The Economics of Broiler Production Matthew Wilson Technical Director, Europe, Middle East and Africa-Cobb Europe Iran, May 2016
50-70 -90 According to FAO, In the year 2050 The World will need to produce 70% more food 90% of which will come from Technology that enables yields to be increased Intensive Poultry production will play a key role in meeting these objectives!
2016 Cobb Europe Confidential & Proprietary The World of Poultry The Good News Population Growth, GDP The World population continues to grow 6 billion in 1999, 7 Billion in 2011, 11 Billion projected for 205 Most of the population growth will take place in developing countries (Asia and Africa) Today China and India already represent 40% of the worlds population Asia will account for five billion people Africa for four billion people Developing countries have high GDP - China, India = 7-9% GDP - Higher buying power means increase in meat consumption - In many countries chicken consumption Is very low (0.5-2kg/annum), potential is enormous
The World of Poultry The Good News Poultry is Most Efficient This not only means less feed usage It also means less waste, more environmentally friendly Emissions per Kg of edible protein depending on performance 2016 Cobb Europe Confidential & Proprietary
The World of Poultry The Good News What have the breeding companies done? Globally approximately 60 billion broilers produced per year In the last ten years feed conversion has improved by 0.145 points, mean.. 17.4 Million tonnes less feed now required or 9.57 million tonnes less wheat/corn or 2.66 million fewer acres required 2016 Cobb Europe Confidential & Proprietary
The World of Poultry The Bad news: Challenges 2016 Cobb Europe Confidential & Proprietary
2016 Cobb Europe Confidential & Proprietary The World of Poultry The Bad news: High Feed Prices Since 2012 feed prices have been declining but factors such as China demand and currency fluctuations (Yuan/Doller/Euro/Real) and climate change making predications unreliable
The World of Poultry The Bad news: Volatile Feed Prices Feed Feed costs as a % of live costs have gone from the low 50% range to the 60-70% range in the past 7 years. Competition for hectares around the world 550 500 Demand is going up! 450 Growing population China Syndrome Severe Weather conditions Bio Fuel demand Grain prices high with increasing volatility The GM vs. Non-GM debate 2016 Cobb Europe Confidential & Proprietary CBOT Corn Futures nearby futures, roll on first of month 6.20 100% CBOT Corn Futures (left axis) 90% 5.70 Percent Change (right axis) 80% 5.20 70% 60% 4.70 50% 4.20 40% 30% 3.70 20% 10% 3.20 0% 2.70-10% -20% 2.20-30% 1.70-40% 2001 2002 2003 2004 2005 2006 2007 2008 EMI Analytics, All Rights Reserved March 2008 forward forecast dollars per bushel percent change prior year World Consumption M tonnes 800 750 700 650 600 Maize Wheat
The World of Poultry The Bad news: Soyabean Main price drops in vegetable oil prices which had moved well above value in bio diesel. Fundamentals are showing tight S&D and the need for more soya bean acres US plantings est. 71.8 million acres this spring, up from 63.6 million year ago Brazil and Argentina- record plantings of soya bean Non GM soyabean meal supplies still tight in the spot position, however many producers finding ways of replacing with GM material In Europe the GM debate continues with retailers and McDonalds still demanding GM free so increasing costs locally China importing 83,000,000 tonnes/year of Soya 2016 Cobb Europe Confidential & Proprietary
The World of Poultry The Bad news: Soyabean Price differentials GM Soya vs. Non GM yields, contaminations premium at US$ 40 per ton and increasing to US$80 per ton Possibly a big issue in 4-5years when availability of NON-GM material will be very limited EU takes minimum of 30 months to approve new GM varieties US, Japan, Canada, China takes 15 months 2016 Cobb Europe Confidential & Proprietary
Soya Prices
Soybean Soya could be very tight going forward depending on demand and production Total area declining while demand increasing
Soya Harvest update-argentina (29 th of April 2016) Delays to harvest in Argentina continue-last year 61.4% Huge uncertainty still remains as crops have over three quarters left standing in fieldsreduced by 2million tonnes (57 million tonnes). The effect of any bean reductions have a significant impact on the global picture as its 18.75% of global production. In April Soya spot prices have increased by 60USD/tonne China demand 83million/tonnes To late in the season to which corn plantings to Soya
2016 Cobb Europe Confidential & Proprietary The World of Poultry The Bad news: Supply and Demand Imbalances Production imbalances and Pricing The circle of Death In developing countries circle is stopped by producers talking and controlling production Difficult to stop in many developed countries (EU): It is illegal for competitors to control pricing Breeder placements Increase Prices go up Excessive Supply Limited Supply Prices Crash Breeder placements decrease
2016 Cobb Europe Confidential & Proprietary The World of Poultry The Bad news: Supply and Demand Imbalances Political Unrest and Notifiable Diseases can create supply imbalances War In Libya: NL, Spain and France had excess HE production and the prices dropped from 0.25 to 0.15-Then shortages!!! War in Iraq: and HE prices increasing from 0.24 to 0.38!!!!!!!!!!
The World of Poultry Global Market Positioning in 2020 China (60 bn $, 2011) and India investing in Argentina, Brazil and Africa to ensure food supply. China imports 22% of the World s soya prod. Middle East is also trying but resources are limited. Become biggest importer in the World 2015 Cobb Europe Confidential & Proprietary
The World of Poultry Global Market Positioning in 2020 2016 Cobb Europe Confidential & Proprietary
The World of Poultry Global Market Positioning in 2020 2016 Cobb Europe Confidential & Proprietary
The World of Poultry Global Market Positioning in 2020 2016 Cobb Europe Confidential & Proprietary
Broiler Meat consumption in the Middle East 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Broiler meat consumption (MT) Iran Turkey Saudi Egypt Iraq Algeria Morocco UAE Jordan Yemen Oman Qater Kuwait Broiler meat consumption (MT)
The World of Poultry Global Market Positioning in 2020 2016 Cobb Europe Confidential & Proprietary
The World of Poultry Global Market Positioning in 2020 2016 Cobb Europe Confidential & Proprietary
Iranian Poultry Industry update Iran produces 2 million tonnes of poultry meat/year 2015 2012 1.6 million tonnes -25% increase in production in three years 23,000 broiler farms produce this meat-mostly unintegrated 2016 increase in domestic production of 200,000 tonnes (10%) 2016 exports will increase from 60,000 to 95,000 tonnes (4.3% of production) Main importers of Iranian poultry are Iraq (60,000 tonnes/year with possible increase to 96,000 tonnes/year) and Saudi Arabia-export subsidy of 0.55USD/kg- dependant of politics and government In the future the focus will be on Russian market possibly 120,000tonnes/year In the region countries import 3 million tonnes of poultry meat/year 2017 expectation that Iran will produce 240,000 tonnes of surplus poultry meat Monthly breeder placements reducimng from 950,000 to 850,000/month-meat prices will increase
Iranian Poultry Industry update 2016 Imports reduce from 18,000 to 6,200 tonnes (0.28% of production) 2012 500,000 tonnes of poultry meat imported (31% of consumption) sanctions stooped this over night 2012 poultry meat increased from 1.9USD/kg to as much as 7USD/kg-now 1.59USD/kg Iranian government supported poultry meat production by 25 million USD (2012-2016) Per capita consumption increased from 20kg/head in 2012 to 26kg per head in 2016 (30% increase) More growth in domestic per capita consumption is unlikely because of preference for beef and lamb but doesn t consume pork 80,000 tones of food waste is now used in poultry to reduce reliance on imported raw materials 70% of raw materials for feed are imported Cost of imported raw materials 16 billion USD/year
Trends in EU memberstates (28) Actual broiler prices 205 200 Evolution of the weekly EU average price for Broiler Latest price (Week 14) : 173.50 Evolution compared same period last year (Week 14) : - 8.5% 195 uro/ 100kg 190 185 180 175 170 Avg 2011-15 2014
Trends in EU memberstates (28) Actual broiler prices
USA Poultry Industry May 2016 Slaughter weights increasing and also meat yield increasing
USA Poultry Industry May 2016 Live cost is lower to produce a 3.85kg compared to a 3kg bird
USA Poultry Industry May 2016 Cold stores containing record chicken inventory -385,000 tones of meat
USA Poultry Industry May 2016 US breeder numbers increasing
USA Poultry Industry May 2016 Meat prices decreasing
What We Do
R&D Investment Hybro genetic lines & research farm New TN pedigree farm Upgrade Herveld pedigree farm Biotechnology Perdue genetic lines All since 2008 ~$145M
Herveld Renovation Before After
Cobb Europe Investment Cobb Europe BU has received major funding GGP pipeline GGP hatchery upgrade Russia & Turkey JV s ~$15.0M ~$0.7M ~$4.1M
A Balanced Breeding Programme From the beginning of today s industry where bodyweight gain was the only driver Skeletal Strength Feed Conversion Bodyweight Breast Meat Body Weight Pre 1970 Cardiac Fitness Eggs 2000s Hatchability Immunoresponse Today We select for more than 60 traits
Balanced Breeding Programme Sustainability of Continual Rate of Genetic Improvement 1) Traditional Selection Methods 2) Develop New Selection Technologies Digital X-Ray Ultrasound Blood O2 Testing Meat Quality Testing ` 3) Move Phenotypic to Genotypic Selection Selection will be based on DNA (blood) testing and presence of the desired SNIPS Increased accuracy of selection Select for traits of low heritability (Fertility) Selection for difficult to measure traits (disease):
Growth of Biotechnology Genomics - Gene Marker Assisted Selection to make progress on difficult traits and increase selection accuracy Look at the possibility of safeguarding food - Salmonella resistant meat? - AI resistant genetic chicken lines? Making poultry meat more healthy Ensure Consumer Acceptance
Regional Technical Service Region North America 14 South America 12 EMEA 14 Asia 8 Total 48 Copyright Cobb-Vantress, Inc.
Cobb 500: Nr 1 World market share by strain Percentage Cobb 500 41 Ross 308 30 Arbor Acres + 8 Cobb 400 4 Ross 708 4 Top 2 in total 71% Top 5 in total 87%
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