIPPINE ANIMAL
PROTEIN CONSUMPTION
2%
3% 3%
10%
Fish/Seafd
Pork
Poultry
Pr Meats
14%
Beef
Others
68%
Source: USDA FAS GAIN Report
14
CONSUMPTION OF CHICKEN MEAT
IN THE PHILIPPINES
BROILER
PORK
BEEF
7.6
12.9
4.3
Philippines
FOOD BUDGET SHARES FOR
SELECTED COUNTRIES
Country
Bev &
Tobacco
Breads,
Cereals
Meat
Fish
Philippines
11.91
Thailand
28.57
US
Dairy
29.73
14.49
14.50
6.71
16.11
18.64
3.31
5.23
28.71
11.39
19.58
1.19
Brazil
12.32
16.80
24.54
France
21.36
10.89
24.92
Fats,
Oils
Fruits,
Veg
Other
Food as
% of
Expenses
1.76
11.10
9.81
48.35
2.76
16.38
8.99
28.56
8.59
1.77
14.66
14.11
9.73
2.31
14.04
3.62
14.83
11.55
22.71
4.75
11.80
2.85
12.39
11.05
15.34
Source: USDA – FAS, 2006
BROILER
PRODUCTION
15
INTEGRATED POULTRY PRODUCTION
GRAND PARENT FARMS
FEEDMILLS
PARENT STOCK FARMS
HATCHERIES
BROILER FARMS
ANIMAL HEALTH GROUP
QUALITY ASSURANCE
PROCESSING
PLANTS
PRODUCT
DEVELOPMENT
SALES &
MARKETING
THE PRODUCTION CYCLE
Grand Parent
Growing period is from day 1 to week 23
At week 24, they start to lay until week 68
Day old chicks from eggs that hatched are selected to get the hy brid male and female line for transfer
to the Parent stock farms
Parent
Growing period is from day 1 to week 23
At week 24, they start to lay until week 68
Day old chicks from eggs that hatched are then transferred to the Contract Growing farms
Broiler
Day old chicks become full grown broilers at an average of 35 days
Processing
First egg laid GParent 162 days
Hatching period
21 days
First egg laid Parent
162 days
Hatching period
21 days
DOC delivered to CG 366 days
DOC to Broiler
35 days
Total Cycle
401 days
Or 1 year, 1 month and 5 days
Harvested broilers are brought to the dressing plant where they are processed
Hatchery
Two major facilities support
the farm operations namely
the Hatchery and Feedmill
Feedmill
Key support groups are :
Animal Nutrition
Diagnostic Lab
Animal Health
16
BROILER PRODUCT FLOW
INTEGRATORS
BREEDER
FARMS
HATCHING
FACILITY
CONTRACT
GROWERS
EXPORT
Dressed
Birds
DRESSING
PLANTS
Int’l
Mkt
HRI
L
Supermarkets
O
C
Day-old
chicks
A
Grown
Broilers
INDEPENDENT
BREEDERS
COMMERCIAL
GROWERS
Day-old
chicks
VIAJEROS
Grown
Broilers
L
Wet Market
Distributors
Small
Retailers
M
K
T
PHILIPPINE BROILER INDUSTRY
DEVELOPMENT (TRENDS AND ISSUES)
increased production by commercial sector
competition among big supermarkets driving
margins in the sector; although only about 10% of
supply is sold in this channel
industry remains highly viable with expanding
line of value – added chicken products (nuggets,
hotdogs, chicken – based ham, tocino, sausages,
marinated chicken)
17
BROILER PRODUCTION PARAMETERS
PARAMETER
PHILIPPINE
AVERAGE
STANDARDS
Feed
Conversion
Ratio
2.00
1.90
Harvest
Recovery %
95%
95%
1.50 – 1.80
1.55
ALW, kg
* How big we grow birds depends on market
preference.
ELEMENTS OF BROILER COST
Feed Cost
Day – old chick Cost
Growers’ Fees
Vaccines and Medication
Operating Expenses (salaries,
incentives of CG personnel)
FEEDS REMAIN THE BIGGEST COST COMPONENT
OF BROILER PRODUCTION
Except for corn, 2006 RM prices are generally
lower than 2005 prices
18
CORN
13
12
11
10
9
8
7
6
5
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Actual '03
8.25
7.80
7.70
7.70
7.80
8.20
8.20
9.50
8.90
9.60
9.60
9.40
Actual '04
9.87
10.56 10.44 10.62 11.23
11.34 10.53
10.30
9.75
9.27
8.84
8.95
Actual '05
8.96
8.43
9.13
9.66
9.85
9.61
9.21
9.45
9.94
Actual '06
10.9
11.51
11.5
11.45 11.62 11.12 11.11 12.14 11.17 10.37 10.64 11.05
9.48
9.42
9.63
INDIAN/CHINESE WHEAT
12
11
10
9
8
7
6
5
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Actual '03
6.90
6.90
6.90
7.50
7.50
7.75
7.75
8.97
8.97
8.88
8.40
8.88
Actual '04
9.86
9.88
11.42 11.41
9.94
Actual '05
9.11
9.70
9.94
9.94
9.94
9.41
9.42
10.04
9.73
9.43
9.38
9.02
10.06 10.07
Actual '06 10.07
10.70 10.33
10.29 10.21 10.13 10.14 11.41
9.41
9.43
9.54
10.25 10.27
9.03
9.67
10.3
11.17
19
ARGENTINE SOYA
24
23
22
21
20
19
18
17
16
15
14
13
Aug
Sep
Oct
Actual '03 14.12 13.70 13.70 13.90 13.90 13.90 13.90 14.85
Jan
Feb
Mar
14.95
14.95
14.55 16.10
Actual '04 17.77 18.47 19.39 20.13 20.25 21.94 21.86 22.25
21.52
19.81
18.47 17.92
Actual '05 18.25
17.99
Actual '06 15.74
14.97
14.9
Apr
May
Jun
Jul
Nov
Dec
18.76 16.85
17.05 17.13 17.06 16.74 16.65 16.22
14.69 14.24 16.74
15.73 15.22 13.34 13.80 13.70 13.14
COCONUT OIL
44
42
40
38
36
34
32
30
28
26
24
22
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Actual '03 28.20 24.50 24.30 24.30 24.00 24.50 24.50 24.70 24.00 26.10
26.10 27.95
Actual '04 31.36 32.18 35.71 38.38 40.65 40.44 39.32 38.28 36.84 35.09
35.40 36.06
Actual '05 35.47
34.6
34.75 35.34 34.63 34.04
33.5
31.18 29.26 28.75
Actual '06 28.59 28.19 28.46 28.62 29.23 29.24 28.75 29.63 30.21 29.73
29.53 28.6
30.12 33.75
20
AI and the PHILIPPINES
Detection of H5 avian influenza strain in a duck farm
in Calumpit, Bulacan in July, 2005
Australian Animal Health Laboratory tests revealed
that the strain is low pathogenic avian influenza (LPAI)
Japan bans all poultry imports from the Philippines
following announcement of detection of AI strain in
Bulacan
Philippines has remained AI free since the July, 2005
incident
Japan lifted its ban on poultry products from the
Philippines last May 24, 2006
Philippines has been granted clearance to pursue
poultry exports in Japan starting June 7, 2006
THE BROILER INDUSTRY AND THE
EXPORT MARKET
BEFORE DETECTION OF THE LPAI STRAIN IN BULACAN,
THE PHILIPPINES HAS BEEN EXPORTING TO JAPAN,
KOREA AND THE MIDDLE EAST
EXPORTS IN ‘000 KILOS
COMPANY
SMFI
SFI
TAVI
ROYAL CARGO
2004
510
606
100
399
AGRI FRUIT
TOTA
1,615
JAN-JUN 2005
540
708
145
1,993
7
3,394
21
CHALLENGES IN GEARING FOR BIGGER
EXPORT BUSINESS
No equivalency in accreditation systems (Halal)
Set – up of traceability system (for EU markets)
Very few plants are GMP and HACCP – accredited
Inadequate disease surveillance system
Inadequate meat inspection system
Production costs remain high despite good efficiencies
Lack of storage and freezing facilities
High cost of freight and storage
Development of export – quality value – added products
NEXT STEPS IN AI PREVENTION
Intensification of AI Protection Program
Review of AIPP protocols
Strengthening surveillance
Domestic poultry
Wild birds
Imports and smuggling
Humans
Strengthening of Poultry Industry Coordination
National Poultry Board
Establishment of Indemnification Fund for AI
Source: Ruben Pascual presentation for UA&P
22
BE A PARTNER OF THE BROILER INDUSTRY . . .
contract grower
contract breeder
trucker / hauler
toll partner – hatchery, dressing plant, feed mill, processed meats
vaccines and medicines supplier
feed raw materials supplier
trade distributor
23