Required Report - public distribution

**Date:** 09/01/2004

**GAIN Report Number:** TC4014

TC4014

**United Arab Emirates**

**Poultry and Products**

**Annual Poultry Meat Report**

**2003**

**Approved by:**

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

U.S. Consulate General

**Prepared by:**

ATO: Mohamed Taha

**Report Highlights:** UAE poultry producers face significant production
hurdles that inhibit their ability to capitalize on opportunities
presented in this growing consumer market. Poultry suppliers are
reacting to the unsatisfied market demand by importing frozen poultry,
at record level in 2003 that does not appear to be waning in 2004
despite health/safety problems internationally.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Dubai \[TC1\]

\[TC\]

[Table of Contents]{.underline}

[Production 3](#production)

[Consumption 3](#consumption)

[Import/Export ...5](#__RefHeading___Toc44206938)

[Stocks 6](#stocks)

[Technical & Economic Factors ...6](#__RefHeading___Toc44206942)

# PS&D Table.................................................................................................................8

**Import Trade
Matrix...................................................................................................9**

**Export Trade
Matrix..................................................................................................10**

**Prices
Table..............................................................................................................11**

# Production

UAE poultry production remained nearly unchanged from last year though
an established medium-sized producer closed but was replaced by a new
start-up operation. Keen competition and production problems posed by
high input costs on raw materials such as feed and medicine
(specifically to address the H9N2 Avian influenza low pathogenic virus
strand found in this region), inhibited expansion. Such production
hurdles will need to be addressed in a serious manner, if major future
expansion is to occur.

U.S. involvement in the UAE poultry sector remains nonexistent, except
for as a supplier of some equipment and technical information. Most
existing farms, particularly major farms, utilize the latest available
technology and periodically upgrade facilities to maintain/improve
production levels. One major producer has plans to increase production
to 10 million birds by 2007, if production factors become more
favorable.

## 

Poultry production is on a 16-week cycle. Of this year's production six
large farms accounted for 65 percent while four medium-sized operations
accounted for 20 percent. The remaining 15 percent is shared among a
number of small farms.

The gap between total demand and domestic production remains wide.
However, current production problems are causing major producers in many
cases to sell at or slightly below cost to stay in the market. One major
company diversified into real estate to offset losses from its poultry
operation.

Major poultry operations are fully integrated. Production is slaughtered
at on-farm facilities. Marketing, sales and distribution is conducted
in-house. Some operations are even involved in direct retail.
Domestically produced poultry is generally sold fresh/chilled. During
summer, when sales typically are soft due to weather, major operations
will freeze some production. In effort to expand market share some farms
are producing limited amounts of chilled boneless or bone-in parts. One
major operation is even producing chicken franks and burgers for the
local market. Small farms usually sell their production live, at weights
usually more than 2 kg/bird.

Domestic and imported poultry is retailed side-by-side in major retail
outlets, such as hypermarkets, superstores and supermarkets. Because of
high production costs and no direct government support local production
tends to be marketed fresh/chilled. It is not sold in small retail
outlets or convenience stores because of its relative high price. All
feed ingredients are imported. The feed conversion rate is about 1.8 kg
per kg weight gain, depending on the breed. Imported poultry, is less
expensive and is marketed in nearly all retail outlet, regardless of
size and type.

# Consumption

Consumption of poultry is rising due, in part, to the following factors:

\- Local population increase,

\- Health and food safety concerns with red meats due to international
problems with BSE, Foot and Mouth disease, dioxin tainted products,
cholesterol and related cardiac problems,

\- Lower cost as compared to red meats and fish,

\- Expansion of the HRI sector

\- Increase in the transit population. The number of visitors last year
reached 6 million and is projected to continue increasing for the next
several years.

Traditionally, the HRI sector sought whole chickens. Leg quarters have
gained in popularity with this sector through competitive pricing and by
being a leaner product than breast meat, which is relatively expensive.
Generally, poultry meat is less expensive than other red meats, such as
beef. In addition, poultry meat is easy to market as it is used in a
broader array of recipes and cooking styles in this culturally diverse
region.

Imported poultry meat, whole and parts, is less expensive compared to
domestic products. Brazilian and Danish poultry are popular among
households for perceived quality and low water content. French poultry,
because of high water content, is used by the institutional sector. U.S.
leg quarters are an ideal alternative to U.S. whole chicken because of
its lower bulk price. Attempts to market U.S. leg quarters pre-packed
for retail distribution proved unsuccessful due to its high retail price
tag. Leg quarters, usually imported in 20 lb. packs, are suited for the
HRI sector. The HRI sector, however, is demanding packaging of leg
quarters and other poultry products on trays for storage and handling
reasons and is turning away from such products packaged in bulk bags
though they may be less expensive.

U.S. whole chicken is absent from the retail sector for two reasons:

1\) Package and presentation are considered unattractive. The
\"misshaped\" bird, owing to the way it is quick frozen after processing
in the U.S., is the principle problem.

2\) C&F prices are usually prohibitive, as compared to cost for
Brazilian, Danish and French poultry.

Boneless chicken is sourced primarily from Thailand displacing China
since the later was banned for health/safety concerns. Boneless chickens
are mainly consumed in Arabic and Lebanese-style restaurants and
cafeterias. Boneless breasts are marketed in retail outlets. Consumption
of whole turkey is seasonal, mainly by Westerners during the
November/December holiday season, while duck is consumed primarily in
Chinese restaurants and in some Arabic restaurants.

Local poultry is consumed as fresh/chilled, mainly by households and, to
a lesser extend, at some HRI sites, such universities, hospitals and
military, particularly in Abu Dhabi area. For religious observance
reasons, some consumers prefer to pay a premium price for local chicken
to gain the guarantee of freshness and the assurance of preparation
according to Moslem rites, i.e., hand slaughtered. A domestic poultry
operation is now producing fresh chicken franks, at a premium, that
suits local tastes.

Because of the price difference, little real competition exists between
domestic and imported chicken. Imported whole chicken retails at about
half the cost of domestic chicken that markets at about US\$3/kg. Among
imported chickens, Brazilian is more widely accepted because of market
visibility and attractive price.

Indicative retail prices (in U.S.\$) for some imported/domestically
produced whole bird/parts follow:

Whole bird: Brazilian: \$2.04/kg; // Danish: \$1.63/kg;

// French: \$1.35/kg; // Saudi: \$2.35/kg

Quails: Saudi: \$4.00/kg

Drumsticks: Brazilian: \$2.38 // French: \$1.50/2 lbs, Saudi: \$1.23/1lb

Thighs, boneless Brazilian: \$4.34/2 lbs // Saudi: \$2.38/1 lbs

Livers: Brazilian: \$2.50/kg

Wings: Saudi: \$1.23/1 lb

Boneless breasts: Brazilian: \$4.08/kg, Saudi: \$ 4.02/2 lbs

# 

# Local Fresh: Whole chicken: \$3/kg; boneless breast: \$ 8.17/kg; breast w/bone: \$4.10/kg

Drumsticks: \$5.45/kg

# Import/Export

Poultry imports surged to a record level in 2003, rising to 178,000 MT,
at a value of \$168 million. Imports in 2004 remain at a brisk pace due
to strong tourism demand and re-exports to Iraq, Iran and Afghanistan,
the current largest re-export markets for UAE. Re-exports to Afghanistan
are mostly of leg quarters.

In 2003 poultry parts rose to represent 35 percent of total imports. The
U.S. share in this market rose to represent 45 percent of total parts
imports, and 15 percent of total imports. Demand for parts is expected
to continue to expand due to the growing health awareness of end users
who are demanding the lower costing parts products. Brazil remains the
dominant supplier in the poultry import market with a 64 percent market
share and is expected to continue this dominance for several reasons
summarized below:

1\) Lower cost of production due to cheaper labor and inputs;

2\) Competition offered by other traditional competitors such as Denmark
and France is waning since the lowering of the EU export subsidy and the
emergence of the EU market,

3\) Higher cost of production in Europe,

4\) Some major EU poultry producers have set up production facilities in
Brazil to produce their brand at the lower cost thus compete with other
Brazilian producers.

U.S. poultry was banned for three months with the detection of Avian
Influenza in February. In May the ban was lifted for all but
fresh/chilled poultry from the States of Texas and Delaware. As of this
report date, this latter ban was still in place.

The UAE does not trade in paws or feet. UAE poultry imports in 2002,
2003 and estimates for 2004 follow.

+---------------+-----------------+-----------------+-----------------+
| UAE Poultry   |                 |                 |                 |
| imports       |                 |                 |                 |
| (Metric Ton)  |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
|               | CY 2002         | CY 2003         | CY 2004         |
|               |                 |                 |                 |
|               |                 |                 | (ATO Estimate)  |
+---------------+-----------------+-----------------+-----------------+
| Brazil        | 78,297          | 107,911         | 125,000         |
+---------------+-----------------+-----------------+-----------------+
| Denmark       | 17,237          | 15,645          | 15,000          |
+---------------+-----------------+-----------------+-----------------+
| France        | 17,782          | 10,036          | 11,000          |
+---------------+-----------------+-----------------+-----------------+
| Saudi Arabia  | 4,530           | 3,515           | 5,000           |
+---------------+-----------------+-----------------+-----------------+
| Thailand      | 1,095           | 1,942           | 2,500           |
+---------------+-----------------+-----------------+-----------------+
| U.S.          | 14,484          | 25,183          | 15,000          |
+---------------+-----------------+-----------------+-----------------+
| Other         | 2,517           | 3,573           | 8,500           |
+---------------+-----------------+-----------------+-----------------+
| TOTAL         | 135,942         | 167,805         | 182,000         |
+---------------+-----------------+-----------------+-----------------+

Printed media advertising is the most popular marketing tool followed by
TV. Year round advertising campaigns are usually maintained. In‑store
promotions are common, particularly for new‑to‑market products.
Suppliers and local producers are constantly looking for new markets and
opportunities to expand sales. Suppliers usually provide local agents
with marketing funds.

Imported and locally produced poultry are channeled to end-users very
similarly, except that the local product has a shorter delivery rout
from the producer to the end user. Imported poultry is channeled from
the importer to a wholesaler to a distributor and, finally, to the
retailer. Distribution trucks reach nearly every retail store in the
country regardless of its size.

Both importers and domestic producers of poultry are well equipped with
excellent air-conditioned warehouses and refrigerated trucks for the
distribution of product. They are also staffed with well-trained sales
representatives. Major retailers are constantly adding more
state-of-the-art super and hypermarkets and providing better service to
ensure that their products are ideally stacked and positioned.

Because of different marketing practices than used with red meats,
poultry products do not require the presence of a butcher and special
handling at the retail level. Therefore, its presence in a retail
outlet, regardless of size and grade, requires the availability of only
a freezer.

# Stocks

Importers and chicken producers usually maintain limited stocks and plan
their imports and production accordingly to avoid unnecessary costs such
as storage. This is also aimed to avoid pressures resulting from price
changes in both the local and international markets.

Report instructions require that stocks in PSD table should be 0.

Technical & Economic Factors:

The UAE is a major oil producer and enjoys one of the world's highest
per capita incomes. Current world oil prices favor the UAE economy. The
UAE currency, the Dirham, is strong. The exchange rate vis-à-vis the
U.S. Dollar remains fixed at 3.673 dirham to US1.00 dollar. The UAE
Government applies a liberal trade policy and does not restrict the
movement of currencies not does it involve itself in trade.

Health and sanitary regulations are strictly enforced regardless of
country of origin, to ensure human and animal health safety. Local
health officials travel periodically to exporting countries to inspect
production and processing facilities. If an exporting plant is found
unable to supply wholesome products, its products will be immediately
banned. Imported product of established brands is randomly checked at
port of entry for Salmonella and other pathogen contamination. If a
given shipment's samples exceed the permissible levels of Salmonella
bacterium per carcass, it will be rejected. Locally produced chicken is
also monitored to determine fitness for human consumption.

Poultry products are required to include on the label the following:

a\) Date of production and expiry;

b\) Net weight;

c\) Country of origin; and

d\) The producer\'s name and address.

(Note: UAE shelf life regulations require the product to arrive within 4
months of date of production. The shelf life for frozen poultry is one
year.)

Poultry must be slaughtered according to Islamic requirements. A Halal
slaughter certificate issued by an approved Islamic Center in the
exporting country must accompany imported poultry. The biotech issue is
attracting some attention. Discussions underway center on whether to
impose labeling standards.

PSD Table

Country United Arab Emirates

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

2003 Revised 2004 Estimate 2005 Forecast UOM

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

Market Year Begin01/2003 01/2004 01/2005 MM/YYYY

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

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

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

Production 33 33 35 35 0 35 (1000 MT)

Whole, Imports 95 120 95 120 0 120 (1000 MT)

Parts, Imports 50 58 45 60 0 62 (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 145 178 140 180 0 182 (1000 MT)

TOTAL SUPPLY 178 211 175 215 0 217 (1000 MT)

Whole, Exports 20 20 20 20 0 20 (1000 MT)

Parts, Exports 25 20 20 20 0 22 (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 45 40 40 40 0 42 (1000 MT)

Human Consumption 133 171 135 175 0 175 (1000 MT)

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

Total Dom. Consmptn 133 171 135 175 0 175 (1000 MT)

TOTAL Use 178 211 175 215 0 217 (1000 MT)

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

TOTAL DISTRBTN 178 211 175 215 0 217 (1000 MT)

CY Imp. from U.S. 0 25 0 15 0 20 (1000 MT)

  ---------------------- -------------- ------------------- --------------
  **Commodity**          Poultry, Meat,                     
                         Broiler                            

  Time Period            2003           Units:               

  Exports for:           Chicken                            **#VALUE!**

  U.S.                   0              U.S.                 

  Others                                Others              

  Azerbaijan             200                                 

  Iran                   6000                                

  Turkmenstan            500                                 

  Afganistan             2000                                

  Bahrain                100                                 

  Kuwait                 200                                 

  Iraq                   500                                 

  Jordan                 500                                 

  Tadzhikistan           1500                                

  Oman                   20000                               

  Total for Others       31500                              0

  Others not Listed      8500                                

  Grand Total            40000                              0

                                                            
  ---------------------- -------------- ------------------- --------------

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

  **Country**       United Arab Emirates                        

  **Commodity**     Poultry, Meat, Broiler                      

  Time Period       2003                         Units:         MT

  Imports for:      Chicken                                     **#VALUE!**

  U.S.              25183                        U.S.            

  Others                                         Others         

  Brazil            107911                                       

  Denmark           15645                                        

  France            10036                                        

  Saudi Arabia      3515                                         

  Thailand          1942                                         

                                                                 

                                                                 

                                                                 

                                                                 

                                                                 

  Total for Others  139049                                      0

  Others not Listed 3573                                         

  Grand Total       142622                                      0
  ----------------- ---------------------------- -------------- -------------

Note: Please note that the Excel Formula for the "Grande Total" could
not reflect the total including US exports. The first cell of the
formula showed "B7" which is a blank cell while in fact US exports do
appear in cell "B6". Since the formula is protected ATO Dubai was not
able to change the formula. Thus the "Grand Total in the above table
does not reflect the actual total which is 167,805 MT. Please check
Excel file attached to the report.

  --------------- -------------------------------- ---------------- --------
  **Prices                                                          
  Table**                                                           

  **Country**     United Arab Emirates                              

  **Commodity**   Poultry, Meat, Broiler                            

  Prices in       US Dollar                        per uom           

                                                                    

  Year            2004                             2005             \%
                                                                    Change

  Jan             1150                                              -100%

  Feb             1100                                              -100%

  Mar             1050                                              -100%

  Apr             1025                                              -100%

  May             1000                                              -100%

  Jun             850                                               -100%

  Jul             900                                               -100%

  Aug             925                                               -100%

  Sep             950                                               -100%

  Oct                                                               

  Nov                                                               

  Dec                                                               

                                                                    

  Exchange Rate   3.673                            Local            
                                                   Currency/US \$   

  Date of Quote                                    MM/DD/YYYY       
  --------------- -------------------------------- ---------------- --------

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