WORLD POULTRY DAY
BUDAPEST 10th May 2014
”At present on the past for the future”
First of all I am most honored for this invitation to this important event and a bit reluctant to address this disquished audience since I have left active service in both national and international poultry and solely act as ad hoc advicer, but I do have some experience from about 40 years serving the poultry sector both national, EU and on a global basis.
And I still have strong feelings and ideas about this sector which has been a great part of my life for 40 years.
My presentation is based upon my experience from my work and my evaluation of the future based upon the past. I have always tried to work in the present on the past for the future.
I served as secr. gen.both for the Danish Poultry Council, AVEC the european poultry organization for more than 38 years and at the same time acted as chairman of the EU Commissions advisory committee for poultry and eggs for 35 years. I was cofounder of the global poultry oraganization IPC and acted as vicepresident for eight years.
I have long wished that a world poultry day was initiated, but it was first when Attila Csorbai undertook the idea and put his energy into it, that something happened, thanks for that Attila and congratulation with the result. The sector which within long shall be the most important meatsector in the world deserves it.
The past
In 1973 when I started in both DK and AVEC the then EEC was enlarged from 6 to 9 membercountries and today it is 28.
The EU was changing from net importer to net exporter of poultrymeat, but the EU legislation did not take that into account and that gave us some big challenges, we fought for sluicegateprices and levies and exportrestitutions and the biggest challenge was to obtain some balance between production and demand, market adaptation.
The poultry market regulation did not look like the ones in the pigmeat or beefsector, we did not have possibility for private storage in a surplus situation like the pigsector. There was no uniform position whether this would be an advantage, but we did underline that when the Commission and the member states did intervene in the other sectors it did have an effect on the poultry sector.
It was very difficult to balance the market and many times we had a catastrophis overproduction, which the Commission adknowledge and a study of the structure of the slaughterhouses was carried out in 1980. We did have an overcapacity and at the time the Commission adviced the industry to adapt market balancing steps like withdrawel of products from the market, reduce the number of day old chicks etc.
Today that would be in conflict with cartel laws in my opinion.
We had examples of french slaughterhouses, who send shiploads of frozen chicken to the Middle East before having a contract with the buyers, that you only do, when panis is ruling.
The structure in the sector was very different from today.
In Denmark we had 37 slaughterhouses today we have 2 and they are not owned by Danes but Scandivian companies, but they produce more than twice the amount of meat.
In the USA there were 200 slaughterhouses and today 40, but producing 5 times the amount of poultry.
This consolidation will continue, but we will still have a lot of midsize and smaller companies, but some companies we thought were solid based do not exist today. It is a very changing world also in the poultry sector.
We shall more companies operating in several countries and even continents and also multi protein business models, where a business is operating in more than one source of meat may be incresing.
We had a lot of family owned and run companies in the 70-s, but many of them have disappeared and many of the middle size companies feel squeezed between the large companies and the smaller local ones. The middles size companies will have to pay strong attention to their growth and competition with the larger and smaller ones.
Maybe we shall see more and more alliances between some of the middle size companies. The smaller ones with mostly local markets will continue to exist, their will grow naturally with the local market and they may adapt very easily to changes in the market.
Challenges, the political demands from national and EU quarters:
In the 70s we experienced that the EU more or less used the poultry sector as trial sector with new legislation. Maybe because the sector did not at that time have enough political attention. In no EU country did poultry at the time play a major role in agricultural politics and therefore the risk of political pressure from the sector was limited, that has changed at lot.
The poultry sector was the first sector with marketing standards, hygiene EU legislation and animal welfare just as examples.
We have to pay attention to assure that the EU is not setting up rules for the EU production which are not scientific justified.
As we have seen more times in the past that has been the case fx meat and bone meal and the consequence is that EU cannot present the same demand to imported products that will violate the WTO rules, but what is worse it caused distortion of competition between the EU and third countries.
The poultry sector has to pay strong attention to the demand that member countries and the EU set for the poultry sector.
Taking salmonella as an example in my country the authorities demande poultry free of all types of salmonella and this scheme did cost the public and the sector a lot of money.
The public demanded it, they got it, but today more than half of the consumption of poultry is imported and 2/3 of the production exported without getting a higher price.
We have been faced with something in line with this as far as campolybacter is concerned but I fully support the yellow card system for improper use of antibiotics and the separation of prescribing and selling of antibiotics, which has been introduces in order to limit antibiotic resitance.
But when it comes to European mortality criteria and maximum stocking density on the one hand and the limiting of mortality rates by the use of medicine on the other. The higher mortality rate is accepted is accepted and not punished by the government, normal mortality rate is around 3 %. But Denmark is no utopi, despite a decade of negligible use of antibiotics the dreaded resistant ESBL bacteria is also present i Denmark.
OPPORTUNITIES.
2 quotations may be good to bear in mind:
Bovee: when everything else is lost, the future still remains
or Leibnitz: the present is great with the future.
I have never had any doubt about the future for the poultry sector, the future is working for the sector.
Poultry meat is the leanest meat, no religious disadvantages, best in feed conversion, the best in environmentprotection the first protein the consumer will ask for when the income for poorest increses jfr. a FAO study.
We are all working to raise the income for the poorer part of the world population, so it going our way.
But we must assure that the EU production is part of this bright future for poultry, but we do have some challenges to overcome in order to preserve our place in the market.
We have to take advantage of the fact that the EU poultry production is ahead of the competitors as far as quality, conformity, foodsafety and animalwelfare is concerned, but we have to looking for the activities of our comppetitors, we have to stay alert and keep innovating, it never stops.
CHALLENGES. Feeding the world population:
Today we are roughly 7mia (billion) in the world in 2050 that number is estimated to be 9 billion
Of the 7 mia 1 mia is underfed and starving 2 billion badly nurished,
How do we feed them?
Will there be agricultural land and water enough?
People are living longer, 100 year is no longer unnormal
We do need new technologies, cloning and synthetical material are already available to some extent.
We need more education to meet these challenges.
To quote Bovee again: we fear things in proportion to our ignorance of them
So education and knowledge are essential factors.
Competition from within the EU, from third countries and especially the alternative meat products like pork and beef.
We must demand a level playing field, we know it does not exist yet, but we must keep that demand.
We are in the EU being met with an enormous amount of legislation to regulate our production be it environment, animal welfare which third countries do not have.
We know that our production cost are higher and probably will remain higher than our third country competitors so what do we do?
We must defend our home market by fx meeting the consumer preference of local produce, adapt to local demand fx earlier in Portugal most poultry was produced in half to meet the traditional portuguese way of preparing and consuming poultry and another example in Spain a slaughterhouse has constructed a cut up installation to cut the poultry so it is ready to use for the traditinal preparation of paella.
In other words we have to on a larger scale that the small local companies to produce products that are difficult to substitute for competitors.
In other words we have to understand who our customers are and what their needs and expectations are and then exceed them.
Will consumption continue to increase?
In the USA where you are close to 50 kg is there a feeling that the more focus on diet and amount of foodintake the consumption will stagnate.
China is the interesting country to look at.
It is expected that China by 2020 will be the largest producer of poultry in the world with 21 mio tons with the US at 19 mio tons and Brazil at 14 mio tons
In China today the consumption of pork meat is strongly increasing following the increase in income, poultry is today only the 4th on the list of products consumed first pork, then farmed fish and thirdly eggs and then poultry.
But even a very small increase in the consumption poultry in China will have a profound impact on the global poultry sector. It is estimated that an increase pr capita of 4.5 kg of poultry meat in China will make China the biggest consumer of poultry in the world.
Chinas export today is about 0.4 mio tons mostly breastmeat, but the forecast for 2020 is 1 mio tons of mostly breastmeat and most certainly at an offerprice that will be very competetive as their production cost are very low.
Only the question of foodsafety and control of animal diseases may threaten that.
Demand for grain and soja will increase and the price will go up and thus the price of the final product, how is that going to affect the competitiveness?
But we also have to look at the other meats and especially the american beefsector has an impressive innovationprogramme to invente new presentation of beefproducts that is expected to be substitutable with poultry meat. So competitors are both in the poultry sector but maybe more attention should be put to the alternative meats.
The poultrysector must innovate in order to avoid a fatigueness amongst the consumer for poultry meat and avoid that the alternative meats exceed poultry.
Animal health is also a big challenge, there is a need for greater biosecurity, improved process and simplifications.
Many companies consider disease challenges as of primary importance followed by higher feed prices and thereafter productioncost in general and last competition.
That underlines the continued focus on improved productivity and risk management.
So to summarize the challenges:
Ability to understand and analyze grain and oilseed markets going forward. It is going to take greater ability, deeper insight to deal with the volatitity in the costs and availability of grains and oilseeds which after all represent the biggest costs of producing poultry.
Risks in the future in terms of shortfall in grains and oilseed. With the increases in food consumption worldwide there is going to be plenty of demand for these crops.
Staying aware of these challenges on the supply side and demand side is something poultry companies are going to have to do a much better job of.
Valatility is going to be as difficult a challenge in the future as it is now.
A management that can take on these risks will be required.
Trade negotiation:
WTO has unfortunately not been able to deliver an agreement and the consequence is that a lot of bilateral trade agreements have been established and more are to come.
These agreements are necessary to boost the economy. Global trade is one of the keys to improve the living standards around the globe.
The trade talks between the EU and the USA the socalled TTIP ( transatlantic trade & investment partnership agreement) is a very ambitious project on a broad range of the economic cooperation between the 2 biggest trade blocs in the world. The potential in such an agreement is huge, but there is also a price to be paid for such an agreement.
The talks started in November 2011 and in 2014 there is planned 5 rounds of talks and it is expected that the talks may terminate in about 2 years because there is the midterm election in the USA and election to the European Parliament and appointment of a new EU Commission in 2014.
The EU consider the american offers too unambitious.
There are 3 elements in the talks:
1marketaccess, the US wants the EU to make great concessions on the meattrade, but the EU maintain the SPS rules as far as hormones, chlorination, GMO etc
It will be the interpretation of the SPS rules and of which products that may be considered sensitive that will be the crucial point
2The harmonization of standards is also crucial and the result may be that there shall only be agreement on coming common standards, as no one is willing to say the other’s standard is better that one own.
3global rules on sustaineability, environment, energy!!
The potential is big, but negoctiations will be sever.
From the EU side it is important to maintain the SPS rules and limit the quotas on meat to the EU, if not then the EU may find itself in very serious problems.
Ther must be a maximum ceiling on quotas in order to avoid an undermining of the talks within WTO by a salami-cutting method by giving concessions to all sides.
In the agreement with Canada it is important to mention that Canada has to meet the EU rules on SPS plant- and animal health area. That must also be the case as far as the US is concerned.
There is a feeling that the quotas for the US would be the same as Canada but multipied by 2, but we must insist on a licens model in order to be able to govern these quotas.
The concequence on the tariff and custom side for the EU Agrisector may be considered negative and it will be very challenging for the pork and poultrysector in the EU.
One may fear that the EU is going to let the agrisector in general and the poultry sector in particular pay the price for greater and easier market access for the EU industrial and service sector to the US market. A very big challenge for the EU.
We have in the EU in many areas no common position because of great difference in the national interests and how many governments will go all the way to defend our sector’s interests in front of other national interests??
I do prefer global agreements to bilateral, my view is that the EU would be much stronger in defending the EU interests in such talks, than bilateral ones.
IPC the global poultry organization:
Why a global organization for poultry, when we are competitors?
Well you have a national organization even though you are competitors and we have a European organization even though we are competitors and why?
Because we want to have a level playing field amongst the competitors both national and on a European level and so why not on a global basis, when trade is becoming more and more global.
The idea of IPC was born in 1976, but it took me 29 years to get it established in Cologne in 2005 and today it represents more than 85% of the global poultry production and more than 95% of the global poutry trade crossborder.
The objectives of the IPC is to strenghten communication between industry in different countries to develop and recommend policies affecting the poultry industry and to promote a common global understanding of and confidence in poultry products as the preferred source of meat protein.
We got very soon an agreement between The world organisation for animal health OIE and IPC and another with FAO and Codex and the basis for an agreement with WHO has been worked out, but no agreement yet made.
Why is it important, well OIE has more than 175 countries as members and they decide upon a long range of international standards, but OIE lack the power to make sure that member countries implement those standards and this where IPC can play an active role.
It is in the interest of the industry that what has been agreed upon in international organisations are respected and implemented fully.