Required Report - public distribution

**Date:** 9/9/2003

**GAIN Report Number:** TH3103

TH3103

**Thailand**

**Poultry and Products**

**Annual**

**2003**

**Approved by:**

![](media/image1.wmf)Rodrick McSherry, Agricultural Counselor

U.S. Embassy, Bangkok

**Prepared by:**

Sakchai Preechajarn, Agricultural Specialist

**Report Highlights:**

Thai broiler industry is forecast to grow further in 2004, following an
anticipated steady growth in domestic demand and exports. While thriving
for exporting to a number of countries, Thailand itself is a protected
market. The Thai government has apparently implemented non-transparent
practices in granting import permit and applied high duties on imported
chicken meat. In fact, Thailand is a potential market for such U.S.
chicken meat products as chicken parts (especially leg-quarters),
mechanically de-boned meat, and value-added chicken meat.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Bangkok \[TH1\]

\[TH\]

#  

[Section I: Situation and Outlook 3](#section-i-situation-and-outlook)

[Section II: Statistical Tables 4](#section-ii-statistical-tables)

[Table 1: Thailand's PS&D Table for Poultry, Meat, Chicken -- 16 wks.
4](#table-1-thailands-psd-table-for-poultry-meat-chicken-16-wks.)

[Table 2: Wholesale Prices for Live Broilers in Bangkok
5](#table-2-wholesale-prices-for-live-broilers-in-bangkok)

[Table 3: Retail Prices for Skinless Boneless Broiler Meat in Bangkok
6](#table-3-retail-prices-for-skinless-boneless-broiler-meat-in-bangkok)

[Table 4: Thailand's Chicken Meat Exports in 2002 (Jan-Dec)
7](#table-4-thailands-chicken-meat-exports-in-2002-jan-dec)

[Table 5: The Comparison of Chicken Meat Exports in 2002 and 2003
(Jan-Jun)
8](#table-5-the-comparison-of-chicken-meat-exports-in-2002-and-2003-jan-jun)

[**Section III: Supply and Demand, Policy & Marketing
9**](#section-iii-supply-and-demand-policy-marketing)

[Production 9](#production)

[Consumption 10](#consumption)

[Trade 10](#trade)

[Policy 12](#policy)

[Marketing 12](#marketing)

#   {#section-1 .unnumbered}

# Section I: Situation and Outlook

Total broiler meat production in 2004 is forecast to grow further by 5-6
percent over the 2003 level, mainly because of an expansion in
production capacities, from farming to processing, among existing
integrated poultry producers. Due to price depression in early 2003, the
Thai integrated poultry processors revitalized industry cooperation in
controlling chick production again in 2003. With the support of the
Department of Livestock Development, most of the integrated poultry
producers agreed to cut down their weekly chick production by 20 percent
during April until May 2003. However, the effect of this two month chick
production decline will likely be negated by growth in chick production
in the balance of the year. Total broiler production through the year
2003 is estimated to increase further by 7 percent over 2002's level.

Broiler meat consumption is forecast to increase further by 10-12
percent in 2004 based on the fact that there is still room to increase
per capita chicken meat consumption, which has been as low as 11-12 kgs.
In addition, broiler meat consumption will be driven by the steady
growth in the Thai economy, the increased number of tourists in
Thailand, and increased popularity of chicken meat. Although an outbreak
of Severe Acute Respiratory Syndrome (SARS) disease in several Asian
countries and Canada diminished the number of in-bound tourists in
Thailand in the second quarter of 2003 (Mar-Jun), total broiler meat
consumption in 2003 is estimated to increase by 10 percent over the year
of 2002.

Total broiler meat exports are forecast to increase 6 percent in 2004 to
530,000 tons, of which about 370,000 tons would belong to uncooked
products, with the balance going to further processed products.

Thai chicken meat exports in 2002 have been volatile, suffering plunging
export prices in the first six months of 2003 then skyrocketing prices
in the second quarter of the year (late June to currently). Export
prices for uncooked boneless leg meat (BL) have increased rapidly from
US\$ 1,200-1,300/ton for shipments delivered in the first quarter of
2003 to currently 2,500-2,600/ton for the last quarter delivery.
Meanwhile, C&F prices for uncooked skinless boneless breast (SBB)
shipped to the EU countries in the fourth quarter are currently US\$
2,100-2,200/ton, as compared to US\$ 1,500-1,600 shipped in the first
quarter (Jan-May).

However, trade sources reported that Thai exports will be impacted for
the rest of the year by two major developments: On one hand, Japan's
decision to lift the ban on poultry meat from China, a major Thai
competitor, may pose some threats to Thai exports. On the other hand,
the EU's response to the Thai request to lower the sampling of chicken
meat imported from Thailand, from originally 100 percent to 10 percent,
should benefit the Thai exports. All in all, total exports of chicken
meat in 2003 should increase further to about 500,000 tons, compared to
464,243 tons in 2002. Of total exports, exports of both raw products and
further processed products are likely to increase to 360,000 tons and
140,000 tons, respectively.

# Section II: Statistical Tables

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

![](media/image2.wmf){width="5.997222222222222in"
height="5.007638888888889in"}

## 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

![](media/image4.wmf){width="3.2465277777777777in"
height="4.1097222222222225in"}Source: Department of Internal Trade,
Ministry of Commerce

## Table 4: Thailand's Chicken Meat Exports in 2002 (Jan-Dec)

![](media/image5.wmf){width="5.996527777777778in"
height="5.317361111111111in"}

## Table 5: The Comparison of Chicken Meat Exports in 2002 and 2003 (Jan-Jun)

##  

![](media/image6.wmf){width="5.992361111111111in"
height="4.793055555555555in"}

##  

## Section III: Supply and Demand, Policy & Marketing

## Production

Total broiler meat production in 2004 is forecast to increase further by
5-6 percent over the 2002 level, mainly because of an expansion in all
activities from farming to processing among existing integrated poultry
producers. The Charoen Pokphan (C.P.) group's new farming operations
will be fully operational in 2004, which may add 500,000 birds/week to
its integrated production. Sahafarm Company, the second largest poultry
operation in the country after the C.P. group, is scheduled to operate
its new poultry processing plant by the end of 2003, which will double
the company's current slaughtering capacity to 1.0 million birds per day
(or 7 million birds/week). The company's breeding and broiler farms have
also been expanded to supply its larger processing facilities. In
addition, GFPT Company plans to invest 620 million baht (approx. US\$ 15
million) to boost its production capacities of a feed mill, farms, and a
processing plant. According to trade sources, the company's broiler meat
production will increase by 15 percent as a result. In addition, a
continued upgrading to \"high-yield-type\" parent stock and the
increased number of evaporative cooling system barns in broiler farming
should favor the overall productivity in 2004.

Due to price depression in early 2003, the Thai integrated poultry
processors revitalized the industry's cooperation in controlling chick
production in 2003. With the support of Department of Livestock
Development, most of the integrated poultry producers agreed to cut down
their weekly production by 20 percent from April until May 2003.
However, following increased overall chick production capacity and
skyrocketing export prices since June 2003, total broiler production
through the year 2003 should continue to increase by 7 percent over
2002's level.

Despite increased competition among exporting countries, a current
global supply surplus, and the likelihood of intense non-tariff trade
barriers among importing countries, Thailand has excellent potential to
expand its broiler production over the next 3-5 years. This is mainly
because Thailand has successfully diversified its broiler meat products
from only basic uncooked boneless parts into premium-quality, further
processed products. This should help Thailand to overcome the
disadvantage of relatively higher feed costs against its main
competitors like the U.S. and Brazil. Meanwhile, China, which could be a
threat to Thai exports due to its labor-cost advantage, may continue to
be troubled with the on-and-off import ban related to its failure to
meet sanitary requirements in the major importing countries such as
Japan and the EU.

After the problem of nitrofuran residue in broiler meat exports to the
EU in 2002, both the Thai government and exporters initiated a strict
safeguard program in all steps of poultry operations, from feed milling
to farming to processing. Some producers isolated their production of
poultry feed from that of other livestock feeds. As for broiler farming,
they also segregated production-for-export farms from regular farms, and
switched to sourcing live broiler production only from their own farms
and reliable contracting farms. Meanwhile, the Thai government set up
guidelines on resolving the residue problem, which include: a)
controlling the importation of drugs/chemicals and their derivatives
which contain prohibited substances; b) regulating all drug use in the
animal feed manufacturing process; c) regulating all drug use on farms;
and d) monitoring the level of drug residues in all meat products by
establishing a specific laboratory which has the capacity to detect any
contamination by prohibited drugs/chemicals in animal feed, premix feed,
and animal products.

The data series for the PS&D tables has been revised across the board in
order to comply with the guidelines by FAS/Washington and to reflect a
change in average weight of live broilers. Based on FAS/Washington's
post guidance for 2004 Annual Poultry reports, all poultry meat trade
statistics must be reported on a ready-to-cook (RTC) basis. Accordingly,
FAS/Bangkok no longer includes the weight of offal and skeleton for
consumption in the calculation. Meanwhile, the new calculation also
takes a change in the average weight of live broilers (from the typical
2.0 kgs to 2.2 kgs per bird) into account.

Average live broiler production costs in 2004 are forecast to be close
to 2003's level, as the possible increased expenses in the costs of
farming (including feed, labor, and farm equipment) may be offset by
anticipated higher productivity and relatively cheaper prices for chicks
(following an increase in chick production).

Like in year 2002, chick prices have fluctuated widely in 2003 from 2-10
baht/bird reflecting volatile export prices for broiler meat. However,
average chick prices in the past 8 months (Jan-Aug, 2003) have widely
fluctuated between 2-13 baht/bird. Meanwhile, feed cost has increased in
2003 following the relative higher prices for feed ingredients,
especially those for soybean meal and corn. The total cost of broiler
production in 2003 is pegged at 25.0-26.0 baht/kg live weight (approx.
27-28 cents/pound live weight), as opposed to 24.0-25.0 baht/kg (26-27
cents/pound) in 2002. The current cost in August 2003 (28.0-29.0 baht/kg
live weight) is roughly derived from day-old chicks (6.50 baht), feed
(18 baht), vaccination and drug (0.80 baht), labor (2.50 baht), and
other costs (0.70 baht), respectively.

## Consumption

Broiler meat consumption is forecast to increase further by 10-12
percent in 2004 based on the fact that there is still room to increase
per capita chicken meat consumption, which has been as low as 11-12 kgs
annually. In addition, broiler meat consumption should be driven by the
steady growth in the Thai economy, the increased number of tourists in
Thailand, and increased popularity of chicken meat consumption. Although
an outbreak of Severe Acute Respiratory Syndrome (SARS) disease several
Asian countries and Canada, diminished the number of in-bound tourists
into Thailand in the second quarter of 2003 (Mar-Jun), total broiler
meat consumption in 2003 is estimated to increase by 10 percent over the
previous year.

Following volatile export prices, live broiler prices in February 2003
declined to the record low prices of 19.60 baht/kg (21 US cents/pound),
and then boosted up sharply during June-August to 32.0-35.0 baht/kg
(35-38 US cents/pound). The average wholesale prices for live broilers
in the first 8 months of 2003 (Jan-Aug) increased by 4 percent to 27.64
baht/kg (30 US cents/pound). Meanwhile, the average prices for chicken
boneless breast meat at Bangkok in 2002 (Jan-Aug) have dropped by 11
percent to 61.79 baht/kg (67 US cents/pound).

## Trade

Thailand\'s broiler meat exports have a high potential to grow steadily
during the next 3-5 years, due to Thailand's competitiveness in
producing further processed broiler meat products, its ability to tackle
sanitary problems, and anticipated demand growth in the major importing
countries. Thai processors have successfully reduced their cost of
production (through improvement in farm management and breeding
genetics) and developed their value added products (through continued
investment). In addition, the Thai experience in monitoring food safety
controls will increase the trustworthiness of Thai poultry products
among buyers. On the demand side, a downward trend in domestic
production of broiler in both the EU countries and Japan should favor
Thailand\'s market opportunity in these countries.

Nevertheless, there are some factors which may limit growth in export
demand. For example, the uncertainties in the EU's directives on its
import levies and on strict implementation of their quality and food
safety controls could upset Thai exports from time to time. As mentioned
in previous reports, the EU's reclassification of uncooked chicken meat
products under the salted-item category (within which exporters enjoy
the lower tariff of 15.4 percent, instead of paying about US\$ 1,000/ton
tariff for unsalted chicken meat) disturbed the exports of uncooked
chicken meat. Trade sources reported that the EU's policy on this issue
has been changed again in that both salted or unsalted items will be
subject to the same high import tariffs (about US\$ 1,000/ton) since
August 15, 2003.

Total broiler meat exports are forecast to increase 6 percent in 2004 to
530,000 tons, of which about 370,000 tons would belong to uncooked
products, while the balance will go to further processed products.

Thai chicken meat exports in 2003 have been volatile, first suffering
plunging export prices in the first six months of 2003 to skyrocketing
prices in the second quarter of the year (late June to currently). On
May 12, 2003, Japan began to ban the imports of Chinese chicken meat
after there was an outbreak of bird flu disease in flocks of duck in
China. In addition, a serious outbreak of SARS (Severe Acute Respiratory
Syndrome) in China, which has discouraged people to travel to China,
caused Japanese buyers to almost totally switch forward buying to
Thailand and Brazil. As a result, export prices for uncooked boneless
leg meat (BL) have increased rapidly from US\$ 1,200-1,300/ton for
shipments delivered in the first quarter of 2003 to currently
2,500-2,600/ton for the last quarter delivery. Meanwhile, demand in the
EU also recovered from early 2003 when an outbreak of avian influenza
disease in Netherlands and Belgium began. C&F prices for uncooked
skinless boneless breast (SBB) shipped in the fourth quarter are
currently US\$ 2,100-2,200/ton, as compared to US\$ 1,500-1,600 shipped
in the first quarter (Jan-May).

However, trade sources reported that Thai exports will be impacted for
the rest of the year by two major developments: On one hand, Japan's
decision to cancel a ban on poultry meat from China, a major Thai
competitor, may pose some threats to Thai exports. On the other hand,
the EU's response to the Thai request to lower the sampling of chicken
meat imported from Thailand, from originally 100 percent to 10 percent,
should benefit the Thai exports. All in all, total exports of chicken
meat in 2003 should increase further to about 500,000 tons, compared to
464,243 tons in 2002. Of total exports, exports of both uncooked
products and cooked products are likely to increase to 360,000 tons and
140,000 tons, respectively.

Japan and the EU countries should remain the major markets for Thai
broiler meat for years to come. In the first six months of 2003
(Jan-Jun), Japan accounted for 46 percent of total broiler meat export
(against 57 percent in 2002). Meanwhile, the EU accounted for 35 percent
(up from 27 percent in 2001). The demand pattern in Japan and the EU has
not changed from the previous reports. Japan usually buys uncooked meat
in forms of boneless leg meat (BL), boneless breast meat (BB), and
special cut meat on a skewer (Yakitori). It also buys made-to-order meat
which is processed or prepared by heat (such as grilling, steaming,
boiling, and etc.) Some of these products are breaded or seasoned (with
salt, Japanese sauce, and etc.). The EU normally buys uncooked skinless
boneless breast (SBB) meat, and semi-cooked and further processed meat
in made-to-order style.

## Policy

Thailand is a protected market. Although, based on the WTO's guidelines,
the Thai government should promptly grant the import permit to allow the
imports of chicken meat, cooked or uncooked, when an importer is able to
meet health requirements and is willing to pay import duties. However,
the Thai government has employed some devices to block the imports.
First, they require that any imports must be subject to import permit
requirements by Department of Livestock Department, which is usually
non-transparent. Thus far, the DLD arbitrarily dropped the import
application or refuses to grant the import permit without reason.
Second, the imports of chicken meat are subject to high import tariff,
currently a 33% WTO bound rate for uncooked meat (chilled or frozen) and
42% for cooked chicken meat. Third, the Thai Government imposes unfair
import permit fee on uncooked chicken products at 10 baht/kg (approx.
US\$ 228/ton), whereas the local producers pay US\$ 17/ton.

## Marketing

For years to come Thai processors are likely to further shift their
production line to higher value-added products in order to overcome
their disadvantage in production costs (mainly feed cost, genetics, and
animal health products) against competitors. Thai investors own nearly
all of existing broiler integrators, except Sun Valley Company which is
linked to the US-based Cargill Corporation. There should be no
additional foreign investment in broiler business in the near future.

However, Thailand is also a U.S. potential market for chicken meat. Like
other Asian countries, Thai local consumers prefer dark meat to white
meat. A recent official data indicated that the prices for bone-in legs
in Thai market are only 9-10% cheaper than breast meat, as compared to
about 30% in case of the U.S. market. On the preliminary price analysis,
FAS/Bangkok found that hypothetical costs of U.S. leg-quarters imported
to Thailand should be 10-20 percent cheaper than domestic wholesale
prices for quarter-legs sold in Bangkok. This is also the case for
mechanically de-boned meat (MDM). Potential U.S products for marketing
in Thailand include frozen chicken parts (especially leg-quarters), MDM,
and value-added chicken meat. Potential buyers for chicken parts and MDM
should be food processors (sausage processor in case of MDM).

End of Report