Required Report - public distribution

**Date:** 9/01/2004

**GAIN Report Number:** KU4003

KU4003

**Kuwait**

**Poultry and Products**

**Annual Poultry Meat Report**

**2004**

**Approved by:**

![](media/image1.wmf)ATO: Michael T. Henney

U.S. Consulate General, Dubai, U.A.E.

**Prepared by:**

ATO: Hovaguim Kizirian

**Report Highlights:**

In 2005, Kuwait's broiler production is projected at 30,000 MT, with
birds mostly marketed live. Frozen chicken imports are forecast at
78,000 MT, including 65,000 MT whole chickens, and 13,000 MT parts.
Brazil is expected to continue its dominance of the whole bird, bone-in
and boneless parts markets. The U.S. should supply 3,000-4,000 MT frozen
leg quarters, mainly for re-export to Iraq, and some bone-in chicken
parts.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Dubai \[TC1\]

\[KU\]

Table of Contents

[1. PRODUCTION 3](#production)

[2. CONSUMPTION 3](#consumption)

[3. IMPORT/EXPORT 4](#importexport)

[4. STOCKS 5](#stocks)

[5. ECONOMIC FACTORS 6](#economic-factors)

[6. PSD TABLE 8](#psd-table)

[7. IMPORT TRADE MATRIX 9](#import-trade-matrix)

# 1. PRODUCTION

In CY 2005 Kuwait's broiler meat production is forecast at 30,000 metric
tons (MT), and is expected to recover slightly from the dismal CY 2004
production estimated to be only 28,000 MT. According to poultry industry
sources, poultry farms in Kuwait were afflicted with several diseases,
including Newcastle, Gamboro and Avian Influenza. Those sources believe
that the situation is slowly coming under control and that production
will resume at a more normal level in the coming year. Though those
diseases are coming under control, mortality rates are expected to
average at 10 percent this year, with some farms reporting mortality
rates will average upwards of 30 percent.

Two major producers account for 75 percent of the local production,
while a third, smaller producer accounts for another 15 percent. Five to
six small farms account for the balance. An estimated 60 percent of the
local broiler production is marketed as live, 5 percent as chilled and
the balance as frozen. Demand for live chickens, mainly from the Kuwaiti
nationals, is declining mainly because of practicality reasons and
health concerns.

Local broiler production does not directly compete with imported
broilers. Local whole frozen chicken retail prices are about 50-60
percent higher than imported frozen chicken. Local chilled chicken
prices are more than double of the imported frozen chicken prices. This
is due to the high cost of production as most of the production inputs
are imported. One of the two major poultry farms produces 1,5-2.0
million quails annually, marketed mostly as chilled. Finally, a smaller
farm produces 50,000-100,000 ducks annually, marketed mostly as live,
and to lesser extent as chilled.

# 2. CONSUMPTION

Kuwaiti consumers, who constitute about 40 percent of the total
population of 2.4 million, prefer live and chilled chicken produced
locally. The fact that the product is fresh and slaughtered in the
country according to proper Islamic Halal requirements appeals to them.
Expatriates, particularly those with low incomes, prefer cheaper,
imported, frozen whole chicken. Specifically, they prefer small sized
(800‑1,000 grams), white skinned, individually wrapped frozen chicken.
Brazilian, Saudi Arabian and European chickens are more popular than
U.S. chickens because they meet these preferences better.

Chicken meat is becoming more popular than red meats because of
increased health awareness and because it is cheaper than other meats.
The BSE scare in Europe and North America and the ecological problems
Kuwait's seafood production is encountering have helped to shift
consumption towards poultry meat at the expense of red meats and
seafood. In addition, since early 2003, the presence of tens of
thousands of coalition troops in Kuwait and nearby Iraq helped increase
demand for poultry meat over the preceding years.

In 2005 total chicken meat consumption is forecast at 104,000 metric
tons, of which 12,000 metric tons or 12 percent are in parts. Per capita
chicken meat consumption in Kuwait is forecast at about 43 kg. Total
chicken meat consumption is expected to increase 3-4 percent annually.
According to the trade, consumption of poultry parts is expected to
increase due to their practicality.

Kuwait enjoys one of the highest per capita incomes in the world, which
is expected to increase further in 2005 due to the increase in world oil
prices since mid-2004. Income distribution is not even, however. While
most Kuwaiti nationals enjoy relatively high incomes, most expatriate
workers, particularly those from Asia work for low wages. This explains
the relatively higher preference for whole chickens compared to the more
expensive parts.

Retail prices for Brazilian whole chickens, by far the dominant origin
in the Kuwaiti market, range between \$1.6 and \$2.14 per kilogram,
averaging at \$2.06 per kilo. The Saudi Arabian brands available are
retailing at \$2.3 per kilo, while the only Danish brand on the market
is retailing at \$2.14 per kilo and the only French brand available is
retailing at \$2.24 per kilo. On the other hand the Kuwaiti frozen whole
chicken is retailing at \$2.85 per kilo.

Retail prices for frozen Brazilian boned chicken parts, per kilo, are as
follows: Drumsticks: \$2.69-3.02; Thighs: 2.18- 2.89; Wings:
\$2.45-2.48; Whole Legs: \$2.18-2.91. American Drumsticks: \$2.2; Whole
Legs: \$2.11. Saudi Arabian: Thighs: \$2.90; Wings: \$2.45; Drumsticks:
2.89 and Breasts: \$3.48.

Consumption comprises of broilers only. Local spent hens are discarded
or recycled in the feed industry. Spent hens are not allowed to enter
the food market in Kuwait.

# 

# 3. IMPORT/EXPORT

In 2005 Kuwait is expected to import 78,000 MT of frozen broiler meat,
including 65,000 MT frozen whole broilers and 13,000 MT chicken parts.
The above is slightly higher than the estimated total imports of 77,000
in 2004. In 2005, Brazil is expected to be again the principal supplier
of frozen whole chickens with estimated imports of 50,000 MT, followed
by Saudi Arabia with 9,000 MT. France and Denmark are expected to be
smaller suppliers with estimated imports of 3,000 MT and 2,000 MT
respectively, while other suppliers, including Germany, the United
Kingdom and Egypt will supply the balance of 1,000 MT. Brazil's share of
the whole chicken market was further enhanced when \"Doux\", the
principal French supplier in the area, opted to supply the Kuwaiti
market from its production facilities in Brazil rather than France.

In 2005 Brazil will also be the dominant supplier of frozen chicken
parts, providing 6,000-7,000 MT of boned parts and 2,000-3,000 MT of
boneless parts. Since late 2003 and early 2004 Kuwait has had a ban on
poultry meat sourced from Thailand and PRC because of Avian Influenza in
those two countries. The bans prompted the trade to shift sourcing of
their boneless chicken parts to Brazil, until further notice.

In 2005, the United States is expected to supply about 1,000 MT of
frozen boned chicken parts and 3,000-4,000 tons of frozen leg quarters.
Trade sources reported that U.S. suppliers are opting for the use of
bags for packing boned chicken parts, rather than the customary 2-lb
trays preferred by local customers. U.S. boned chicken parts sales to
this market could be adversely affected if customers suddenly shift to
suppliers more responsive to their needs. U.S. leg quarters are imported
mainly for re-export to Iraq.

An estimated 80 percent of all Kuwait imports are concentrated in the
hands of 6-7 large companies, who are importing established Brazilian,
Saudi Arabian, Danish and French brands. Another 5-10 smaller importers
account for the balance of imports. Trade sources also estimate that
chicken meat imports will increase about 3-4 percent annually in the
coming few years. This is due to increasing consumer preference for
chicken meat rather than other meats and to a lesser degree to growth in
the population.

## 

Brazil's market share increased dramatically in the past few years at
the expense of European suppliers. The reduction of EU poultry subsidies
made Brazilian chickens more competitive.

Also, there is a public conception that Brazilian producers adhere more
closely to Islamic Halal slaughter procedures than their European and
U.S. counterparts. This latter factor has also benefited, albeit to a
smaller degree, Saudi Arabian chicken sales in Kuwait despite the fact
that Saudi chickens are 30-40 percent higher in price than chickens
imported from Brazil or Europe.

Brazilian and European chicken brands are also popular because of their
small sizes, competitive prices and aggressive marketing. U.S. whole
chicken prices are not competitive with imports from Brazil, France and
Denmark. Brazil and the United States practically share, albeit
unequally, the boned chicken parts market, estimated at about 8,000
metric tons annually. Several U.S. chicken part brands are currently
available in the market. In 2004, demand for U.S. chicken parts may
decrease substantially because of the switching of many U.S. suppliers
to packing chicken parts in bags rather that 2-lb trays preferred by
consumers. Large quantities of U.S. chicken parts are being imported for
the coalition troops present in Kuwait and nearby Iraq, but these do not
enter the local trade.

Brazil is now dominating the local boned parts market because of
competitive prices, attractive packaging and intensive marketing
efforts, including print media and TV advertising. Brazilian parts are
also more popular with local consumers due to smaller parts packed in
retail trays, which makes them more attractive to buyers. Trade sources
estimate that Brazil's share of the boned chicken parts market now
stands at 80 percent, while the United States and Saudi Arabia share the
balance.

Brazil will also be the principal supplier of the boneless chicken parts
market, estimated at 2,000-3,000 tons annually. Boneless parts, normally
packed in 1 or 2 kg packages, are popular both with consumers and with
restaurants, particularly \"Shawarma\" sandwich shops, because of their
practicality. However, their high prices are an impediment to wider
household use. In addition, the ban on poultry imports from the PRC and
Thailand, due to Avian Flu, should further reduce import levels of this
product this next year.

Turkey imports, mainly from the United States and to a lesser degree
from France and Brazil are limited to 150 MT annually. Turkey
consumption is seasonal and concentrated mostly around Thanksgiving and
Christmas holidays. Duck imports, mainly from the United States, France
and Canada are estimated at 80 tons annually. About 10-15 MT of Cornish
hens are also imported annually, exclusively from the United States.
Finally, about 40-50 MT of quails are imported annually from Brazil and
Lebanon.

Normally, re-exports of chicken meat from Kuwait were insignificant and
were always less than 1,000 MT. However, since the liberation of Iraq by
coalition forces, several Kuwaiti firms started to supply the Iraqi
market. In 2004 an estimated 3,000-4,000 MT of frozen poultry meat,
particularly mostly U.S. leg quarters are expected to be re-exported to
Iraq. This trend is expected to continue in 2005, if peaceful conditions
prevail in Iraq. Trade sources report that other countries such as
Turkey and Jordan are competing with Kuwait as alternate re-export
routes to Iraq.

According to trade sources Brazilian frozen whole chickens, at present,
are offered at \$1,000 per MT, CIF Kuwait, up from \$850 only a few
months ago. French whole chickens are offered at \$1,100 per MT, while
Danish chickens are offered at \$1,200 per MT. Saudi Arabian whole
chickens are offered at \$1,600 per MT. Brazilian boned chicken parts
are offered at \$1,300 per MT CIF Kuwait. U.S. turkeys are offered at
\$2,300 per MT, while Brazilian and French turkeys are offered at
\$1,650 per MT, CIF Kuwait. Finally, French frozen whole ducks are
offered at \$2,750 per MT CIF.

# 4. STOCKS

Kuwait does not have an official stock holding program. Trade sources
report that the trade normally holds 2 months supply as stocks for the
market needs.

# 5. ECONOMIC FACTORS

As of September 1, 2003 Kuwait's Customs Directorate started to
implement the GCC Unified Customs Law (UCL), which imposes a flat five
percent import tariff on practically all processed food products,
including poultry meat.

There are no import quotas or other trade restrictions. The following
documents are required for imported poultry:

\(1\) Invoice

\(2\) Certificate of origin

\(3\) Bill of lading

\(4\) Halal slaughter certificate

\(5\) Health certificate.

The invoice, certificate of origin and Halal slaughter certificate must
be certified by an Arab Chamber of Commerce in the country of origin and
by the Kuwaiti Embassy or Consulate in the country of origin. If these
are not available, certification may be done at any other Arab Embassy
or Consulate, except those of Iraq and Sudan.

Salmonella tolerance is zero. However, an unofficial 20 percent
tolerance is actually enforced, based on a sample size of five birds.
Each bird or tray of parts and export carton must carry a label with the
following information in English and Arabic or only Arabic:

1\) brand and product names,

2\) country of origin,

3\) net weight in metric units,

4\) producer\'s or packer\'s name

5\) production and expiry dates (day/month/year or month/year in that
order; English language digits are accepted provided no letters or codes
are used), and

6\) a statement verifying that the product is Halal slaughtered.

There is no shelf life requirement for frozen chicken products in
Kuwait. Manufacturers shelf life is accepted. Most importers however are
asking their suppliers to use a 12 month and to a lesser degree, an
18-month shelf life for poultry products. Frozen poultry must arrive in
Kuwait within 4 months of its slaughtering date. GMO's are not an issue
in Kuwait, although authorities are studying the subject in consultation
with other GCC countries.

All processed food products imported in Kuwait, including poultry must
be tested at the Ministry of Health laboratories before clearance. The
clearance procedure takes from one week to 10 days. Importers may store
the products in their own warehouses pending clearance.

An estimated 70 percent of imported poultry meat is marketed through
consumer cooperative societies, who dominate the food retail market in
Kuwait. A growing number of newly established private supermarkets are
reportedly accounting for 10 percent of the market. An estimated 10
percent of the imported poultry is marketed through the wholesale
market, and the balance of 10 percent is sold to institutional users,
such as restaurants, hotels, hospitals and others. The distributor's
margin is 15-20 percent, the wholesaler's 7-10 percent and the
retailer's margin is 10-15 percent.

Promotional activities are important to market development in Kuwait.
The Brazilians and French are normally very active in brand promotions.
The Danes emphasize generic promotions. TV and press advertising is
aggressively used by these countries. Supermarket promotions are popular
and are conducted regularly by competitors. These promotions, however,
appear to be less effective than TV and media advertising.

According to the trade, meeting the following requirements could
increase U.S. supplier\'s opportunities in the Kuwaiti poultry market:

‑Supply smaller-sized birds weighing between 900‑1,100 grams;

‑Improve the shape of produced chickens;

‑Use transparent shrink-wrap bags;

‑Avoid the use of strip calendar label marking for production and expiry
dates;

‑Produce small size parts;

‑Advertise and promote more;

‑Provide Arabic labels or stickers.

# 6. PSD TABLE

  ----------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
  Country           Kuwait                                                            

  Commodity         Poultry,                                    (1000                 
                    Meat,                                       MT)(MIL               
                    Broiler                                     HEAD)                 

                    2003       Revised    2004       Estimate   2005       Forecast   UOM

                    USDA       Post       USDA       Post       USDA       Post       
                    Official   Estimate   Official   Estimate   Official   Estimate   
                    \[Old\]    \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]    

  Market Year Begin            01/2003               01/2004               01/2005    MM/YYYY

  Inventory         0          0          0          0          0          0          (MIL
  (Reference)                                                                         HEAD)

  Slaughter         0          0          0          0          0          0          (MIL
  (Reference)                                                                         HEAD)

  Beginning Stocks  0          0          0          0          0          0          (1000 MT)

  Production        30         30         31         28         30         0          (1000 MT)

  Whole, Imports    61         61         62         64         65         0          (1000 MT)

  Parts, Imports    10         11         11         13         13         0          (1000 MT)

  Intra EC Imports  0          0          0          0          0          0          (1000 MT)

  Other Imports     0          0          0          0          0          0          (1000 MT)

  TOTAL Imports     71         72         73         77         78         0          (1000 MT)

  TOTAL SUPPLY      101        102        104        105        108        0          (1000 MT)

  Whole, Exports    2          1          2          0          0          0          (1000 MT)

  Parts, Exports    1          3          1          4          4          0          (1000 MT)

  Intra EC Exports  0          0          0          0          0          0          (1000 MT)

  Other Exports     0          0          0          0          0          0          (1000 MT)

  TOTAL Exports     3          4          3          4          4          0          (1000 MT)

  Human Consumption 98         98         101        101        104        0          (1000 MT)

  Other Use, Losses 0          0          0          0          0          0          (1000 MT)

  Total Dom.        98         98         101        101        104        0          (1000 MT)
  Consumption                                                                         

  TOTAL Use         101        102        104        105        108        0          (1000 MT)

  Ending Stocks     0          0          0          0          0          0          (1000 MT)

  TOTAL             101        102        104        105        108        0          (1000 MT)
  DISTRIBUTION                                                                        

  Cal. Yr. Imp.     4          4          4          4          4          0          (1000MT
  From US                                                                             
  ----------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------

# 7. IMPORT TRADE MATRIX

  -------------------- -------------- -------------------- -------------- --
  Import Trade Matrix                                                     

  Country              Kuwait                                             

  Commodity            Poultry, Meat,                                     
                       Broiler                                            

  Time Period          JAN-DEC        Units:               MT             

  Imports for:         2002                                2003           

  U.S.                 521            U.S.                                

  Others                              Others                              

  BRAZIL               45446                                              

  S. ARABIA            2686                                               

  DENMARK              2715                                               

  THAILAND             234                                                

  PRC                  1885                                               

  GERMANY              432                                                

  FRANCE               3030                                               

                                                                          

                                                                          

                                                                          

  Total for Others     56428                               0              

  Others not Listed    1009                                               
  -------------------- -------------- -------------------- -------------- --

1\. Source: Ministry of Planning - Statistics and Census Sector.

2\. Official trade statistics for CY 2003 are available through
September only.