USDA GAIN: Poultry and Products
20 September 2012
2012 Iraqi poultry production is expected to be on par with 2011 production. Increased production in the poultry sector during the first half of 2012 has now been sharply curtailed by high feed prices and serious disease problems that have not been addressed. Both these factors are likely to carry over into 2013. The Iraqi Poultry Producers Association (IPPA) estimates that the industry average mortality rate is approximately 30 percent, with incidents with mortality rates as high as 70 percent. These high mortality rates and sharply higher feed costs suggest either weak or negative returns during the remainder of 2012 and through at least the first half of 2013. Disease problems and associated losses represent an area that the Iraq poultry sector has been slow to address. Potential expansion of domestic poultry production is not anticipated until the fall of 2013 and will only take place under a scenario of lower feed costs and improved feed availability, as well as some degree of industry success in addressing the currently high mortality rate.
Disease problems continue to affect domestic production negatively, and problems have been noted across all areas of Iraq and are particularly severe across central and southern areas. Bio-security and bio-safety protocols are not strictly adhered to by most producers, which make it difficult to separate disease problems from poor overall care and management by poultry producers. Both industry and Iraq Ministry of Agriculture officials are well aware of the problem but have been slow to react and formulate effective measures to counter the problem.
Domestic poultry production potential also continues to be constrained by onerous import regulations and outright seasonal import bans on important feed products, such as wheat, corn, and barley. There are some indications that Iraq domestic corn production will be up in 2012, but while helpful the impact will be small.
Domestic feed availability declined during 2012 as lower domestic feed wheat availability and lower barley production will limit feed supplies. 2012 corn production will likely be above the 2011 production level of 250 TMT but will not make up the shortfall in the other grains. 2012 corn production is forecast at 275 TMT. Quality problems are pervasive in domestic corn. Corn is harvested and shucked by hand and then sold/delivered to Mesopotamia State Company for Seeds, part of the Iraqi Ministry of Agriculture, where it is shelled. Lack of shelling, storage and drying capacity leads to mold/fungi development and potential aflatoxin issues. Larger, integrated poultry operations have indicated that past experience with Iraqi corn was problematic and that they no longer use it.
Protein meal continues to be a major constraint, as Iraq produces only very limited quantities of oilseed crops. Sunflower and sesame production is strictly for confectionary and food uses. Cotton production has rebounded in recent years but Iraq has no operational cottonseed processing facilities. Cottonseed is utilized whole for domestic livestock feeding and is also exported.
Imports of feed for the poultry sector remain constrained by cumbersome import requirements and seasonal import bans. Importers also report that the conflict in Syria has cut the supply chain for both imported bulk feed products and finished feed products such as pellets. End users also report sharply higher import procurement costs over the summer months, as international prices have risen sharply since May 2012. Imported feed costs within Iraq remain well above what might be expected assuming efficient market transactions, since traders/importers deal in relatively small quantities and rarely use bulk shipment. Corn, soybean meal, and pelleted feed are generally shipped to Iraq in 50 kilogram bags. Imported feed and protein prices as reported by the IPPA at the end of July were $525 per metric ton for corn and $950 per metric ton for 44 percent protein soybean meal, suggesting ample opportunity for increased imports and lower feed prices, under a more relaxed regulatory and market structure.
The Ministry of Agriculture’s poultry initiative, announced in the spring of 2010 appears to be inactive. Under the proposal/plan the Ministry of Agriculture would have purchased corn and soybean meal then resold the imported feed products at subsidized prices, approximately 25 percent under their procurement and handling cost. A tender for corn was issued during the fall of 2011 but with specifications so restrictive that no offers were received. No follow-up activity is taking place. U.S. corn was excluded due to a ban on imports of genetically modified organisms. The Ministry of Agriculture needs to better understand that lower-cost imported feed products along with better producer practices are necessary to grow the domestic poultry industry.
|Feed Supplies: (Thousand Metric Tons)|
|Other Feed (Imported)|
|Source: FAS, Post Estimates|
With domestic production flat and imports of poultry products increasing during 2012, per capita consumption is expected to decrease slightly from the 2011 level of 24.6 kilograms to 24.2 kilograms per capita. Continued economic growth across Iraq fueled by oil revenues should lead to continued gains in personal income, supporting poultry meat purchases by consumers. As long as domestic production remains stagnant, rising domestic demand will be satisfied by imports. The outlook for continued high consumer prices in the red meat sector adds to a generally favorable outlook for both poultry production and imports. While imported poultry prices may increase during 2013, the relative price advantage that imported poultry holds over domestic poultry and red meat products will remain solidly in place.
Total Iraqi poultry imports are increasing steadily in response to population growth and rising incomes due to increased economic activity and oil revenues. This trend is expected to continue. Imported poultry is the most economical meat available to consumers in Iraq, priced at about one third the cost of imported and domestically produced beef and lamb. Total imports for 2012, including transshipments through regional countries, are expected to be 603 TMT up three percent from 598 TMT in 2011.
U.S. poultry exports to Iraq in 2012, including transshipments, are expected to decline moderately to 137 TMT from 160 TMT in 2011, due to difficulties with precertification requirements and increased competition from other suppliers, including Turkey. The outlook for the import of U.S. poultry products remains positive, however, with increase imports expected as the market continues to grow.
Precertification, which requires inspection and certification of shipments in the country of origin by a private sector contractor hired by the Iraqi government, continues to be an impediment to U.S. poultry exports to Iraq. It is important to note that the northern Kurdish region did not implement precertification for food products, so poultry enters Iraq from Turkey without this burdensome requirement. Precertification also appears to be distorting normal trading patterns and routes, resulting in increased transshipments to Iraq through regional countries.
Precertification was proposed by the Ministry of Planning/Central Organization for Standards and Quality Control (COSQC), approved by the Council of Ministers in December 2010, and implemented on July 1, 2011. Under this new requirement, COSQC contracted with two private sector companies, SGS and Bureau Veritas, to inspect and certify, in the country of origin prior to shipment, that products meet Iraqi import requirements. Products arriving at Iraqi ports in the lower 15 provinces during 2011 and early 2012 were required to have a certificate of conformity issued by one of these two companies in the country of origin. The KRG has also implemented precertification of imports, but did not include food products. In March of 2012, the contract with SGS in the lower 15 provinces was canceled by COSQC leaving Bureau Veritas as the only provider of precertification services worldwide.
The new pre-import inspection and certification scheme came about in an effort to control imports of substandard and unsafe products. This was a legitimate and serious problem that needed to be addressed. However, precertification has proven to be a major technical barrier to trade for U.S. exporters, including poultry, and ineffective at controlling the quality and safety of imports. With the cancelation of the SGS contract, the ability of the one remaining company, Bureau Vertis, to provide certification services in the entire United States appears limited. Outdated and problematic import standards for food products are also a fundamental problem that further complicates the precertification system.
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