Required Report - public distribution

**Date:** 8/25/2004

**GAIN Report Number:** RO4015

RO4015

**Romania**

**Poultry and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Brian Goggin

U.S. Embassy Bucharest

**Prepared by:**

Cristina Cionga

**Report Highlights:**

> Heavily hit in the first part of 2004 by unprecedented high feed
> prices both from domestic sources and the world market, the Romanian
> poultry industry is expected to recover by the end of the year and
> further into 2005. Demand for poultry and products maintains its
> upward trend, despite the recent steady appreciation of domestic
> prices. U.S. is consolidating its market share in Romania, becoming a
> stable supplier of relatively low-priced products (frozen broiler leg
> quarters).

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Sofia \[BU1\]

\[RO\]

Table of Contents

[Consumption 4](#consumption)

[Graph 1. Meat Consumption Preferences
5](#graph-1.-meat-consumption-preferences)

[Trade 5](#trade)

[Import Trade Matrix 5](#import-trade-matrix)

[Export Trade Matrix 6](#export-trade-matrix)

[Table 1. Romanian Bindings vs. Applied Tariffs in 2004 (percent)
7](#table-1.-romanian-bindings-vs.-applied-tariffs-in-2004-percent)

[Prices 7](#prices)

[Prices Table 7](#prices-table)

[Table 2. Ex-factory Broiler Meat Prices, US\$/MT, VAT Included
(end-of-month)
8](#table-2.-ex-factory-broiler-meat-prices-usmt-vat-included-end-of-month)

[Domestic Support Policy 8](#domestic-support-policy)

Production

After two years of growth, the Romanian poultry industry was heavily hit
in 2003 by unprecedented high feed prices both from domestic sources
(with draught-devastated feed crops) and the world market (which
dramatically diminished soybean meal imports). Poultry inventories
shrank with some 1 percent, but meat production was up 14 percent
overall, although the largest contribution to this growth is reportedly
attributed to come from small households, which typically grow layers
for self-consumption.

Broiler meat production in industrial operations expanded by 9 percent,
reaching (according to the Romanian Union of Poultry Producers) 185,000
MT carcass weight at the end of the year. The industry faced a downward
scenario in the first part of 2004. Broiler meat production in
January-May 2004 decreased with 2 percent compared to the same period of
2003. However, prospects for the second half of the year are more
encouraging, mainly due to bumper grain and oilseed crops, which have
already cheapened feed significantly. FAS Bucharest anticipates some
recovery by the end of the year, although this is severely limited by a
reported reduction in the breeding stock. Government support programs
and productivity improvements are expected to contribute to a continued
sector expansion in 2005, for which an 8 percent growth rate seems quite
realistic. Though this forecast refers only to production obtained in
large and small commercial operations, though individual households,
which output never reaches the market, cover a large share (roughly 35
percent) of poultry meat consumption in Romania.

Productivity continued to increase in most farms. Weight gains per day
in the first seven months of 2004 averaged 47 grams/day, varying,
depending on farm performances between 42-50 grams/day. By comparison,
during the same period of 2003, the average weight gains stood at 43
grams/day. In terms of input use efficiency, feed conversion ratios
decreased from 1.99 kg feed/kg meat in January -- July 2003 to 1.90 kg
feed/kg meat in 2002.

Analysts show that there are good chances for Romania to be able to
compete within the EU in the future when Romania becomes part of the EU.
The key to competitiveness is the normally low cost of local corn, as
Romania is net corn exporter and is expected to remain so. Though
soybeans is a crop eligible for domestic support measures and production
raised significantly in recent years, some soybeans will be likely
needed in most years to meet domestic needs.

The industry concentration surged significantly in the past couple of
years: the six largest operations account for roughly 50 percent of
country's commercial production, but there are a significant number of
small players, producing 1,500-2,000 MT/year. The large farms are fully
integrated from reproduction, to slaughter and processing, and,
occasionally, they even have they own distribution network. Smaller
producers are not integrated and deliver their production to local
slaughterhouses.

FDI level in the industry is one of the highest in agriculture, with
investors from Middle East and EU, who generally acquired formerly
state-owned farms. There is also interest for greenfield operations
(recently, Banvit - the largest Turkish poultry company - revealed its
intention to expand in Romania). Since labor costs in the industry are
much lower than in EU, investments in new technologies have been made
for raising quality of products that target export markets.

##  

# 

  ------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------
  **Romania**                                                                                         

  **Poultry, Meat,                                                                                    
  Broiler**                                                                                           

                      **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                   01/2003                   01/2004                    01/2005        MM/YYYY
  Begin**                                                                                             

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

  **Slaughter         0           147           0           0              0           0              (MIL
  (Reference)**                                                                                       HEAD)

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

  **Production**      170         185           185         195            0           212            (1000 MT)

  **Whole, Imports**  1           1             0           3              0           0              (1000 MT)

  **Parts, Imports**  82          83            85          77             0           70             (1000 MT)

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

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

  **TOTAL Imports**   83          84            85          80             0           70             (1000 MT)

  **TOTAL SUPPLY**    253         269           270         275            0           282            (1000 MT)

  **Whole, Exports**  0           0             0           0              0           0              (1000 MT)

  **Parts, Exports**  3           5             5           7              0           10             (1000 MT)

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

  **Other Exports**   3           0             5           0              0           0              (1000 MT)

  **TOTAL Exports**   3           5             5           7              0           10             (1000 MT)

  **Human             250         254           265         258            0           262            (1000 MT)
  Consumption**                                                                                       

  **Other Use,        0           10            0           10             0           10             (1000 MT)
  Losses**                                                                                            

  **Total Dom.        250         264           265         268            0           272            (1000 MT)
  Consumption**                                                                                       

  **TOTAL Use**       253         269           270         275            0           282            (1000 MT)

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

  **TOTAL             253         269           270         275            0           282            (1000 MT)
  DISTRIBUTION**                                                                                      

  **Calendar Yr. Imp. 0           43            0           38             0           33             (1000 MT)
  from U.S.**                                                                                         
  ------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------

# 

# 

# 

# 

# 

# Consumption

Per capita meat consumption in Romania is about half of the EU average
(92 KG). Romanians show a strong preference for pork (Graph 1), though
chicken meat's share in the average diet is increasing.

Recent statistics show that in the first semester of the current year,
poultry meat consumption reached 7.8 kilos/capita, that is, 4 percent up
form the same period of 2003, while pork and beef consumption stood at
8.8 and, respectively 3.9 kilos/capita. This pattern cannot be
extrapolated, though, for the whole year, because of the seasonality in
pork consumption.

## Graph 1. Meat Consumption Preferences

![](media/image2.wmf)

## 

Consumers are not devoted to a single brand, but product availability
(i.e., good distribution through supermarkets and smaller groceries)
plus an acceptable price/quality ratio are factors that influence
consumption of a certain brand. Generally, local market reveals a
preference for dark poultry meat (legs) versus white meat (breast),
therefore there is no significant price difference between the two.

Although price remains an important factor in shaping their behavior,
domestic consumers are shifting to higher quality products. As a
consequence, about 40 percent of locally produced poultry meat is sold
chilled, rather than frozen. Important investments have been made in
branding and better packaging the products.

High value-added chicken products (ready-to-cook) are not yet in demand
on the local market.

# Trade

Chicken meat export volume is insignificant compared to imports (see
trade matrixes below).

## Import Trade Matrix

  ---------------- -------------------- --------- ------------------------
  **Country**      Romania                        

  **Commodity**    Poultry, Meat,                 
                   Broiler                        

  Time Period      MY                   Units:    MT

  Imports for:     2003                           **January-June 2004**

  U.S.             43264                U.S.      19293

                                                  

  Others                                Others    

  Brazil           26232                          12400

  Hungary          2221                           1104

  The Netherlands  2145                           3125

  Germany          1870                           2576

  Italy            1650                           824

  UK               1355                           622

  Belgium          1216                           1264

  Ireland          724                            482

  Canada           573                            687

  France           409                            296

  Total for Others 38395                          23380

  Others not       1857                           8456
  Listed                                          

  Grand Total      83516                          44236
  ---------------- -------------------- --------- ------------------------

## 

## 

## Export Trade Matrix

  ---------------- -------------------- --------- ------------------------
  **Country**      Romania                        

  **Commodity**    Poultry, Meat,                 
                   Broiler                        

  Time Period      MY                   Units:    MT

  Exports for:     2003                           **January-June 2004**

  U.S.             0                    U.S.      0

                                                  

  Others                                Others    

  The Netherlands  3613                           2672

  UK               603                            485

  France           498                            230

  Germany          350                            221

  Bulgaria         107                             

  Switzerland      43                             36

  Greece           36                             127

                                                   

                                                   

                                                   

  Total for Others 5250                           3771

  Others not       38                             27
  Listed                                          

  Grand Total      5288                           3798
  ---------------- -------------------- --------- ------------------------

## 

In 2003, US supplied more than half of the total broiler meat imports
and Brazil another 30 percent. The two countries have remained the main
import sources in 2004. A good 90 percent of these imports are frozen
parts (especially chicken leg quarters), despite a quite protectionist
import regime, with MFN duties set up at 45 pecent *ad valorem* (see
Table 1).

In response to the import concessions granted by Romania, as shown in
Table 1, in 2004 EU offers "zero treatment" to 3,900 MT of poultry meat
(chilled or frozen) and 975 MT of processed poultry meat originated from
Romania. Although the country started using these concessions, there are
still significant sanitary-veterinary restrictions that prevent exports
to EU.

### 

Currently, there are only 6 poultry slaughterhouses and 4 processing
units that fully comply with the EU requirements and eligible to ship to
Member States. Seven slaughterhouses are being revamped to be compliant
by the end of 2006, while for other two EU granted a transition period
of additional three years, according to the recent documents stating the
official closure of the Agricultural chapter in the bilateral
negotiations. Under the optimistic scenario that Romania joins EU in
2007, products from establishments subject to transitional arrangements
will not be sold to other Member States and will be clearly identified.

### Table 1. Romanian Bindings vs. Applied Tariffs in 2004 (percent)

+---------+------------------------------+--------+-------+-----------+
| HS Code |                              | WTO    | 2004  | Special   |
|         |                              | bound  | ap    | EU        |
|         |                              | tariff | plied | p         |
|         |                              |        | duty  | reference |
+---------+------------------------------+--------+-------+-----------+
| 0207.11 | Chicken cuts and edible      | 96     | 45    | 0 for TRQ |
|         | offal, fresh or chilled      |        |       | (1)       |
|         | (whole birds)                |        |       |           |
+---------+------------------------------+--------+-------+-----------+
| 0207.11 | Chicken cuts and edible      | 96     | 45    | 0 for TRQ |
|         | offal, frozen (whole birds)  |        |       | (1)       |
+---------+------------------------------+--------+-------+-----------+
|         |                              |        |       |           |
+---------+------------------------------+--------+-------+-----------+
|         |                              |        |       |           |
+---------+------------------------------+--------+-------+-----------+
| 0202    |                              |        |       |           |
+---------+------------------------------+--------+-------+-----------+
| 0207.14 | Chicken cuts and edible      | 96     | 45    | 0 for TRQ |
|         | offal, frozen                |        |       |           |
|         |                              |        |       | \(1\)     |
+---------+------------------------------+--------+-------+-----------+
| 0207.13 | Chicken cuts and edible      | 96     | 45    | 0 for TRQ |
|         | offal, fresh or chilled      |        |       | (1)       |
+---------+------------------------------+--------+-------+-----------+
| 0207.27 | Turkey cuts and edible offal | 96     | 35    | 0 for TRQ |
|         | (including liver) frozen     |        |       | (1)       |
+---------+------------------------------+--------+-------+-----------+
| 1602.31 | Meat and meat offal of       | 180    | 45    | 0 for TRQ |
|         | turkeys, prepared or         |        |       | (2)       |
|         | preserved, nesoi             |        |       |           |
+---------+------------------------------+--------+-------+-----------+
| 1602.32 | Meat and meat offal of       | 180    |       | 0 for TRQ |
|         | chicken, prepared or         |        |       | (2)       |
|         | preserved nesoi              |        |       |           |
+---------+------------------------------+--------+-------+-----------+
| 1602.31 | Meat and meat offal of       | 180    | 45    | 0 for TRQ |
|         | turkeys, prepared or         |        |       | (2)       |
|         | preserved nesoi              |        |       |           |
+---------+------------------------------+--------+-------+-----------+

(1) TRQ for poultry meat (fresh and frozen) in 2004 is 4050 MT.

(2) TRQ for prepared/preserved poultry meat in 2004 is 675 MT.

Broiler meat imports in 2004 are expected to stay close to previous
year's level, with especially good prospects for frozen cuts, reasonably
priced for low income population segments.

# 

# Prices

Ex-factory broiler meat prices surged significantly in the first half of
2004 as against the corresponding period of 2003, especially triggered
by feed prices (Prices Table). Although breast meat price has increased
more rapidly than prices for other products, the gap between dark and
white meat is far less than in Western countries, because of the
preference domestic consumers show for chicken legs (Table 2). More
stable poultry prices are forecast for the second part of 2004, because
of relatively cheap feed grains in a year with record yields for most
crops.

## 

## Prices Table

  ---------------- ---------------------- -------------------- ----------
  **Country**      Romania                                     

  **Commodity**    Poultry, Meat, Broiler                      

  Prices in        US\$                   per uom              MT

                                                               

  Year             2003                   2004                 \% Change

  Jan              1147                   1443                 26%

  Feb              1207                   1497                 24%

  Mar              1235                   1501                 22%

  Apr              1295                   1504                 16%

  May              1354                   1629                 20%

  Jun              1363                   1728                 27%

  Jul              1494                   1707                 14%

  Aug              1406                                        

  Sep              1479                                        

  Oct              1629                                        

  Nov              1554                                        

  Dec              1605                                        

                                                               

  Exchange Rate    Montly official        Local Currency/US \$ 
                   average                                     

  Prices            (VAT not included)                         
  ex-factory                                                   
  ---------------- ---------------------- -------------------- ----------

## Table 2. Ex-factory Broiler Meat Prices, US\$/MT, VAT Included (end-of-month)

  ----------------- ----------------- ----------------- -----------------
                    Whole birds       Bone-in breast    Bone-in legs

  January           1,781             2,601             2,126

  February          1,887             2,750             2,366

  March             2,008             2,876             2,407

  April             1,911             2,796             2,355

  May               2,005             2,793             2,459

  June              2,163             2,764             2,466

  July              2,068             2,664             2,400
  ----------------- ----------------- ----------------- -----------------

Source: Union of Romanian Poultry Producers

The official monthly average exchange rate is used in all cases.

# 

# Domestic Support Policy

### 

In order to stimulate poultry inventories and production, the budgetary
effort was increased in 2004, but outlays structure was pretty much
similar to the one in 2003. The GOR intends to provide the sector with
support until the moment Romania will join the EU, after which poultry
production will not any longer be eligible, as the sector is liberalized
in Member States. Some of the support programs qualify as Green
Box"-type and are measures exempted from the reduction commitment
(budgetary allocations to preserve the breeding stock), while others
count in the Aggregate Measurement of Support, but still below the "de
minimis level". The later type is disbursed as a procurement payment
(market price support). In 2004, the eligible production is 127,000 MT
lwe of chicken meat delivered for slaughtering, for which 643.5 billion
lei (roughly, \$18.9 million) were budgeted. This is equivalent with a
unit subsidy of 5000 ROL/kilo lwe, while for ecological broiler meat the
unit subsidy increases to 7000 ROL/kilo (respectively, \$0.15 and 0.21
per kilo).

The Union of Poultry Producers assess that the effect of these programs
was quite significant in stimulating commercial production in Romania.