Required Report - public distribution

**Date:** 8/25/2006

**GAIN Report Number:** VE6010

VE6010

**Venezuela**

**Poultry and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Bonnie Borris

U.S. Embassy Venezuela

**Prepared by:**

Mora Paiva

**Report Highlights:**

Forecast for 2006 and 2007 is for an increase in poultry production.
Increases in production continue to be driven by a rising consumer
demand. Consumer demand is growing because of higher disposable incomes
and the direct effect of an expansion of government poultry purchases.

The forecast for 2006 and 2007 is that poultry imports will grow by 20
and 25 percent, respectively. All poultry imports are carried out by the
Government of Venezuela, largely from Brazil.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Caracas \[VE1\]

\[VE\]

Table of Contents

[**Production 3**](#production)

[Production Problems 3](#production-problems)

[Production Structure 3](#production-structure)

[Price Controls 4](#price-controls)

[Production Levels: An Estimate 4](#production-levels-an-estimate)

[Consumption 4](#consumption)

[Marketing 5](#marketing)

[Trade 5](#trade)

[Notes to the Trade Figures 5](#notes-to-the-trade-figures)

[PSD Table 7](#psd-table)

[Appendix I: Venezuelan Poultry Organizations and other Related Groups
9](#appendix-i-venezuelan-poultry-organizations-and-other-related-groups)

# 

# Production

Forecast for 2006 and 2007 is for an increase in poultry production of 6
and 9 percent respectively. Increases in production continue to be
driven by rising consumer demand. Consumer demand is growing because of
higher disposable incomes and the direct effect of an expansion of
government poultry purchases. The Government of Venezuela (GOV)
continues its policy of offering low-priced food products to the poor,
and poultry is included in their basket of food products.

## Production Problems

Despite increasing demand for poultry products, the domestic industry
deals with increasing costs of production and a controlled price at the
retail level, which has been unchanged since 2004. Costs of production
are affected as the industry heavily depends on imported yellow corn,
soybean meal, and yellow grease to produce animal feed. Salary and other
labor benefits decreed by the GOV also have an impact on the cost of
production.

Venezuela's feed manufacturers and poultry producers are forced to
purchase the surplus of domestically produced white corn before having
access to imported feed ingredients. Corn production in Venezuela mainly
consists of white corn for human consumption. Venezuela's food
processing industry uses almost the entire white corn crop to make corn
flour for "arepas", a corn bread considered staple food by Venezuelans.
Once the food processing industry fills its demand for white corn, the
surplus is sold to the animal feed manufacturers. At the time of writing
this report, there is a surplus of domestic white corn. Corn producers
are requesting the GOV to halt the issuance of import licenses until the
crop is completely purchased by the animal feed manufacturers.

The animal feed manufacturers and the poultry industry prefer imported
commodities such as yellow corn, soybean meal and yellow grease, due to
better quality and lower prices. Access to imported feed ingredients is
limited because of government control over the issuance of import
licenses for these products, which has become even more restricted. In
addition, imports are also subject to foreign exchange controls.
Venezuela's poultry industry could be 100% self-sufficient if it had
more access to imported feed ingredients.

The process of registering processed food products as well as importing
basic commodities involves several ministries and agencies. Paperwork
goes from import permits, licenses, certificates, sworn-declarations of
domestic production based on imported inputs, to foreign exchange
applications and laboratory analysis, to name just a few. Yet,
Venezuela's poultry industry continues to make strides in productivity
in spite of such constraints.

## Production Structure

About 80% of domestic poultry production is concentrated in Venezuela's
central and southwestern states of Aragua, Carabobo, Miranda and Zulia.
Larger poultry companies have acquired smaller companies, which are
unable to deal with increasing costs of production and price controls at
the retail level. In general, the Venezuelan poultry industry is
vertically integrated (feed processing, hatcheries, poultry farms,
slaughterhouses, processing, distribution and marketing), aimed at
improving operational efficiencies.

## Price Controls

With the objective of keeping food products available at reasonable
prices, the GOV implemented price controls in February 11, 2003. This
move was made in conjunction with the imposition of exchange controls in
late January 2003, and was an attempt by the government to help restrain
inflation.

Poultry and eggs are included in the list of price controls. The latest
price increase for poultry was decreed by the GOV in April 2004. Since
then the poultry industry has insistently lobbied the GOV for a price
increase. On several occasions, the domestic poultry industry and the
animal feed manufacturers have presented cost of production structures
to the GOV that justify an increase in the retail price. According to
the poultry industry, these efforts have been fruitless. There is no
indication that the GOV will increase the price of poultry nor will it
lift price controls in the near future. Current prices of meat are shown
in the following table:

**Price Comparison Between Poultry, Beef and Pork Meat**

**(Bolivars per Kilo)**

+------------+-----------------------------+--------------------------+
| *          | **Free Market Price/ 1**    | **Controlled Price/ 2**  |
| *Product** |                             |                          |
+------------+-----------------------------+--------------------------+
| ####       | 3,500                       | 3,130                    |
| ## Poultry |                             |                          |
+------------+-----------------------------+--------------------------+
| **Beef**   | 14,500                      | 10,800                   |
+------------+-----------------------------+--------------------------+
| **Pork**   | 8,800                       | 4,000                    |
+------------+-----------------------------+--------------------------+

> *Source:*
>
> *1/ Wet market quotes as of August 2006.*
>
> *2/Official Gazette Nº 37,918, dated 04/15/04 and Nº37,629, dated
> 02/11/03*

*Exchange rate Bs. 2,150 per 1 US\$*

Large stores, such as the hypermarkets, supermarket chains, and
established butcher shops are required to sell products at the
established price on the price control list. Offering market prices
above the official controlled price is an illegal practice and leads to
steep fines and can lead to temporary closures of poultry facilities,
supermarkets and hypermarkets. These closures occurred repeatedly in
2005 and continue to happen during 2006.

## Production Levels: An Estimate

There is no consent on poultry production levels. The GOV does not
publish production figures. Only the Venezuelan Poultry Federation (in
Spanish: Federación Venezolana de Avicultura, or FENAVI) has published
production data, although some agricultural sectors doubt these figures.
Therefore, FAS/Caracas is estimating poultry production levels based on
past levels, estimates for local demand based on current prices, and a
review of availability of feed ingredients. For more information on
poultry production and feed availability, please refer to the end of
this report.

# Consumption

Poultry consumption is forecast to expand in 2006 and 2007, as result of
higher disposable incomes and because poultry remains the cheapest
source of animal protein as compared to beef and pork meat. During the
last three years, the GOV has developed a food distribution system based
on food procurement and a network of stores. Poultry and poultry
products are included in these programs. The GOV, through its
procurement agency called CASA, purchases both domestic and imported
poultry. The GOV then sells the poultry through its network of food
stores called MERCAL, at prices below the controlled price level.

Venezuela's annual per capita consumption of poultry is about 30 kilos.
Some changes in retail practices have contributed to the increase in the
number of poultry products available in the last year and a half. These
practices include offering boneless, skinless poultry and adding various
spices to different fresh cut poultry pieces. Any small value-added
practice that can be included or offered at the retail level is an
opportunity to sell at prices higher than the established price controls
for poultry, as only whole poultry, breast and leg quarters, fresh or
frozen are under price controls.

## 

# Marketing 

In order to compensate for declining profit margins that result from
selling poultry meat at the controlled price, the industry continues to
look for alternative ways to increase profitability, including
increasing the production of processed poultry products. Specialized
processed products such as frozen and precooked chicken nuggets; chicken
pieces; marinated chicken; and other varieties of valued-added poultry
products will continue to grow rapidly in the next year or two. Again,
these types of products are not subject to price controls.

During 2006, FAS/Caracas attended the "Poultry Show" in Atlanta, along
with 100 to 125 Venezuelans. Attendance at this show exposes the
Venezuelan poultry industry to state-of-the-art technology and
developments in animal health issues, among other things.

# Trade 

The forecast for 2006 and 2007 is that poultry imports will grow by 20
and 25 percent, respectively. All poultry imports are carried out by the
GOV, largely from Brazil. Poultry imports could grow further as
Venezuela has recently joined Mercosur as a full member. At the time of
writing this report there is no information about the level of trade
preferences or exceptions given by Mercosur.

## Notes to the Trade Figures

According to official government statistics, in 2005 poultry imports
reached 38,707 metric tons. This is an increase of 56% as compared to
2004. However, the domestic poultry and animal feed industries disagree
with the official government data. The industry has commented that
poultry imports were between 88,000 metric tons to 112,000 metric tons.

Most recently, the Argentine national animal feed and food quality
service (SENASA) announced that during the first five months of 2006, it
exported 1,008 metric tons of poultry meat to Venezuela. These figures
are not shown in Venezuelan official trade statistics.

The following table provides the monthly record of imports. The
government carried all imports.

**Venezuela's Poultry Imports**

**(Metric tons)**

  ------------- ----------------------- ----------------- -----------------
                **2004**                **2005**          **2006\***

  Jan           4,679                   \-                \-

  Feb           \-                      6,019             \-

  Mar           \-                      1,278             \-

  Apr           \-                      2,728             8,640

  May           \-                      11,190             

  Jun           \-                      9,152              

  Jul           2,924                   8,340              

  Aug           \-                      \-                

  Sep           3,826                   \-                 

  Oct           7,501                   \-                 

  Nov           3,755                   \-                 

  Dec           2,153                   \-                 

  **Total**     **24,838**              **38,707**        **8,640**
  ------------- ----------------------- ----------------- -----------------

####### Source: SENIAT as reported to World Trade Atlas

*Note: 2006 is not complete*

# 

# PSD Table

+---------------------+------+------+------+------+------+------+------+
| **Venezuela**       |      |      |      |      |      |      |      |
|                     |      |      |      |      |      |      |      |
| **Poultry, Meat,    |      |      |      |      |      |      |      |
| Broiler**           |      |      |      |      |      |      |      |
+---------------------+------+------+------+------+------+------+------+
|                     | **20 | **R  | **20 | **Es | **20 | **Fo | **U  |
|                     | 05** | evis | 06** | tima | 07** | reca | OM** |
|                     |      | ed** |      | te** |      | st** |      |
+---------------------+------+------+------+------+------+------+------+
|                     | **   | **   | **   | **   | **   | **   |      |
|                     | USDA | Post | USDA | Post | USDA | Post |      |
|                     | Offi | Es   | Offi | Es   | Offi | Es   |      |
|                     | cial | tima | cial | tima | cial | tima |      |
|                     | \    | te** | \    | te** | \    | te** |      |
|                     | [Old |      | [Old |      | [Old |      |      |
|                     | \]** | **\  | \]** | **\  | \]** | **\  |      |
|                     |      | [New |      | [New |      | [New |      |
|                     |      | \]** |      | \]** |      | \]** |      |
+---------------------+------+------+------+------+------+------+------+
| #####               |      | 01/  |      | 01/  |      | 01/  | MM/  |
| # Market Year Begin |      | 2005 |      | 2006 |      | 2007 | YYYY |
+---------------------+------+------+------+------+------+------+------+
| **Inventory         | 0    | 0    | 0    | 0    | 0    | 0    | (MIL |
| (Reference)**       |      |      |      |      |      |      | H    |
|                     |      |      |      |      |      |      | EAD) |
+---------------------+------+------+------+------+------+------+------+
| **Slaughter         | 0    | 0    | 0    | 0    | 0    | 0    | (MIL |
| (Reference)**       |      |      |      |      |      |      | H    |
|                     |      |      |      |      |      |      | EAD) |
+---------------------+------+------+------+------+------+------+------+
| **Beginning         | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Stocks**            |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Production**      | 330  | 350  | 345  | 370  | 0    | 405  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Whole, Imports**  | 75   | 100  | 95   | 120  | 0    | 150  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Parts, Imports**  | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Intra EC          | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Imports**           |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Other Imports**   | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL Imports**   | 75   | 100  | 95   | 120  | 0    | 150  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL SUPPLY**    | 405  | 450  | 440  | 490  | 0    | 555  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Whole, Exports**  | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Parts, Exports**  | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Intra EC          | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Exports**           |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Other Exports**   | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL Exports**   | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Human             | 365  | 405  | 400  | 445  | 0    | 510  | (    |
| Consumption**       |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Other Use,        | 40   | 45   | 40   | 45   | 0    | 45   | (    |
| Losses**            |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Total Dom.        | 405  | 450  | 440  | 490  | 0    | 555  | (    |
| Consumption**       |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL Use**       | 405  | 450  | 440  | 490  | 0    | 555  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Ending Stocks**   | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL             | 405  | 450  | 440  | 490  | 0    | 555  | (    |
| DISTRIBUTION**      |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Calendar Yr. Imp. | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| from U.S.**         |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+

![](media/image2.wmf)

# Appendix I: Venezuelan Poultry Organizations and other Related Groups

For further information regarding poultry production and trade, please
refer to the following organizations:

**Federación Nacional de Avicultura de Venezuela (FENAVI)**

*(Venezuela's National Poultry Federation)*

Contact: Mr. Francisco Tagliapetri, Executive President

Address: Av. Casanova, C.C. El Recreo, Torre Sur, piso 10, ofi.10-3,
Caracas

Tel: 58-212-761-8843, 761-7489

Fax: 58-212-761-8843

Email: <fenavi@cantv.net>

Web: [www.fenavi.com](http://www.fenavi.com/)

**Asociación Venezolana de Fabricantes de Alimentos Concentrados
(AFACA)**

(*Venezuelan National Association of Animal Feed Manufacturers)*

Contact: Mr. Henrique Pocaterra, President

Address: Boulevar de Sabana Grande, Edif. 3H, piso 4, Caracas

Tel: 58-212-762-0528, 762-0075

Fax: 58-212-762-2389

Email: presidenciafaca@cantv.net

Web: [www.afaca.com.ve](http://www.afaca.com.ve/)

Instituto Nacional de Estadística (INE)

*(National Statistics Institute)*

Address: Av. Boyacá, Edif. Fundación La Salle,piso 4, Mariperez, Caracas

Tel: 58-212-709-5311

Fax: 58-212-709-5317

Email: na

Web: [www.ine.gob.ve](http://www.ine.gob.ve/)