Report Highlights

Recent market developments appeared to limit prospects for Thailand’s broiler industry in 2006 and 2007. Exports, which have been a main engine driving production growth, have been stagnant during this time due to limited exports to the EU and Japan. Expansion in broiler production, accordingly, will be driven by domestic consumption only.

Summary

Recent market developments limit prospects for Thailand’s broiler industry in 2006 and 2007. The exports, which have been a main engine driving production growth, have been stagnant during this time due to limited exports to the EU and Japan. Expansion in broiler production, accordingly, will be driven by domestic consumption only. Although HPAI, which remains a huge problem for Thailand, has not affected broiler production directly, it has hurt the broiler industry in terms of reducing their ability to export raw (uncooked) meat. Consumption dipped as consumers negatively responded to the news of HPAI-related casualties.

Trade barriers in the EU market play an important role in limiting Thai exports in 2006 and 2007. These barriers include: (1) the recent EU directive to prolong the ban on raw (uncooked) poultry products into the EU from Thailand and other HPAI affected Asian countries until 2007; and (2) the new EU directive to replace a current tariff schedule with a tariff-rate-quota system, which will be translated to limit import volume from exporting countries including Thailand.

Thailand has struggled to export raw or uncooked chicken products to major markets like the EU and Japan and has been negotiating with these two countries to accept the compartmentalization concept recently initiated by the OIE. To date, there has been no significant progress in the negotiations thus far.

Section I: Situation and Outlook: Production

Production Trend
Thailand’s broiler meat production in 2007 is forecast to grow 5 percent over the 2006 level. The growth is relatively low compared to 2005 and 2006 because broiler exports are likely to stagnate in 2007 while domestic consumption registers slow growth. The estimate of broiler production for 2006 has been also revised downward reflecting the fact that nearly all integrated broiler producers are cooperating to reduce their chick production in late 2006.

Trade sources reported that chick production in the first half of the year increased sharply from 17-18 million birds per week in late 2005 to 19-21 million birds per week. However, prices for chicks and broilers slipped down quickly when the export demand and domestic consumption was not able to absorb significantly increased chick production. In July 2006, a group of integrated broiler producers called for a meeting and agreed to control chick supplies. Their target is to reduce a weekly chick production from about 21 million birds in July to average 18 million birds per week. The production control began in effect from September 2006.

Oversupply of chicks began in 2006 when Thai integrated broiler producers increased their imports of grandparent-stock (GPS) and parent-stock (PS) chicks in 2005 in response to a recovery in both domestic and overseas market for Thai broiler meat in 2005. The Department of Livestock Development (DLD) reported that Thailand’s breeding chick stocks increased sharply by 40 percent from 6.56 million birds in 2004 to 9.18 million birds in 2005.

Production Costs

Production costs of live broiler in 2007 are forecast to be close to 28-29 baht/kg (35- 36 cents/pound). Trade sources reported that the average live broiler production costs in the first seven months of 2006 (Jan-Jul) rose by 3-5 percent from the same period of 2005 due mainly to increasing prices for corn (up 9 percent in the first seven months), which accounts for 50-60 percent in poultry feed ration, and higher expenses on labor and transportation costs. The current average production costs in the first 7 months of 2006 (Jan-Jul) are 28.00 baht/kg (35 cents/pound), which is derived from day-old chicks (5.00 baht), feed (18.50 baht), vaccination and drugs (1.00 baht), and labor and other costs (3.50 baht), respectively.

HPAI and Broiler Production

High Pathogenic Avian Influenza (HPAI), H5N1 type, has hit Thailand periodically since January 2004. There are no reports of HPAI-caused death in broiler farms since the reoccurrence of the disease in July 2006. Both relevant government offices and integrated broiler processors claimed that the broiler farms, especially broiler farms belonging to integrated producers, have never been infected by the HPAI thus far. They believed that prevailing stringent biosafety surveillance and controls has effectively prevented their farms from disease contacts.

Although HPAI has no direct impact on broiler production, it severely affected the Thai broiler industry. For instance, the first hit by HPAI in 2004 defamed the Royal Thai Government (RTG)’s transparency over the handling of the HPAI. The Ministry of Agriculture and Cooperatives (MOAC) announced the first HPAI case in poultry after the Ministry of Public Health (MOPH) confirmed a human causality relating to HPAI. During this time, the disease spread to 89 districts in 42 provinces (out of 76 provinces of Thailand) and the RTG urgently launched a stamping-out campaign to depopulate poultry up to 20 million birds in the first wave of the HPAI from Januray-July 2004. Although nearly all depopulated animals were not broilers, a lack of confidence led both exports and domestic consumption of chicken meat to drop sharply in 2004. The broiler production was reduced by 32 percent accordingly. It is also estimated that integrated chicken operations in Thailand lost about 5.0-6.0 billion baht (US$ 137 million) in 2004.

HPAI and Vaccination

The RTG has prohibited the vaccination of poultry against Avian Influenza. However, the RTG is unlikely to enforce its regulation effectively. It is widely rumored that several poultry raisers, especially layer farmers and fighting cock breeders, have used smuggled vaccines obtained from China and Hong Kong. Nevertheless, the Minister of Agriculture and Cooperatives recently said that Thailand would continue with its plan to avoid vaccination and control the disease through segregation and stamping out. The Thai Food and Drug Administration (FDA) recently reported that the agency arrested several vaccine smugglers from 2004-2005, confiscating 1.525 million doses of illegal HPAI vaccines for animal.

HPAI Situation and Disease Surveillance and Control

1) Current Situation: The Fourth Wave
The RTG reported to the OIE on April 6, 2006, that Thailand elapsed 140 days free of HPAI since the last case on November 9, 2005. The reappearance of the disease, however, was reported when the first case of human H5N1 infection was confirmed on July 24, 2006. On the same day, the Ministry of Agriculture and Cooperatives (MOAC) reported to the OIE to confirm HPAI animal infection to about 30 birds of poultry in Phichit Province, north of Thailand. Several media outlets have reported suspicious poultry deaths in nearby provinces, including Phitsanuloke and Uttaradit. On July 29, the Ministry confirmed another HPAI outbreak in Nakhon Panom Province, northeastern of Thailand.

Department of Livestock Development (DLD), MOAC, reacted immediately to the outbreaks by imposing several disease surveillance and control measures. The measures include:

• Depopulate all poultry at infected premises, with 75 percent of market prices compensated to affected farmers;
• Disinfection of affected premises, all infected or contaminated materials and high-risk areas;
• Screening by cloacal swab sampling in a 5-kilometers radius of the infected farm; and
• Control movement in a 10-kilometers radius of the infected farm;

• Implement a week of intensive screening and control (called X-ray campaign) from August 7-14, 2006 in 29 HPAI-risk Provinces. These provinces include Bangkok, Sing Buri, Ang Thong, Ayutthaya, Nonthaburi, Suphan Buri, Chai Nat, Pathumthani, Lop Buri, Chachoengsao, Nakhon Nayok, Prachin Buri, Samut Prakan, Chaiyaphum, Nakhon Ratchasima, Udon Thani, Nahkon Panom, Kalasin, Khon Kaen, Phichit, Kamphaeng Phet, Nakhon Sawan, Phetchabun, Phitsanulok, Uttaradit, Sukhothai, Uthai Thani, Nakhon Pathom, and Kanchanaburi.

• Ban poultry imports from neighboring countries, including Laos, Cambodia, Burma, Malaysia, Indonesia, and Viet Nam.

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September 2006