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Required Report - public distribution

**Date:** 9/11/2007

**GAIN Report Number:** TH7119

TH7000

**Thailand**

**Poultry and Products**

**Annual**

**2007**

**Approved by:**

![](media/image1.wmf)Gary Meyer, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Sakchai Preechajarn, Agricultural Specialist

**Report Highlights:**

Since April 2007, the Thai broiler industry has successfully addressed
many issues plaguing them in the past year. The factors driving this
turnaround include increased productivity, reduced pressures from high
stocks, and increased prices in both domestic and overseas markets.
Reflecting growing domestic consumption and export demand, Thai broiler
production is expected to increase by at least eight percent in 2008.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Bangkok \[TH1\]

\[TH\]

**Executive Summary**

# Since April 2007, the Thai broiler industry has successfully addressed many issues plaguing them in the past year. The factors driving this turnaround include increased productivity, reduced pressures from high stocks, and increased prices in both domestic and overseas markets. Reflecting growing domestic consumption and export demand, Thai broiler production is expected to increase by at least eight percent in 2008.

# 

# Data included in this report is not official USDA data. Official USDA data is available at http://www.fas.usda.gov. 

# **Section I: Situation and Outlook**

## Production

*Production Trend*

Thailand's broiler meat production is expected to increase at least
eight percent in 2008 due to improved market conditions and increased
productivity. Trade sources expect export demand for Thai cooked poultry
meat to also increase in 2008. Domestic consumption should rebound to
some degree, as the economy is expected to pick-up after a new general
election. On the supply side, trade sources report that the average feed
conversion ratio (FCR) in integrated broiler farms has increased as
nearly all of commercial broiler producers continue to seek improved
genetics, and are utilizing evaporative cooling systems in their broiler
facilities which effectively prevents disease. The feed conversion ratio
(FCR) has reportedly improved from 2.0-2.1 to currently 1.7-1.8. The
average weight of an individual live broiler has also increased from 2.0
kgs per bird to currently 2.4-2.5 kgs per bird.

Despite the increased average weight of a live broiler, estimated
broiler production for 2007 has been revised downward as broiler
processors reduced their chick production, from 18-19 million birds per
week in late 2006 to currently 14-15 million birds per week. The move
was driven by business losses the Thai broiler industry faced in 2006
and the first quarter of 2007. Huge stocks of poultry meat in early 2007
compelled the industry to scale down broiler production.

However, decreased supplies of broiler and chicken meat production are
better shaping up the Thai broiler industry since May 2007, and should
continue until the end of 2007. Domestic prices for all broiler products
have risen across the board, from broiler chicks to chicken meat. Stocks
of chicken meat dropped sharply in the last few months. Export prices
(in net Thai bath term) also increased due to strong demand from major
buyer countries.

*Production Costs*

Production costs of live broiler in 2008 are forecast to be around 28-29
baht/kg (38-39 cents/pound), which are close to the 2007 level.

Although feed costs continued to increase sharply 2007, its effect on
average live broiler production costs has been partly offset by
increased productivity. As a result, average live broiler production
costs in the first seven months of 2007 (Jan-Jul) rose by 3-4 percent
from the same period of 2006 to about 29.00 baht/kg (39 cents/pound).
Current average production costs are 29.50 baht/kg (40 cents/pound),
which is derived from day-old chicks (7.00 baht), feed (18.00 baht),
vaccination and drugs (1.00 baht), and labor and other costs (3.50
baht), respectively.

*HPAI Update and Its Effect on Broiler Production*

High Pathogenic Avian Influenza (HPAI), H5N1 type, has hit Thailand
periodically since January 2004. There are no reports of HPAI-related
deaths or culls in broiler farms since the reoccurrence of the disease
in July 2006. Both relevant government agencies and integrated broiler
processors claimed that broiler farms, especially broiler farms
belonging to integrated producers, have never been infected by the HPAI.
They believed that the prevailing stringent biosafety surveillance and
controls have effectively prevented their farms from coming in contact
with HPAI.

As discussed in GAIN TH7030, the Royal Thai Government (RTG) confirmed
the reappearance of HPAI to the OIE on January 15, 2007. The first
outbreak case appeared in 130 Khaki Campbell ducks from a free-range
farm in Phitsanulok Province. As of March 3, 2007, there have been a few
additional outbreaks in Nong Khai and Ang Thong Provinces. The last
incidence of HPAI was confirmed on March 28, 2007, and affected native
chickens in Mukdaharn Province. None of the reported outbreaks affected
commercial broiler farms. As of August 6, Thailand reached 144 days of
no HPAI incidences since the last affected flock was depopulated.

The Department of Livestock Development (DLD) maintains the same disease
surveillance and control measures as in past years, including poultry
depopulation, disinfection of affected premises, cloacal swab screening
in a 5-kilometers radius of the infected farm, control of movement in a
10-kilometers radius of the infected farm, and extended intensive
screening and control (called X-ray campaign).

AI Vaccination is prohibited in Thailand. However, the Thai Ministry of
Agriculture and Cooperatives (MOAC) reported that the RTG might apply
HPAI vaccinations as a backup measure to control AI outbreaks in the
near future. The DLD recently conducted a joint meeting with the Bureau
of Budget, Ministry of Finance, and agreed to set aside a budget of 68
million baht (US\$ 2 million) per annum as a part of HPAI preparedness
programs.

According to the DLD's classification system for avian influenza, a
level 1 designation refers to outbreaks reported in one sub-district,
occurring sporadically in different plots of the area; level 2 refers to
outbreaks reported in no more than three sub-districts with the ability
to be contained within one week; level 3 refers to outbreaks reported in
3-8 sub-districts and remain more than two weeks; and level 4 to
outbreaks reported in more than eight sub-districts and remain more than
two weeks. The DLD plans to produce HPAI vaccines in its existing
vaccine plant in Pakchong District, Nakhon Ratchasima, about 170 kms
northeast of Bangkok.

## Consumption

Domestic chicken meat consumption in 2008 is forecast to increase by
four percent, in anticipation that a new general election in early 2008,
which should resolve the current political tension that has slowed
economic growth. In addition, anticipated high prices for other protein
sources, especially pork and beef, should benefit chicken consumption.

Broiler meat consumption in 2007 is estimated to increase marginally
over the 2006's level due mainly to unfavorable economic situation
associated with a military coup in late 2006 and political uncertainty,
and increasing chicken meat prices.

Average domestic prices for live broilers in the first half of 2007
(Jan-Jun) increased by five percent over the same period of 2006 to
30.17 baht/kg (approx. 40 cents/pound) due mainly to curtailed supplies
of live broiler. However, average retail prices for chicken boneless
breast meat in Bangkok in 2007 (Jan-Jun) dropped by 14 percent to 69.43
baht/kg (84 cents/pound) over the 2006 level as high chicken meat stocks
plagued early 2007.

## Trade

*Export Trend*

The Thai broiler industry anticipates that exports of cooked chicken
meat will continue to grow at least 10 percent in 2008 in line with
strong demand from the EU and Japan. Trade sources believe that the EU's
quota administration, which began in 2007, turned out to benefit Thai
exports with higher than average quota allocations (see section *The EU
Quota for Poultry Products*). In addition, China, a major competitor in
Japanese market, is likely to lose its competitiveness with Thailand as
a result growing domestic consumption and increased concerns from
trading partners about the safety of Chinese food products.

Thailand's chicken meat exports in 2007 should reach 290,000 tons based
on export figures from Jan-Jun 2007 and reports from trade sources. In
the first half of 2007, the EU and Japan remained major markets for Thai
chicken meat exports (all cooked products), accounting for 49 and 40
percent, respectively.

*Export Prices and Products*

There are no export price quotations on basic uncooked items such as
boneless leg (BL) and skinless boneless breast (SBB) from Thailand.
Trade sources report that export prices since April 2007 have been
profitable due to strong demand from the EU and a reduction in Thai
supplies. Under the EU quota, several importers in the EU have been
sourcing more product from Thailand and Brazil. In addition, concerns
about the quality of Chinese food products should also benefit Thai
poultry exports, particularly to Japan.

Export prices for steamed dice-shape-cut skinless boneless breast (SBB),
a major item exported to the EU, increased from about \$3,000/ton CIF in
the first quarter to currently \$3,600/ton. Meanwhile, export prices for
fried cut boneless leg, one of the basic cooked products to the Japanese
market, are currently \$3,500/ton, as compared to \$3,000/ton in early
2007.

Cooked chicken products are normally made‑to‑order meat products that
are processed or prepared by heat (such as grilling, steaming, boiling,
etc.). Some of these cooked meat products are puffed or seasoned (with
salt, Japanese sauce, etc.).

###### The EU Quota Administration

Under the agreement, Thailand received 92,610 tons, out of total quota
of 264,245 tons, for salted poultry meat (EU HS code 02109939). The
in-quota tariff rate is 15.4 percent while the out-of-quota rate will be
1,300 €/ton. Quota for cooked chicken meat (EU HS code 16023219) for
Thailand will be 160,033 tons, out of total quota of 250,953 tons, and
in-quota imports from Thailand will be subject to 8 percent. The
out-of-quota rate for cooked chicken meat is 1,024 €/ton. There is no
agreement on turkey meat as Thailand is not an exporter of this product.

Trade sources view that the current TRQ structure as benefiting Thailand
mainly because: 1) The allocated quotas for both salted poultry meat and
cooked chicken meat are higher than historical averages of Thai poultry
exports to the EU; and 2) The EU reduced a bound tariff rate for
in-quota cooked chicken meat for Thailand from 10.9 percent, the level
agreed with Brazil in late October 2006, to 8 percent; and 3) from their
price analysis, out-of-quota cooked products from Thailand will be
cheaper than out-of-quota products from Brazil.

###### Compartmentalization and Export Prospect

Thailand has made an effort to convince major importing countries, i.e.,
Japan and the EU, to accept the compartmentalization practice allowing
Thailand to export raw/uncooked chicken meat to these markets again,
regardless the country status of Avian Influenza disease. The concept of
compartmentalization was initiated by the World Animal Health
Organization (OIE) as a way to facilitate safe and fair international
trade. Trade sources in the Thai Broiler Processing Exporters
Association reported that the DLD has approved two Thai integrating
companies, Charoen Pokphand Group (CP) and GFPT, to be qualified for a
compartmentalization audit. Representatives from the DLD and the
association plan to discuss a possible introduction of
compartmentalization initiatives as a pilot project with Japanese
officials in late 2007.

## Stocks

Reflecting reduced broiler production, the current carry over of broiler
meat apparently has dropped from nearly 100,000 tons in to currently
20-30,000 tons, which is considered relatively low.

## Policy

There has been no new development in Thai production and trade policies
since the last reports (TH6086 and TH7030).

Regarding imported poultry products, Thailand seemingly exceeds OIE
guidelines when exporting countries confirm a finding of Low Pathogenic
Avian Influenza in their countries. In the case of live poultry and
poultry products, the RTG banned U.S. live poultry and poultry products
(both uncooked and cooked) after a finding of Low Pathogenic Avian
Influenza (LPAI) cases in California, North Carolina, and Missouri, from
March 2005 to June 2007. Although the ban was lifted for these states on
June 8, 2007, DLD is now requiring for all states that the animal health
certificate contain the statement "I hereby declare that the goods are
derived from origin of animals which is free from Avian Influenza and
Newcastle diseases." Regulatory officials from the USDA Animal Plant
Health Inspection Service are currently working with the DLD on this
requirement.

On July 26, 2007, DLD additionally banned live poultry and poultry
products from Nebraska due to a finding of LPAI.

## Marketing and U.S. Opportunities

# 

There has been no new development in this section since the last reports
(TH6086 and TH7030).

**Section II Statistical Tables**

Table 1: Thailand's PS&D Table for Poultry, Meat, Chicken -- 16 wks.

![](media/image2.wmf){width="5.997916666666667in"
height="4.048611111111111in"}

Note: 1) Not Official USDA Data

2\) FAS/Bangkok began to use official export data released by Thai
Department of Customs. As a result, the figures may differ from those
reported by other sources, including Thai Broiler Processing Exporters
Association.

Table 2: Wholesale Prices for Live Broilers in Bangkok

![](media/image3.wmf){width="3.2465277777777777in"
height="4.1097222222222225in"}Source: Department of Internal Trade,
Ministry of Commerce.

Table 3: Retail Prices for Skinless Boneless Broiler Meat in Bangkok

Source: Department of Internal Trade, Ministry of Commerce.

![](media/image4.wmf){width="3.4097222222222223in"
height="4.1097222222222225in"}

End of Report.