Report Highlights:

In 2011, post is projecting a steady, but relatively high level of broiler consumption, roughly unchanged from 2010 at 2.01 million MT. Post is projecting a slight increase in total imports at 735,000 MT. U.S. broilers are expected to do exceptionally well this year, projected up by 67% from last year to 30,000 MT, and accounting for 8% of total imports.

2011 Broiler Market Outlook (New)

Relatively High, Steady Consumption Expected

In 2011, the Japanese broiler market will primarily be driven by the state of economy. Post expects that the current deflationary trend, high unemployment rate (5.3% in June, 2010), and tight consumer spending will continue through the next year. In contrast with the beef and pork market, the situation indicates a positive market outlook for Japan’s broiler market driven by price and value-conscious consumers.

In 2011, post is projecting a steady, but relatively high level of broiler consumption, roughly unchanged from 2010 at 2.01 million MT. This demand will be met by both imports and domestic production projected at approximately the same level as the previous year. Post is projecting a slight increase in total imports at 735,000 MT (bulk broiler meat cuts: unchanged at 395,000 MT; prepared and processed products: up slightly by 1% to 340,000 MT) while domestic output is expected to be around 1.28 million MT. At the end of the year frozen stocks will be slightly lower than the beginning of the year at an estimated 106,000 MT.

This positive outlook scenario is made based on the assumption that current low market prices for both domestic and imported chicken meat will be sustained through to the next year. Chinese prepared/processed products, which are competitive with Thai products, are expected to continue to recover in 2011.

2010 Broiler Market Outlook (Revised)

2009 PS&D Adjusted due to Recent Revisions to Domestic Production

In this report, post made a couple of revisions to the 2009 PS&D numbers based on the latest MAFF revisions to 2009 domestic poultry production data, which turned out to be significantly different from the previous numbers used in the last voluntary report (JA 0011).

The 2009 national broiler projection is 1.282 million MT differing from the previously announced preliminary number (1.255 million MT), which was a 2% increase from the previous 2008 total. Increased average weight gain of the birds (a couple of percentage points) is mainly attributable to the growth. Likewise, total consumption for 2009 was revised up by 3% to 1.978 million MT. There were no other revisions to 2009 PS&D numbers since the last reporting.

The new 2009 numbers partially explain the fairly low price situation for domestic cuts. Of course, as noted in the previous report (JA0011), importers and domestic meat distributors utilized more frozen poultry stocks while cutting second half imports almost by half; low priced frozen chicken stocks were sold in the retail, food service, and processing sectors as discount sales.

In light of the above revisions, the 2010 PS&D numbers were adjusted and revised based on the relevant production, trade and frozen stock data available to date. The newer numbers made in this report were entered based on analysis of the market situation so far this year.

Solid Consumption to Lead Imports Recovery in 2010

A higher number of broiler chicks placed on feed, coupled with increased production of formula mixed feed for broilers in the first half of the year indicate a continuation of Japan’s high level broiler production at 1.28 million MT; the same level with 2009.

Meanwhile, post expects total broiler consumption in 2010 will likely continue at a high level and is projecting consumption up by 1% from the last year to 2.01 million MT. Imports have made a remarkable recovery, projected up by 13% to 730,000 MT (Bulk Broiler Cuts: projected up by 19% to 395,000 MT, Prepared and Processed Products: projected up by 7% at 335,000 MT). A strong JP Yen, lower than last year’s prices for Brazilian boneless leg meat and China’s competitive prices for prepared/processed products are the reason for projected import growth this year.

U.S. broilers are expected to do exceptionally well this year, projected up by 67% from last year to 30,000 MT, and accounting for 8% of total imports. A promotion at a major fast food fried chicken chain using American broiler cuts is said to be one reason for the sudden surge in Japan’s imports of bone-in leg this year, in addition to continuous bans on raw poultry from China and Thailand due to HPAI and surplus U.S. poultry supply during the Russian import ban.

2010 Market Situation Summary (New)

In 2010, low market prices for chicken seem to be the key element sustaining a relatively high level of broiler consumption. Outstanding retail sales during the first half were the result of growing household consumption (quantity: up 8%, price: down 2%) – (See table 1). Despite sluggish food service sales persisting from last year, sales of chicken have been strong. Some fast food entities have actively promoted chicken menus (even hamburger chains) this year to take advantage of low procurement costs.

As a result, broiler supplies decreased while demand in the first half and market prices remained strong (see tables 2-a, 2-b). Reduced imports in the previous year recovered remarkably during the first half of the new year (bulk broiler cuts: up by 17% at 199,484 MT; prepared and processed products: up by 11% at 162,970 MT). Depleted stocks at the beginning of 2010, a strong JP Yen, and prices lower than the previous year offered by major suppliers were the key to recovery (bulk broiler cuts: average CIF value down 14% @US$ 2.45 per kg; prepared and processed products: average CIF value down 8% @US$4.21;.

U.S. broilers surged in the first half of the year, far exceeding many expectations up by 87% or 16,356 MT. Total U.S. bone-in legs drove the import surge and accounted for 76% of sales. According to a trade source, Japan’s largest fast food chain (fried chicken) has been promoting several menus using price competitive American cuts (this chain reportedly uses mostly domestic chicken supplemented by imports). At the present point in time, it is uncertain if Japan’s purchases of U.S. broilers will be sustained through the next year now that Russia’s import suspension has been lifted.

According to the same trade source, Japan’s major hamburger chain has been conducting a chicken menu campaign this year using pre-cooked products manufactured in China and Thailand. Overall, the market has been relatively free of safety related incidents and scandals that reduced demand for imports from China beginning in 2008. The Japanese trade has aggressively purchased price competitive Chinese products this year to meet the price and value demands of the market.

Lastly, give the abundant supply of low priced domestic breast cuts since last year, Japanese retailers have reportedly started to promote domestic breast meat (boneless/skinless) with a healthy image in front. Most of the surplus domestic breast meat has reportedly been picked up by processing end-users to make ready-to-eat foods that are sold at a substantial discount from average market prices.

Further Reading

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October 2010