Update on European Commission Measures to Support the Poultry Market

In response to the impacts felt from Avian Influenza on the consumption, production, and prices of poultry and eggs in the European Union (EU-25), the management committee for eggs and poultry approved a Commission proposal to allow the co-financing by the EU-25 budget of measures to support the poultry market on June 21, 2006. Until now there has was no way to take into account market problems linked to lost sales, due to reduced consumer confidence. The only tool available in the past has been export subsidies, which have already been increased on several occasions but have proven ineffective for the current market situation.

At the time, the expected cost to the EU-25 budget proposed was between €50 and €65 million (US $63.8* and US $82.8* million), and the following aid measures were to be covered: the destruction of hatching eggs; the processing of hatching eggs; the destruction of chicks (of chicken, guinea fowl, duck, turkey, and goose); the early slaughter of some of the breeding flock; the extension of periods of temporary nonproduction beyond three weeks; the voluntary reduction in output by reduced placing of chicks; and the early slaughter of ready to lay pullets.

On July 3, 2006 the details of the market support measures were laid down in Commission Regulation 1010/2006 and published in the Official Journal of the European Commission, which describes the maximum levels of compensation for destruction and depopulation. The support is to be co-financed by the governments on a 50-50 percent basis in most Member States (MS) with each MS putting in half of the support. The maximum level calculated by the European Commission (EC) was about €75 million (US $94.3** million) of which the sector projects to realistically only receive about half of this amount, due to restrictions in Regulation 1010/2006 setting the minimum time span for advancing breeding flock slaughter at least six weeks before the standard date of slaughtering. The majority of the support is reserved for the destruction of hatching eggs and breeding birds.

As of July 14, 2006, 14 MS requested aid measures: Austria, Cyprus, Czech Republic, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Poland, Portugal, Slovakia, and Spain. Nothing thus far has been allocated to compensate promotional campaigns to gain consumer trust or for the storage or destruction of poultry meat as reportedly asked for by Belgium and Hungary. On July 12, 2006 the EC amended a few details in Regulation 1010/2006, and are expected to be published on the Official Journal of the EC within two weeks. Note: * On July 10, 2006 €1 = $1.2736; ** On July 25, 2006 €1 = $1.2576
Source: USDA FAS/Official Journals of the EC/USDA AMS

EU Poultry Update

Broiler production in 2005 increased more than previously estimated, is projected to decrease 4% in 2006 when compared with 2005, and is forecast to partially recover in 2007 but not quite to pre-Avian Influenza (AI) levels. Reductions in broiler production in Greece and Italy were in response to bird flu in Romania and Turkey. The largest reductions were felt in France, Italy, and Spain, due to AI and consumption depression, while the Northern Member States recorded only marginal reductions.

Other Member States (MS) such as the Netherlands, Germany, and Denmark suffered production cuts as a result of severely depressed prices and market volatility. Whereas, turkey production dropped slightly below previous estimates in 2005, due to reduced domestic consumption, especially in Germany and the United Kingdom. Turkey production is projected to drop 5% in 2006, mostly in France as it is the largest producer, and continue declining in 2007.

Exports of chicken meat finished 2005 steady, however are 22% lower in the first quarter of 2006 in comparison to 2005 levels, due to decreased demand worldwide, a glut of cheap chicken (Brazil and US), and bans on France. Broiler exports could partially recover in 2006 if the bans are lifted and worldwide consumption phobias ease. Forecasts for 2007 chicken meat exports are predicting the EU-25 to partially recover as long as AI continues to fade, however the EU-25 will face increased competition from Brazil, Thailand, and the US. At the same time, turkey meat exports are projected to drop 20% in 2006, due to bird flu in France, and be unable to recover lost markets in 2007.

Chicken meat imports in 2005 were more than estimated, especially imports of cooked meat from Thailand in the second half of the year. Forecasts for 2006 imports predict an increase of a little more than 15%, despite the impacts of AI. Estimates for 2007 indicate broiler imports will rise, due to the WTO ruling, the decrease in tariffs, and the increased cooking capacity of Thailand. Whereas, turkey meat imports are predicted to increase in 2006 and marginally so in 2007 as a result of the WTO "salted poultry" outcome.

The rise in imports stems from a recent WTO ruling over the "salted poultry" case between the EU-25, Brazil, and Thailand. Complaints were filed by Brazil and Thailand May 30, 2005 after the EU issued Regulation 1223/2002 in 2002 and Decision 2003/97/EC in 2003, which were adopted to prevent Brazil and Thailand from continuing to export salted poultry cuts to Europe under customs heading 0210 (15.4% at valorem tariff) and instead force these imports under customs heading 0207 (€102.4/100 kg tariff). Under the "loophole", imports soared from 3,000 Metric Tons (MT) in 1996 to 400,000 MT in 2001. The WTO ruled that the EU had "acted inconsistently with requirements of the GATT 1994" and forced the EU to let poultry exports from Brazil and Thailand to resume again.
Source: USDA FAS/WTO/USDA AMS

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