Required Report - public distribution

**Date:** 9/12/2006

**GAIN Report Number:** SA6012

SA6012

**Saudi Arabia**

**Poultry and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)David Rosenbloom

Agricultural Trade Office, U.S. Embassy

**Prepared by:**

Hussein Mousa

**Report Highlights:**

Saudi Arabian broiler meat production is forecast to reach 559,000
metric tons in 2007, an increase of two percent over 2006. The Kingdom's
total broiler meat imports in 2006 will decline 10 percent to 434,000
metric tons due to decreased consumption January-April because of AI
consumer concerns following detection of the disease in nearby
countries.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Riyadh \[SA2\]

\[SA\]

Table of Contents

[Broiler Meat Production 2](#broiler-meat-production)

[Market Year Begin 2](#market-year-begin)

[Production Cost 2](#production-cost)

[Production Policy 3](#production-policy)

[Grow-Out Period 3](#grow-out-period)

[Poultry Diseases 3](#poultry-diseases)

[Consumption 4](#consumption)

[Trade 4](#trade)

[Imports 4](#imports)

[Recent C&F Prices 5](#recent-cf-prices)

[Claims of Unfair Prices for Imported Chicken
5](#claims-of-unfair-prices-for-imported-chicken)

[Tariffs 5](#tariffs)

[Major Poultry Import Requirements
5](#major-poultry-import-requirements)

[Exports 6](#exports)

[Distribution Channel 6](#distribution-channel)

[Trade Matrix 7](#trade-matrix)

# Broiler Meat Production

The Saudi Ministry of Agriculture (MOA) classifies poultry production
farms as either specialized (commercial) or traditional. The PSD table
in this report includes only

commercial production. The vast majority of poultry meat produced in
Saudi Arabia consists of broiler chicken (about 97 percent), the balance
attributed mainly to culled hens and quail production.

######## Production, Supply and Demand Table 

+---------------------+-------+--------+------+-------+------+--------+
| **PSD Table**       |       |        |      |       |      |        |
+---------------------+-------+--------+------+-------+------+--------+
| ######### C         | **    |        |      |       |      |        |
| ountry {#country-1} | Saudi |        |      |       |      |        |
|                     | Ara   |        |      |       |      |        |
|                     | bia** |        |      |       |      |        |
+---------------------+-------+--------+------+-------+------+--------+
| **Commodity**       | **Pou |        |      |       |      |        |
|                     | ltry, |        |      |       |      |        |
|                     | Meat, |        |      |       |      |        |
|                     | Br    |        |      |       |      |        |
|                     | oiler |        |      |       |      |        |
|                     | (*    |        |      |       |      |        |
|                     | *1000 |        |      |       |      |        |
|                     | MT)   |        |      |       |      |        |
+---------------------+-------+--------+------+-------+------+--------+
|                     | 2005  | R      | 2006 | Est   | 2007 | Fo     |
|                     |       | evised |      | imate |      | recast |
+---------------------+-------+--------+------+-------+------+--------+
|                     | USDA  | Post   | USDA | Post  | USDA | Post   |
|                     | Off   | Es     | Offi | Est   | Offi | Es     |
|                     | icial | timate | cial | imate | cial | timate |
+---------------------+-------+--------+------+-------+------+--------+
|                     | (Old) | (New)  | (    | (New) | (    | (New)  |
|                     |       |        | Old) |       | Old) |        |
+---------------------+-------+--------+------+-------+------+--------+
| #                   |       | 0      |      | 01    |      | 0      |
| # Market Year Begin |       | 1/2005 |      | /2006 |      | 1/2007 |
+---------------------+-------+--------+------+-------+------+--------+
| Inventory           | 0     | 0      | 0    | 0     | 0    | 0      |
| (Reference)         |       |        |      |       |      |        |
+---------------------+-------+--------+------+-------+------+--------+
| Slaughter           | 0     | 0      | 0    | 0     | 0    | 0      |
| (Reference)         |       |        |      |       |      |        |
+---------------------+-------+--------+------+-------+------+--------+
| Beginning Stocks    | 0     | 0      | 0    | 0     | 0    | 0      |
+---------------------+-------+--------+------+-------+------+--------+
| Production          | 479   | 537    | 489  | 548   | 0    | 559    |
+---------------------+-------+--------+------+-------+------+--------+
| Whole, Imports      | 480   | 454    | 490  | 414   | 0    | 440    |
+---------------------+-------+--------+------+-------+------+--------+
| Parts, Imports      | 0     | 30     | 0    | 20    | 0    | 30     |
+---------------------+-------+--------+------+-------+------+--------+
| Other Imports       | 0     | 0      | 0    | 0     | 0    | 0      |
+---------------------+-------+--------+------+-------+------+--------+
| TOTAL Imports       | 480   | 484    | 490  | 434   | 0    | 470    |
+---------------------+-------+--------+------+-------+------+--------+
| **TOTAL SUPPLY**    | **    | **     | **9  | **    | *    | **     |
|                     | 959** | 1021** | 79** | 982** | *0** | 1029** |
+---------------------+-------+--------+------+-------+------+--------+
| Whole, Exports      | 10    | 10     | 10   | 10    | 0    | 10     |
+---------------------+-------+--------+------+-------+------+--------+
| Parts, Exports      | 0     | 0      | 0    | 0     | 0    | 0      |
+---------------------+-------+--------+------+-------+------+--------+
| TOTAL Exports       | 10    | 10     | 10   | 10    | 0    | 10     |
+---------------------+-------+--------+------+-------+------+--------+
| **Human             | **    | **     | **9  | **    | *    | **     |
| Consumption**       | 949** | 1006** | 69** | 967** | *0** | 1014** |
+---------------------+-------+--------+------+-------+------+--------+
| Other Use, Losses   | 0     | 5      | 0    | 5     | 0    | 5      |
+---------------------+-------+--------+------+-------+------+--------+
| **Total Dom.        | **    | **     | **9  | **    | *    | **     |
| Consumption**       | 949** | 1011** | 69** | 972** | *0** | 1019** |
+---------------------+-------+--------+------+-------+------+--------+
| TOTAL Use           | 959   | 1021   | 979  | 982   | 0    | 1029   |
+---------------------+-------+--------+------+-------+------+--------+
| Ending Stocks       | 0     | 0      | 0    | 0     | 0    | 0      |
+---------------------+-------+--------+------+-------+------+--------+
| **TOTAL             | **    | **     | **9  | **    | *    | **     |
| DISTRIBUTION**      | 959** | 1021** | 79** | 982** | *0** | 1029** |
+---------------------+-------+--------+------+-------+------+--------+
| Calendar Yr. Imp.   | 0     | 1      | 0    | 1     | 0    | 1      |
| from U.S.           |       |        |      |       |      |        |
+---------------------+-------+--------+------+-------+------+--------+

Preliminary information provided by the MOA indicates higher broiler
meat production in 2005 than initially estimated by local poultry
producers. Accordingly, we have revised our PSD table for 2005 upward to
reflect this new information. The MOA indicated that the country's total
broiler meat production reached 537,000 metric tons in 2005. Based on
the MOA data and local trade information, broiler meat production is
forecast to reach 559,000 metric tons in 2007. Newly licensed farms are
the main reason for the expected production increase. The total number
of broiler meat production units in 2005 reached 410.

## Production Cost

Saudi Arabia's production capacity is estimated to have increased to
650,000 metric tons. Local production, however, is not expected to
increase dramatically because of continued stiff competition from highly
competitive imported poultry meat. Increases in domestic broiler meat
output is tied to generous financial, technical and other government
assistance. This support is designed to compensate for the higher local
production costs ranging from \$1,090 to \$1,380 per metric ton compared
to a C&F price for imported Brazilian frozen broiler meat that fell to
as low as \$800 per mt earlier this year.

## Production Policy 

The Saudi government encourages the establishment of new poultry farms
and the expansion of existing ones in order to attain the maximum
possible self-sufficiency level in broiler meat production. To help meet
this goal, the government grants interest free loans to new viable
poultry farms. It also maintains a subsidy program, started in the late
1970s, which pays 25 percent of the cost of selected poultry equipment.
In September 2004, the government introduced a new subsidy scheme for
local poultry meat producers to help them construct cold stores, buy
refrigerated trucks, screeners, grading and farm packaging equipment.
Poultry farms, particularly larger units, benefit from various
government subsidy schemes to spur investment in the latest broiler
production and management technologies. Local poultry equipment
manufacturers also are entitled to receive various government subsidies.
The Saudi government provides a subsidy to importers of \$42.67 per
metric ton for imported corn and soybean meal. The corn subsidy is based
on U.S. number 2 yellow corn, which provides a significant incentive for
Saudi importers to buy U.S. corn. The government pays importers \$66.67
per metric ton for imported feed barley.

## 

## Grow-Out Period

The grow-out period for broilers in the Kingdom ranges between 35 and 42
days. Although there is no data available indicating the average weight
gain per day, the average broiler live weight when marketed is 1.40 kg.
It takes about 1.8 kg of feed to produce a marketable chicken.

## Poultry Diseases

**Avian Influenza**

Thus far, the Kingdom is free of the H5N1 strain. However, in late
January 2006, the Saudi Ministry of Agriculture killed and burned 37
falcons after five of them died because of infection with H5 avian flu.
On November 12, 2005, the Saudi Government imposed an immediate ban on
the importation of live birds due to concerns over avian influenza. This
followed the discovery of bird flu in Kuwait. The government import ban
excludes day-old chicks and hatching eggs.

In order to reduce possible human infection with poultry related
diseases, the MOA has ban new sales of live chickens within Saudi city
limits, effecting August 2007. Currently, there are several thousand
live chicken retail stores in the Kingdom. Customers buy live birds,
which are slaughtered in the shops. After August 2007, poultry consumers
will have access only to chilled and frozen poultry sold in supermarkets
and other fresh/frozen meat retailers. The government had contemplated
closing the live chicken retail stores for several years due to the
inability of most stores to meet established hygiene standards. However,
it delayed until August 2006, issuing a decree because of the
significant adverse economic impact on both retailers and their
suppliers, many of which are mostly small poultry farmers.

**Common Poultry Diseases**

The most common poultry diseases found in the Kingdom include: Newcastle
Disease Virus (NDV), Gumoro, Infectious Bronchitis (IB), Avian Influenza
(H~9~N~2~ subtype), and Salmonellosis, Caccidiosis. According to major
poultry producers, no major disease outbreak was reported in 2006. NDV,
however, continues to be a major problem for small-scale poultry
farmers.

The MOA's decision in December 2002 to ban the transportation of live
poultry from one region to another helped minimize production problems
related to poultry diseases such as NDV. The scheme reduced the
possibility of transferring the transfer of diseases from affected
regions and reduced high chicken mortality rates incurred during
transport.

# Consumption 

Per capita consumption of poultry meat and products is estimated at 37.4
kg in 2005, based on the Kingdom's total population of 27 million. Per
capita consumption in 1979 reached only 16.5 kg. Broiler meat
consumption is projected to continue growing over the next few years due
to: (1) chicken is the most competitive animal protein source in the
country (\$1.60 per kg compared to \$5.33 for red meat) and (2) a
growing preference for chicken meat by increasingly diet conscious
consumers.

Poultry meat consumption during January-April period this year fell by
15 percent following the detection of AI in Egypt and Kuwait. However,
consumer fear of AI has since abated. This largely reflects measures
taken by the Saudi Government to ban imports of poultry and poultry
products from affected countries coupled with repeated announcements by
the government that the Kingdom is free of AI.

# Trade

## Imports 

For the past several years, Brazil has been the leading frozen broiler
meat supplier to the Kingdom, followed by France. Argentina and South
Africa were a distant third and fourth respectively in 2005. Last year,
Saudi Arabia imported 484,202 metric tons of broiler meat, an increase
of 12 percent compared to 2004. In 2005, Brazil exported 380,523 metric
tons of poultry meat to Saudi Arabia (accounting for more than 78
percent of total imports), France 93,088 mt, Argentina 7,237 mt, South
Africa 1,555 mt and other countries 1,799. Brazil will continue to
dominate the Saudi poultry import market for the next several years due
largely to its price competitiveness and its reputation as a
high-quality frozen broiler meat supplier.

The Kingdom's total broiler meat imports in 2006 is forecast to decline
10 percent to 434,000 mt due to decreased consumption January to April
because of AI consumer concerns. According to Brazilian Customs data for
the first six months of 2006, total exports to Saudi Arabia declined 19
percent compared to the same period a year earlier (see trade matrix at
the end the report). In 2007, imports are expected to bounce back due to
reduced consumer fears.

## Recent C&F Prices 

According to local importers, Brazilian frozen poultry meat prices (C&F
Saudi ports) increased from \$1,200 per metric ton in July to \$1,350 in
August. Prices for French chickens are similar to those for Brazilian
products. A further \$100 price increase is expected by December. This
is attributed to increased Saudi demand for poultry meat to feed more
than 2 million foreign pilgrims who will come to Mecca to perform Haj
rituals. It is worth mentioning that Brazilian poultry prices fell to
\$800 per metric ton in early 2006 due to reduced import demand.

The considerable price increase recorded in recent months is largely
attributed to an import demand in Egypt due to the collapse of the
Egyptian poultry industry as a result of AI outbreak last February. In
order to satisfy market needs, the Egyptian government reportedly
decided to remove both quantitative restrictions and tariffs on poultry
imports for 6 months starting from July 2006. Brazil seems to be the
only player in the Egyptian market since the country is free from AI and
its poultry prices are very competitive compared to other supplying
countries. According to FAS Cairo, the Egyptian plan is to import
450,000 metric tons during the July-September 2006 period. Other factors
accounting for the rise in C&F prices for Brazilian poultry delivered to
the Kingdom include: (1) higher Brazilian production costs; (2)
increased demand for Brazilian chicken in other markets; (3) stronger
Brazilian Real exchange rate; (4) static poultry production in Brazil;
(5) reduced exports from France; and (6) a ban on Chinese poultry meat
imports imposed by the Saudi government.

## Claims of Unfair Prices for Imported Chicken

Despite various government subsides provided to the local poultry
industry, producers continue difficulty in competing with imports. At
most times during the year, locally produced frozen broilers are more
expensive than imported product. Local producers maintain that the
Brazilian and French governments subsidize their poultry exporters and
that product is dumped in the Kingdom. Saudi Arabia's Cooperative
Society for Poultry Producers is engaged in a high profile lobbying
effort to convince the Saudi government to increase the import duty on
poultry meat from the current rate of 20 percent or \$0.266 per kg,
whichever is higher. The organization also is active in a media campaign
to discredit the quality of imported chickens, claiming that they are
below the established Saudi poultry specifications. The government has
indicated its willingness to revisit the import tariff and to implement
other control measures if the Cooperative Society can prove that
imported chickens are under-priced or that they do not meet local
standards. The society has presented to date any convincing evidence to
support its claims.

## Tariffs

The customs duty on imported chicken is 20 percent or \$0.267 per
kilogram, whichever is higher. This rate has been in place for several
years.

## Major Poultry Import Requirements

**1. Hormone Free Certification**: The Saudi Ministry of Commerce (MOCI)
requires that the responsible government agency of an exporting country
include in a health certificate accompanying exported poultry meat a
statement confirming that the poultry meat was tested and found to be
totally hormone free. All imported poultry meat is randomly tested for
Nutrofuran and chlorophenical hormones periodically during the year.

**2. Ban on Animal Ruminant Feeding:** MOCI import requirements require
the health certificate accompanying shipments conform to ministerial
decree 123 issued in January 2001. This decree requires that health
certificates issued by a government agency of the exporting country
clearly indicate that the birds slaughtered had not been fed animal
protein, animal fats, or animal by‑products. MOCI, which implemented the
requirement on April 25, 2001, maintains that the measure is necessary
to prevent the entry of poultry meat considered unfit for human
consumption if birds have been fed these animal ruminant products.

**3. Quality Standards**: Imported poultry meat and products must meet
all existing Saudi poultry meat quality standards and specifications,
including halal slaughtering requirements.

**4. Laboratory Test:** All poultry meat and products imported will be
tested at Saudi ports of entry to ascertain that they meet the above
requirements.

## Exports

Faced with stiff competition from imported poultry and low prices, some
Saudi broiler

producers have turned to exports. Saudi Arabia\'s broiler meat exports
(whole and parts) are forecast to remain at 10,000 metric tons over the
next couple of years. Saudi Arabia's exports and largely directed to
nearby Arab countries such as Qatar, Bahrain, Kuwait, U.A.E., Oman and
Yemen.

## Distribution Channel

The Kingdom has an extensive infrastructure for poultry meat
distribution. Poultry producers and importers have generally adequate
storage facilities, including refrigerated trucks and cold storage.

Poultry meat and products are available in both wholesale and retail
outlets throughout the Kingdom. Major poultry farms and importers sell
their products either directly to consumers through their own nationwide
retail outlets or through poultry wholesalers. Consumers may purchase
poultry meat in cardboard boxes containing ten chickens from wholesalers
or on a piece basis from retailers and supermarkets. Commercial
customers buy their poultry supplies either from importers/distributors,
poultry farms, or both. The Saudi government requires catering companies
to use only locally-produced chicken when catering to government
institutions such as the military or government-owned hospitals.

Many major poultry producers are vertically integrated with other
poultry related businesses. They produce their own feed requirements and
sell directly to customers through their own retail outlets or through
wholesalers. Several poultry producers operate their own chicken fast
food outlets. Al-Fakieh Poultry, the second largest poultry farm, opened
its first outlet as Taza Barbecue Chicken in 1990 and now has outlets
throughout the Kingdom as well as several branches in other Arab and
some Asian countries. The firm has one outlet in the United States in
Chicago.

## Trade Matrix 

<table style="width:100%;">
<colgroup>
<col style="width: 26%" />
<col style="width: 0%" />
<col style="width: 13%" />
<col style="width: 0%" />
<col style="width: 10%" />
<col style="width: 0%" />
<col style="width: 13%" />
<col style="width: 0%" />
<col style="width: 10%" />
<col style="width: 0%" />
<col style="width: 10%" />
<col style="width: 0%" />
<col style="width: 13%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="13"><strong>Major Broiler Meat Suppliers to Saudi Arabia,
2000-2005</strong></td>
</tr>
<tr class="even">
<td colspan="2"><p><strong> </strong></p>
<p><strong> </strong></p></td>
<td colspan="11"><strong>Year of Reporting (Metric Tons)</strong></td>
</tr>
<tr class="odd">
<td colspan="2"><strong>Reporting Country</strong></td>
<td colspan="2"><strong>2000</strong></td>
<td colspan="2"><strong>2001</strong></td>
<td colspan="2"><strong>2002</strong></td>
<td colspan="2"><strong>2003</strong></td>
<td colspan="2"><strong>2004</strong></td>
<td><strong>2005</strong></td>
</tr>
<tr class="even">
<td colspan="2"><strong>Brazil</strong></td>
<td colspan="2">207,809</td>
<td colspan="2">255,990</td>
<td colspan="2">251,387</td>
<td colspan="2">288,555</td>
<td colspan="2">333,223</td>
<td>380,523</td>
</tr>
<tr class="odd">
<td colspan="2"><strong>France</strong></td>
<td colspan="2">112,683</td>
<td colspan="2">106,693</td>
<td colspan="2">101,684</td>
<td colspan="2">113,147</td>
<td colspan="2">83,032</td>
<td>93,088</td>
</tr>
<tr class="even">
<td colspan="2"><strong>China</strong></td>
<td colspan="2">18,490</td>
<td colspan="2">33,534</td>
<td colspan="2">34,913</td>
<td colspan="2">42,008</td>
<td colspan="2">4,799</td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2"><strong>Argentina</strong></td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">454</td>
<td colspan="2">4,196</td>
<td colspan="2">5,369</td>
<td>7,237</td>
</tr>
<tr class="even">
<td colspan="2"><strong>United States</strong></td>
<td colspan="2">6,952</td>
<td colspan="2">2,109</td>
<td colspan="2">941</td>
<td colspan="2">230</td>
<td colspan="2">192</td>
<td>706</td>
</tr>
<tr class="odd">
<td colspan="2"><strong>South Africa</strong></td>
<td colspan="2">754</td>
<td colspan="2">109</td>
<td colspan="2">0</td>
<td colspan="2">11</td>
<td colspan="2">429</td>
<td>1,555</td>
</tr>
<tr class="even">
<td colspan="2"><strong>Other Countries</strong></td>
<td colspan="2">728</td>
<td colspan="2">901</td>
<td colspan="2">1,576</td>
<td colspan="2">4,225</td>
<td colspan="2">2,417</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td><strong>Total Imports</strong></td>
<td colspan="2"><strong>347,416</strong></td>
<td colspan="2"><strong>399,336</strong></td>
<td colspan="2"><strong>390,955</strong></td>
<td colspan="2"><strong>452,372</strong></td>
<td colspan="2"><strong>429,461</strong></td>
<td colspan="2"><strong>484,202</strong></td>
</tr>
</tbody>
</table>

**Source: World Trade Atlas**

Following are data on Brazilian poultry meat exports to Saudi Arabia for
January-June 2006.

  ------------- ------------------------ ---------------------------------
  **Supplying   **Reporting Period       
  Country**     (quantities in MT)**     

                **January-June 2006**    **January-June 2005**

  **Brazil**    142,645                  177,798
  ------------- ------------------------ ---------------------------------

Source: Brazilian official data.