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Good day,

I would like to ask for a copy of your feasibility study on poultry business. I am planning to venture in this business but i really don't have any idea. Your feasibility would be a big help.

Thank you doc in advance. 

<emdumandan@yahoo.com>

GLOBAL POULTRY TRENDS - Chicken Output to Exceed 40MT in 2013 in the Americas

If chicken meat production maintains the expected growth this year and next, total output for the region will exceed 40 million tonnes in 2013, according to industry watcher, Terry Evans, in his latest analysis of the global poultry industry.

 



Global chicken meat production growth could well slow to around two per cent a year in the next decade, which contrasts with around four per cent in the 10 years to 2010. Nevertheless, the total is likely to approach 91 million tonnes this year and possibly 93 million tonnes in 2013. This compares with less than 59 million tonnes back in 2000 (Table 1). In broad terms, chicken meat production currently represents almost 88 per cent of poultry meat output compared with less than 86 per cent some 12 years ago.
 
Regarding international chicken meat data, it should be noted that the figures released by the FAO are for all chickens (i.e. table birds and culled layers) while the data published by other authorities such as the United States Department of Agriculture (USDA) and the Food and Agricultural Policy Research Institute (FAPRI) do not include estimates of the meat from culled layers.
 
The five major regions (Table 1) have exhibited differing rates of growth. Based on FAO figures, over the period 2000 to 2010, both Africa and Asia have recorded increases of around 4.5 per cent a year, while growth in the other regions has been below four per cent, averaging 3.9 per cent in Europe, 3.7 per cent in Oceania and 3.5 per cent in the Americas. Since 2010, all the regions have recorded slower growth rates reflecting lower profitability in the face of higher costs (principally feed), while in some countries, disease outbreaks have also played a role in this scenario.



Since 2000, production in the Americas has escalated by a little more than three per cent a year from 27.2 million tonnes to an estimated 39.4 million tonnes this year. This has been slower than the global total of around 3.7 per cent hence this region has seen its share of world output slip three percentage points from 46.3 per cent to 43.3 per cent. For 2013, a 2.0 per cent gain would push total production above 40 million tonnes.
 
The year 2010 is the latest for which figures are available for all countries (Table 2) and these reveal that there were seven countries in the Americas producing at least a million tonnes of chicken meat a year and combined, they accounted for over 35 million tonnes or more than 91 per cent of the total (Tables 2 and 3). However, just two countries – the US and Brazil – were responsible for 27.7 million tonnes or 72 per cent! While production in the USA grew by some three million tonnes or 22 per cent in the decade to 2010, Brazil’s industry expanded by a massive 4.7 million tonnes or 79 per cent.





According to USDA economists (Table 4), broiler production in the top seven producing countries in the region grew at an average 3.7 per cent a year between 2000 and 2012 from 24.5 million tonnes to an estimated 37.8 million tonnes. If the envisaged expansion of two per cent is achieved next year, output from these seven countries will climb to around 38.6 million tonnes. As the data for Peru has been taken from FAO statistics, a small proportion of the annual totals for this country will include culled layers. It looks as though broiler output in the US will approach 17 million tonnes in 2013. In Brazil, the figure should exceed 13.5 million tonnes, while in Mexico, third in the ranking table, output might hit the three million tonnes mark.

 


Figure 1. Leading chicken meat producers in the Americas – 2000 to 2013 (forecast)
 
The US is the world’s largest chicken meat producer, output (i.e. total production less condemnations) having climbed to a record near 16.7 million tonnes in 2011. However, the impact of higher costs on profit margins is expected to produce a near one per cent cut–back this year to 16.6 million tonnes.
 
A more optimistic view is taken of 2013 with production recovering by 1.7 per cent to 16.8 million tonnes. The actual extent of any increase will be influenced primarily by two factors, namely the degree to which processors consider that chicken demand will reflect any recovery in the US economy and also, how integrators feel about changes in the costs of production, especially feed prices. According to US economist Dr Paul Aho, there were a couple of factors that could lead to lower maize prices but recent drought conditions (up to mid–July) make that scenario unlikely. If there were to be a good maize crop this year, the proportion going for ethanol production would drop; the opposite will be true should the harvest be poor.
 
The dramatic rise in maize prices has boosted production worldwide. In 2000/01, maize production outside America was less than 340 million tonnes while the US produced some 250 million tonnes, giving it a 42 per cent market share. This year, production outside the US could reach 600 million tonnes compared with an early estimate of 350 million tonnes within the US, reducing its market share to 37 per cent or less.
 
However, should the recovery in the US economy slow down, the rate of expansion in chicken output could be curtailed somewhat. Tough economic conditions through 2011 resulted in several companies either having to close or be acquired by competitors. Dr Aho considers that as much as 80 per cent of US production could eventually come from just three or four companies. USDA long-term forecasts point to production increasing by only 1.3 per cent a year from now until 2021 when broiler output is expected to reach 19 million tonnes.



While, as for all countries, the estimates of chicken meat production vary somewhat according to source, there can be no doubt that the industry in Brazil has recorded a rapid increase since 2000 with an annual rate of growth in the six– to seven per cent range. Currently, it is considered that the rate of increase has been halved to around three per cent, reflecting uncertainties regarding the likely growth in exports, domestic consumption and higher production costs. Chicken meat output this year is likely to amount to some 13.3 million tonnes. USDA forecasts anticipate a growth of around 2.4 per cent a year which would put the 2020 total at around 16 million tonnes. In contrast, a Brazilian Ministry of Agriculture/Brazilian Agricultural Research Corporation study expects a much more optimistic 4.2 per cent a year increase to 2021/22.
 
Late in 2011, the Brazilian anti-trust regulator approved the merger of Sadia and Perdigão to create Brasil Foods SA (BRF), which now supplies 35 per cent of the domestic market and accounts for nearly half of Brazil’s exports. BRF is currently building a processing plant in the United Arab Emirates capable of producing 80,000 tonnes a year of further-processed chicken products.
 
Continued vertical integration in Mexico is helping offset the negative impact of high grain prices, according to a USDA report and as a result, it is anticipated that production this year will show a small gain over 2011 at a shade over 2.9 million tonnes, while three million tonnes could be achieved in 2013. As well as the worst drought for 70 years, the industry is having to contend with high grain prices as well as increased competition for feed from the pork and beef sectors. The country was also been hit by a series of outbreaks of highly-pathogenic avian influenza from the end of June 2012. The initial focus of the outbreaks was in Jalisco, the country’s leading egg-producing state with the resulting cull soon running into the millions. If the infection spreads to other regions, Mexico’s chicken meat industry could suffer production and trade difficulties for some time to come.
 
Although a much smaller industry than in the US or Brazil, chicken production in Argentina more than doubled between 2000 and 2011, reaching close to 1.8 million tonnes with an average growth rate of 6.7 per cent. Continued expansion is anticipated, boosted by increasing consumption allied to an expanding export trade. Consequently, production in 2013 is expected to come close to two million tonnes.
 
Canada operates a supply-management scheme for broiler production via a quota system, the quantities being reappraised on an eight–week cycle. In the decade to 2010, output expanded at 1.6 per cent a year but since then, growth has been limited to only 0.6 per cent and in general, it is considered that future growth will primarily be linked to population increases and to a lesser extent, dietary preferences.
 
The two other countries with annual broiler outputs in excess of a million tonnes, according to the USDA (Table 4) – Peru and Colombia – recorded good annual growth rates of 6.5 per cent and 5.4 per cent, respectively, from 2000 to 2010. If Peru has managed to maintain that momentum, annual output will have exceeded that of Canada. However, in Colombia, production has since slowed to around one per cent per year.
 
August 2012

Friday, August 10, 2012

Namibia Beef Exports Fall

NAMIBIA - Namibian beef exports dropped significantly in the first half of 2012 compared to the first six months of 2012. Volumes exported were 10,772 tons, less than half the amount exported in the same time frame last year.


Increased costs of production and decreased demand for beef had a major impact on young cattle price.

Production and prices suffered, due to the drop in export markets, but also due to lower domestic demand.

Competition for exports to South Africa was faced by Botswana selling excess beef onto the market at reduced prices.

Beef imports also fell as a result of the foot and mouth outbreak in South Africa as well as a partial ban applied by the Ministry of Agriculture, Water and Fisheries on beef imports.

USA Hog Markets
09 August 2012

 

US - Margins continued to weaken over the second half of July as feed costs moved steadily higher while hog prices failed to keep pace, writes Doug Lenhart.
 
One exception to that trend though has been in far deferred periods of 2013, where traders may be anticipating a more significant herd reduction due to the likelihood that sharply higher feed costs will stick in the new crop year. Forward margins remain at or below the 10th percentile through Q1 2013, and only about average from a historical perspective beyond that.
 
Crop conditions have been declining all summer, and now both corn and soybean condition rating indices are below 1988 for this point in the season. Analysts expect USDA to make another significant cut to their yield and production forecasts in the August WASDE report, with corn below 130 bushels per acre and soybeans under 40. Rainfall may still help to preserve soybean yield potential, and the next two weeks are seen as critical with the crop now moving through its pod-setting stage of development.
 
The hog market has been weak as the pork cutout is running about $10/cwt. or nine per cent below year-ago levels. Hot summer weather may be impacting grilling demand more than normal this season, and this in turn has limited strength in cash hog prices. Moreover, near to medium-term liquidation as producers cull herds in response to soaring feed costs may likewise pressure the market through the fall.
 
Producers continue to focus on the second half of 2013 as a combination of higher hog prices with a potential correction in the corn and soymeal markets may present the opportunity to protect margins at or above the 70th percentile.
 
3rd Qtr ’12 Most Recent Offering of $(12.81), the low was $(13.76), the high has been $14.07 and the 5 year percentile of 5.7 per cent.
 
4th Qtr ’12 Most Recent Offering of ($17.90), the low was ($19.23), the high has been $7.19 and the 5 year percentile of 2.3 per cent.
 
1st Qtr ’13 Most Recent Offering of ($9.94), the low was ($10.89), the high has been $6.04 and the 5 year percentile of 10.4 per cent.
 
2nd Qtr ’13 Most Recent Offering of $4.77, the low was $(0.45), the high has been $9.83 and the 5 year percentile of 41.2 per cent.
 
The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. Thank you to Commodity & Ingredient Hedging, LLC (CIH) for the margin data. Please visit www.cihmarginwatch.com to subscribe to the CIH Margin Watch report.
 

Zhongpin Continues to Invest in Tough Market
10 August 2012

CHINA - Chinese meat and food processing company, Zhongpin, has reported higher sales revenues and lower net income for the three months ended 30 June compared with the second quarter 2011.
 
Total sales revenues increased 11.4 per cent to $408.2 million for the three months ended 30 June from $366.5 million in the second quarter 2011 primarily due to higher sales volume for pork products sold at lower average selling prices.
 
Net income decreased 43.0 per cent to $11.0 million in the second quarter 2012 from $19.3 million in the second quarter 2011 primarily due to a lower gross profit margin, the cost of more employees to support expansion, higher salaries, rising labor and utility costs, and higher interest expenses and income taxes.

The higher expenses were mainly due to business expansion and intense competitive pressure in the pork market as the industry continues to consolidate and companies are required to vie aggressively to win additional market share in a variety of ways, Zhongpin said.
 
Basic earnings per common share (based on net income attributable to Zhongpin shareholders) decreased 39.6 per cent to $0.29 in the second quarter 2012 from $0.48 in the second quarter 2011. Average basic shares outstanding decreased 7.8 per cent to 37,189,322 shares in the second quarter 2012 from 40,355,502 shares in the second quarter 2011.

Diluted earnings per common share (based on net income attributable to Zhongpin shareholders) decreased 39.6 per cent to $0.29 in the second quarter 2012 from $0.48 in the second quarter 2011. Average diluted shares outstanding decreased 7.8 per cent to 37,209,695 shares in the second quarter 2012 from 40,365,654 shares in the second quarter 2011.
 
Zhongpin expects that sales revenues should be within a range of US$1.55 billion to $1.72 billion for 2012.

Gross profit margin is expected to be within the range of 8.6 per cent to 10.2 per cent. Net profit margin is expected to be within the range of 3.3 per cent to 4.2 per cent.

The resulting diluted earnings per share for the year 2012 is expected to be within the range of $1.36 to $1.92 per share, assuming average diluted common shares outstanding of about 37.5 million shares in 2012. Assumptions and judgments supporting the guidance are shown below.
 
Xianfu Zhu, Chairman and Chief Executive Officer for Zhongpin, said: "We achieved good sales growth in the second quarter on higher tonnage at lower average prices, compared with last year's second quarter.
 
"The continuing intense competitive pressure due to the ongoing pork industry consolidation in China, and higher costs generally in China, have reduced our gross profit margin and increased our operating costs for this quarter and this year.
 
"We continued to expand our operations in the second quarter, but at a slower rate, to help secure our long-term growth and achieve a much stronger market position in the years ahead. Recently, we finished the construction for additional annual production capacity of 50,000 metric tons for prepared pork products and started trial production in July. With that addition, our total annual production capacity was 954,760 metric tons for all of our products at the end of July 2012.
 
"Pork prices were lower than expected, mainly due to intense competitive pressure as the industry continues to consolidate. Hog prices also declined, but not as rapidly as pork prices. Those were the main factors for our lower gross profit margin in the second quarter compared with last year's quarter.
 
"Our product growth strategy is to develop, produce, and sell more prepared pork products -- first, because customers like them, and second, because the products can be sold at higher profit margins. So the shift you see in our product mix -- with lower tonnage, lower prices, and lower sales revenues from frozen pork and higher numbers from our prepared pork products this quarter – reflects our strategy to use more of our resources to develop and produce our prepared pork products, because those are considerably more profitable and have a very attractive future. Chinese consumers today are embracing more easy-to-complete-and-serve meals, often based on the outstanding quality, safety, and taste of Zhongpin's prepared pork products. In some markets, we even sell complete kits for those meals.

"As of June 30, we offer more than 440 types of different categories of products.

"I believe the long-term outlook for China's pork industry and for Zhongpin is quite good, but given the pork industry's massive consolidation that is expected to continue with increasing intensity in the next several years, we believe that delivering a sustained pattern of higher net income and higher net cash flows in those coming years will be a difficult challenge."
 
Zhongpin is investing approximately $58.5 million to build a new production, research and development, and training complex in Changge, Henan province, excluding the cost of land use rights that it has already obtained.

When completed, this new facility should have an annual production capacity of about 100,000 metric tons for prepared pork products.

Alongside this new production facility, Zhongpin plans to develop a center for research and development, training, and quality assurance and control. Construction for the first phase with a production capacity of approximately 50,000 metric tons for prepared pork products started in the second quarter of 2011 and trial production started in July 2012.
 
Zhongpin established a joint venture company in June 2011, of which the Company owns 65 per cent, with Henan Xinda Animal Husbandry Company Limited. The joint venture company is financed by capital contributions and bank loans. All capital contributions to the joint venture company have been made. The joint venture company will provide 20,000 sire boars annually. Construction of the facility for sire boar breeding is continuing and the operations are expected to begin in the third quarter 2012.
 
Zhongpin is investing approximately $18.0 million in a cold-chain logistics distribution center in Anyang, Henan province. This distribution center will have processing capacity, a temperature adjustable warehouse with a floor area of approximately 27,000 square meters, a distribution center, and a quality control center. The distribution center will be used for third-party cold-chain logistics service. Zhongpin expects to put this distribution center into operation in the third quarter of 2012.
 
Zhongpin plans to invest approximately $87.5 million in a chilled and frozen food processing and distribution center in Kunshan, Jiangsu province, which is near Shanghai. The center will be built in three phases. The first phase will include a processing center, cold-chain logistics center, and business complex. Zhongpin expects to invest about $35.0 million on the first phase that should be put into operation in the fourth quarter of 2012.
 
Zhongpin will be investing approximately $10.5 million in a by-product processing plant in Changge, Henan province. This facility will have a production capacity for 100 million meters of casings and 300 billion units of raw material to make heparin sodium. The construction started in March 2012, and the new facility is expected to begin operations in the fourth quarter of 2012.
 
Zhongpin will be investing approximately $49.0 million to build a slaughtering and processing plant, low temperature prepared pork plant, and logistics center in Tangshan, Hebei province. This facility will have an annual production capacity of about 60,000 metric tons for chilled pork, 20,000 metric tons for frozen pork, and 22,000 metric tons for prepared pork products. Construction is scheduled to start in the third quarter of 2012, and the new facility for chilled and frozen pork is expected to begin operations in the second quarter of 2013.
 
As of June 30, 2012, Zhongpin had an annual capacity of 728,760 metric tons for chilled and frozen pork, 126,000 tons for prepared pork products, 20,000 tons for pork oil, and 30,000 tons for vegetables and fruits, for a combined total of 904,760 metric tons. With the additional annual capacity of 50,000 metric tons for prepared pork products that started trial production in July, Zhongpin's total annual capacity for all products was 954,760 tons as of 31 July 2012.

Zhongpin's outlook for hog prices and pork prices has decreased somewhat since the end of the first quarter 2012.

Although China's economy appears to be healthy and pork continues to be the preferred protein for most Chinese consumers, and the fundamental demand for pork should continue to be quite good, the vigorous competition for market share in the pork industry, as the industry consolidates, has helped to reduce pork prices in the second quarter 2012 more than the cost of hogs has decreased.
 
Zhongpin believes that hog prices may have reached the bottom of the current price decline, despite the current abundant supply of hogs. As the costs for breeding and feed are rising, the Chinese government has recently started to increase the nation's pork reserve, which in the past has generally had the effect of stabilizing hog prices somewhat above the cost to raise hogs.

Hog prices have declined about 15 per cent from the end of January 2012 to early August 2012. Given the expected bottom, we still estimate hog prices to decline on average by 15 per cent to 20 per cent in the year 2012 compared with 2011. The hog price declines in the second quarter 2012 are consistent with that estimation for the year 2012.
 
Pork prices tend to follow hog prices, since most pork producers, including Zhongpin, try to maintain a good spread between the price of hogs and the price of pork.