Shift to Cheaper Protein Expected to Boost Poultry Profts in Argentina

ARGENTINA - Argentina's 2016 poultry production is expected to reach 2.2 million tons this year according to the latest report from the US Department of Agriculture's Foreign Agricultural Service (USDA-FAS), an upward revision to estimates following higher domestic demand and minor export growth.
calendar icon 11 March 2016
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As beef prices continue to rise, consumers shift towards more inexpensive animal protein sources to maintain a stable level of animal protein consumption, and this is expected to make broiler production more profitable despite increased costs.

The report said production costs were mainly rising as a result of policies from Argentina's new government.

In December 2015, the new Argentine government reduced the export tax on soybeans and its byproducts by 5 percentage points and is eliminating export taxes on all other agricultural commodities.

Soon after that, the new administration eliminated export permits (ROEs) for grains and oilseeds. This is expected to increase feed costs – about 30 per cent of overall costs – as more grain and oilseed supplies flow towards the export sector.

However, producers were fully prepared for these policy changes under the new administration and prepared themselves accordingly. As such, the report said these elevated costs are expected to have a minimal effect on production.

In December 2015, Argentina's former second largest producer Cresta Roja declared bankruptcy after accumulating massive debts, in part due to unpaid sales to Venezuela, and closed.

Due to protests of former employees, the government soon intervened and oversaw a transfer of ownership. The company is now operated by Ovoprot International and is expected to reopen its March 2016.

Consumption in Argentina is expected to increase in 2016 by 2.2 kg per capita over the previous year, reaching 1.98 million tons due to greater demand for cost-effective animal protein sources.

Argentina's 2016 export predictions have been revised up by 5,000 tons to 230,000 tons, fuelled by growth in major markets such as Middle East and East Asia, and new growth in smaller markets, such as Cuba.

The report said industry is expecting a growth in exports of 25 per cent as it diversifies its export markets after the loss of Venezuela.

The export sector along with the government has begun an aggressive campaign to open markets throughout globe, especially in Southeast Asia, the Middle East, and Sub-Saharan Africa.

Much of the sector’s performance will be affected by competition from Brazil. In 2015, Brazil was able to offer much lower prices as a result of the devaluation of the Real - this diminished Argentine market share in markets where both countries competed. Argentina may be able to recover as Brazil is facing an increase in production costs and a slight normalisation of prices is expected to occur.

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