UTRECHT, The Netherlands – The EU announced it will lift restrictions on imports of raw poultry from Thailand starting July 1. The end of the ban will hopefully cut prices for consumers. The implications of these changes are detailed in a new Rabobank report titled “The Return of Thai Raw Chicken – Global players need to change strategy.”
The EU restrictions started following an outbreak of bird flu in Thailand in 2003. Japan also stopped importing Thai poultry at that time, and there are expectations that it too will now lift those restrictions. Rabobank reports that Brazil will likely be hit hard by the decision to lift the Thai ban because it is currently the major supplier to both Japan and Europe.
The re-opening of the EU and Japanese markets could see Thailand's raw chicken production grow by 20 percent by 2015. The EU and Japan have long favored Thai products for their high quality and low prices and as a result, "Thailand's return to the market will lead to a new wave of investment in the Thai poultry industry as it might offer new growth opportunities," says Nan-Dirk Mulder of Rabobank Food and Agribusiness Research & Advisory.
In the EU, an expected influx of 92,000 tonnes of chicken on to the market is expected to significantly increase price competition between suppliers of raw chicken from Thailand and Brazil.
In Japan, the return of Thailand to the market will give traders more options to source products, again to the detriment of Brazil. Japanese imports of Thai raw chicken are set to reach up to 150,000 tonnes within a few years, with imports from Brazil falling from 350,000 tonnes to 250,000 tonnes and lower prices all round, according to Rabobank.
Despite the boost from the lifting of the EU ban, Thailand needs to focus on reducing risks in the industry. According to Rabobank, the bird flu outbreak illustrated the risks of being mostly focused on raw meat and the increased proportion of cooked meat products will help in the event that bird flu returns to Thailand, a country where the disease is endemic. "A well-balanced approach to dealing with the constantly present possibility of an avian influenza outbreak is the base for a strong international position," Mulder says. "An ongoing emphasis on biosecurity will be key."
To lower its risk, Rabobank believes the Thai poultry industry could:
• Further strengthen and prioritize the country's position as the world's leading cooked meat exporter – pushing growth in raw meat volumes without also investing in primary processing capacity could increase costs for Thailand's processed chicken plants if prices rise.
• Keep emphasizing the strength of the compartmentalization model in global and bilateral trade negotiations - this makes sense from a veterinary perspective but it has been difficult to implement globally.
• Diversify the country's export portfolio, which is currently overwhelmingly focused on the EU and Japan – 90 percent of Thailand's exports go to these two markets. It needs to establish itself in other markets, particularly in Asia and the Middle East.
• Internationalize the industry's business model by investing in production and distribution facilities in leading markets such as China and the EU, something that companies such as CP Foods and Bangkok Ranch have already done.