Russia allowed to resume poultry exports to EU
Russia has been given permission to resume poultry exports to EU countries, head of the Federal Veterinary and Phytosanitary Control Service (Rosselkhoznadzor) Sergei Dankvert told Interfax.
The European Commission banned poultry exports from Russia on August 17 due to the bird flu outbreak in the central and eastern parts of the country.
Dankvert said that representatives of EU veterinary services on Tuesday evening voted in favor of introducing a system in which poultry exports would not banned from the country as a whole, but just from the regions where bird flu was registered.
"This is a very important decision since it opens the door not just for poultry deliveries, but also provides the possibility to export Russian grain to EU countries," Dankvert said. He said that when bird flu is registered in an exporting country, an importing country can ban imports of meat and grain, in particular feed grain, from that country as a safety measure.
Ban on poultry antibiotic takes effect on Monday
The first U.S. ban of a veterinary antibiotic because of concerns it could lead to antibiotic-resistant bacteria in humans takes effect Monday.
Farmers no longer will be able to use Baytril, known generically as enrofloxacin, on poultry under a ban issued by the Food and Drug Administration.
The ban ends a five-year battle between manufacturer Bayer, the FDA, poultry farmers and advocacy groups who argue that the overuse of antibiotics could lead to strains of bacteria that no antibiotic can overcome.
Baytril is in the same family as the popular drug Cipro, which is used by humans. The FDA ban does not apply to use of the drug in cattle and house pets.
Record profits for poultry firms
HIGH prices for chicken and eggs are an annoyance for housewives, but a windfall for the companies that produce these food items.
Wholesale prices of chicken were raised to RM5 a kilo during the Chinese New Year and unlike previous years, prices have not dropped after that festive period.
This is the highest price that a businessman said he has seen in the last 10 years that he has been involved in the industry.
At the same time, large eggs are selling for 30 sen each compared with about 22 sen last year.
Not surprisingly, share prices of companies that produce chicken and eggs have been steadily rising this month, possibly ahead of record or near-record profits for the second quarter this year.
Farm's Best Bhd (previously known as Sinmah Resources Bhd) announced a net profit of RM13.2mil or earnings per share (EPS) of 26 sen for the first half ended June 30. The shares are trading at a price/earnings ratio (PE) of just 1.8 times, if earnings are maintained for the rest of the year.
“There are a few poultry stocks trading at a PE of less than two times. This is going to be a record year; it's already August and business conditions are still favourable.
“This is the right year for the industry, this is the Year of the Rooster,” said an executive in the industry, referring to the symbol for the current Chinese lunar year.
Leong Hup Holdings Bhd will also be able to crow about its results this year. It reported a net profit of RM24.3mil or EPS of 16 sen in its fourth quarter (Q4) ended March 31. “It could make a profit of RM100mil this year,” said a fund manager.
The stock is trading at a PE of 1.9 times based on earnings extrapolated from its Q4 results.
“Supply is short. The avian flu scared the farmers and they became cautious in expanding production,” QL Resources Bhd managing director Chia Song Kun told StarBiz.
In previous years, whenever poultry or egg prices were high, there would be many new entrants into the industry, mainly small-scale farmers and they would increase supply and bring prices back into balance.
Not this time, as poultry farmers suffered large losses in recent years as each bout of avian flu in neighbouring countries caused consumers to shun poultry products. As the industry reports record profits, however, rural people are expected to eventually rear chicken again.
Business conditions are so buoyant because there is a convergence of favourable factors. While prices for chicken and eggs are high, feed prices have dropped significantly from last year.
Feed prices have come off as global prices for maize, a key ingredient, have declined. An industry executive said feed prices could fall further as maize is imported in US dollars. “The poultry sector is a beneficiary of a strengthening ringgit. Chicken eat in US dollars and are sold for ringgit,” he added.
A large poultry company could consume about RM100mil a year on feed so that a 5% rise in the ringgit will translate into cost savings of RM5mil a year. These savings would, of course, be offset if maize prices were to rebound.
Huat Lai Resources Bhd managing director Lim Yeow Her told StarBiz: “Demand for eggs has improved and we have increased our capacity to meet the demand.” The company exports about 35% of its output to Singapore, while the rest is sold locally.
The poultry companies in Malaysia would be able to export more of their output to Singapore and Japan as a result of recent outbreaks of avian flu in Thailand, Vietnam and Indonesia.
A dealer said Comsa Farms Bhd should be watched for its warrants which expire in November. There is a provision for extension in the trust deed and considering that two key directors still own about 25% of the warrants, these are likely to be extended. This may explain the interest in the warrants, he added.
Chicken ranks as USA's most popular meat
Americans will purchase 26 billion pounds of chicken in 2005 - 87 pounds for each man, woman and child - making chicken by far the country's most popular meat. And as the poultry industry marks the seventeenth consecutive September as National Chicken Month, new survey statistics confirm that we're eating more chicken than ever, both at home and in restaurants.
Despite the surge in restaurant dining and the continued squeeze many people feel on their time, most of the chicken that Americans eat is still cooked and eaten in the home. Fifty-eight percent of chicken sold in this country is purchased at grocery stores, club stores and other retail outlets at which people buy food for home cooking and eating.
And while "meal assembly" may have replaced "scratch cooking" in many people's minds as the definition of "home-cooked meal," chicken is still the best source for a tasty, economical, nutritious and easy preparation.
"(The chicken) industry has a wide variety of convenience-oriented products, and that is one reason why demand for chicken has continued to grow," said Tom Shelton, chairman of the National Chicken Council and CEO of Case Foods, Inc., speaking to a group of food reporters gathered in Charlotte, N.C. for the 46th National Chicken Cooking Contest. "We are providing more partially and fully prepared individual items and entrees than ever before, both fresh and frozen."
The average family of four will put more than two hundred pounds of chicken in the grocery cart in 2005, a number that has increased steadily in recent years. This compares to 1990, when a family of four purchased about 145 pounds of chicken each year at the grocery store, and 2001, when the amount was 180 pounds.
About half of all total food dollars today are spent outside of the home, ranging from fast food establishments, school and business cafeterias and other institutions, to the finest white-tablecloth restaurants. What are Americans eating when dining out? More than ever, some sort of chicken dish.
The single most prevalent chicken item on restaurants is the Caesar Salad with Chicken, according to Restaurants and Institutions magazine in their 2003 survey. Two-thirds of restaurants of all types have a Caesar Salad with Chicken on the menu; orders for this item are up 9 percent in the last year.
Other prevalent chicken items on all restaurant menus, in descending order of popularity, are chicken strips and tenders (50 percent of all restaurants feature this item); chicken noodle soup (44 percent); grilled chicken breast sandwiches (43 percent); and chicken wings and grilled chicken breasts (39 percent).
Looking specifically at casual dining restaurants like Chili's, TGI Friday's, Ruby Tuesday's and others, it's chicken wings that are at the top of the list. Sixty-six percent of those establishments feature chicken wings, one of the most popular appetizers in the United States. In fact, last year more than 18 billion chicken wing segments were sold in American restaurants - about 60 wings for every person in the United States.
And at quick-service restaurants, fast food establishments and other places with counter services, chicken strips and chicken tenders are the leading item on the menu. Eighty-seven percent of those restaurants feature strips and tenders; 82 percent of those menus contain grilled chicken breast sandwiches and 61 percent feature chicken nuggets.
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FDA bans use of antibiotic in poultry
The Food and Drug Administration has prohibited a common antibiotic for use in poultry products because they believe it could trigger rampant antibiotic resistance.
The antibiotic, called Baytril, has similar qualities to that of Cipro, a medication that is used to treat campylobacter bacteria in humans. FDA commissioner Lester A. Crawford states that using Baytril in poultry products will hinder Cipro's effectiveness because a form of the drug will have already been dispersed in humans. Since Baytril's inception in the 1990's, resistant forms of campylobacter bacteria has increased steadily each year.
Margaret Mellon, director of food and environment at the Union of Concerned Scientists, states that the ban is unique in that it was based on the future well-being of consumers, instead the fear of an immediate detriment to the consumer's health.
"It's the first time FDA has withdrawn a veterinary drug on the basis of antibiotic resistance concerns, fearing that use of the drug in animals is going to erode the effectiveness of the drugs in human medicine."
Large chicken retailers, such as McDonald's, Wendy's, Dairy Queen, Burger King, Domino's, Hardee's, Popeye's, Subway and Bon Appetit, are implementing policies that prohibit the purchase of Baytril-infused chicken.
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The Way for American Chicken to Russia Is Open
Russian poultry breeders are terrified by the agreements between Russia and the U.S.
It became known yesterday that the Russian Government had approved a draft agreement between the Russian and the U.S. authorities entitled On the Trade of Certain Sorts of Poultry, Beef and Pork fixing the volume of meat import to Russia for the next four years. Russian poultry farmers have already labelled the document “a treachery of the Russia’s interests”. The implementations of these accords will lead to a 20-percent rise in the volume of poultry import by 2009. Importers comment on the situation in a more reserved way saying everything could have been much worse.
This year’s poultry import quota amounts to 1,05 million tons. The quota is divided among the source natures, imports that exceed quotas are prohibited. The biggest shares are owned by the U.S. (74 percent) and the E.U. (18 percent). Pork and beef are levied by tariff quotas, which means that the import exceeding quotas is admissible but prohibited duties are imposed. The pork quota amounts to 450,000 tons and the beef quota is 420,000 tons. The two quotas are also allotted among the countries. 100 percent of poultry quota and 90 percent of beef and pork quotas are allotted among source natures by the Russian Ministry of Trade and Economic Development pro rata the volume of the last year’s import. 10 percent of pork and beef quotas are sold by auction.
“This is a treachery of the interests of the agriculture and of Russia as well. We are not satisfied by all the accords in general,” Sergey Lisovsky, chairman of the board of directors of Mosselprom, told Kommersant after scrutinizing the text of the agreement. Nikolay Khaustov, Centrptitseprom’s director general, is of the same view. “Everything achieved over the past five year has been stultified. The flow of investment has stopped,” he maintains.
The sharp reaction of the Russian poultry breeders is understandable. According to the agreement, the U.S.’ share in the total volume of the poultry import will remain the same, but the total volume of quotas will rise 20 percent by 2009. In other words, the rise of poultry market will be mostly carried out not by Russian, but by overseas producers. Russian companies find it bizzare. “Americans didn’t even use some 90,000 tons of their quota last year,” Mr.Lisovsky points out. “It’s a usual practice that if the quota is not spent, its volume is to be reduced, not raised.”
However, it’s not only the rise of the quotas volume that worries the participants of the market. Firstly, under the agreement, the poultry quota is virtually changing from a foreign into a tariff one. That is, if the importers wish to, they may carry out over-quota imports, though having to pay prohibitive duties. Secondly, the agreement provides for obligatory consultations with the Americans in case the Russian Federal Veterinary and Plant Health Inspection Service imposes some veterinary restrictions on the meat import. Anton Surikov, acting director of the Association of the Operators of the Russian Poultry Market (the organization comprises the companies controlling 95 percent of the American poultry import) says that “Russia used to impose all the restrictions on its own, but now we have to submit everything to the approval of Americans.” Finally, the document contains an article saying that in case the U.S. does not choose the fixed quota, still it may import the meat next year. In short, the Russian poultry farmers do not really have any opportunity left to lobby their interests. “This agreement has only one positive side,” Mr. Surikov says. “It lays down the rules of play for the next few years.”
The chicken-meat imports were less emotional today evaluating this document. They believe that it is by no means the worst alternative. The talks on the signing of the documents, with Maxim Medvedkov as a representative from the Ministry of Trade and Economic Development, were launched a year ago. It was initially suggested that it would be the producers of the so-called “Bush legs” that would distribute the U.S’ part of quota, not the Russian Ministry of Trade and Economic Development. But being pressed by Russian chicken imports who would have lost all their business returning $300 billion a year at once, this article was deleted.
The comments of beef and pork producers and importers on the Russia-U.S. agreement were even milder. As Dmitry Zubkov, representative of Cherkizovksy meat-processing factory, says “the offered arrangement of the quotas on red meat import doesn’t fundamentally change the existing state of affairs.”
Now, under the Government’s regulation signed by Russian PM Mikhail Fradkov, the Ministry of Trade and Economic Development is to sign this agreement on behalf of Russia and obtain the corresponding signature of the U.S. Furthermore, the agreement alongside dozens of others documents will be ratified by the two chambers of the Russian Parliament and the President within the framework of the approval of the legislation on Russia’s accession to the WTO. The Ministry of Trade and Economic Development, though, will soon start preparing the decree on the next years quotas basing on the text of the aforesaid agreement. Thus, meat importers and producers will not manage to introduce any fundamental changes to the quotas system up to 2009.
last update: 05-05-2004
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Thai Poultry Processors To Focus On Local Markets In 2005
Stiff competition is expected among Thai poultry processors in the domestic market in 2005. Producers are eyeing increased domestic sales to offset the shortage of export markets for raw meat due to the re-emergence of bird flu last year.
With the all-clear unlikely to be seen at least for the next two years, domestic sales are one option for exporters faced with a towering 200,000-ton inventory of frozen raw chicken meat.
Leading companies such as Saha Farms, Charoen Pokphand Foods and Betagro Group have said they would focus on expanding local markets. There are plans to introduce a variety of new semi-cooked and cooked products, with additional sales channels sought via international restaurant chains and supermarkets.
"It is a challenge for us to expand the local market since our expertise is in exports,'' said Betagro executive vice-president Nopporn Vayuchote.
"To expand domestic markets, we might need strategic partners to penetrate the food business more comprehensively.''
Fresh chicken meat, pork, sausages and eggs sold under various brands are among the products from Betagro currently available on the Thai market.
In 2005, it plans to develop other processed foods, including snacks, which will be more attractive to young consumers.
Mr Nopporn said Betagro was looking at either joint ventures, or acquiring franchise licenses from popular foreign fast-food restaurant chains to expand its sales channels in the Thai market.
He revealed that the company would prefer to join up with established food chains rather than develop its own house brand, which could take years to achieve widespread brand recognition.
"It's easier to do marketing if we get international brands such as McDonald's or KFC that are already recognized globally,'' he said, adding that there were still have many popular foreign food restaurant chains that might appeal to Thais. Betagro currently has about 10,000 tons of frozen chicken in stock.
Charoen Pokphand Foods Plc (CPF) is also restructuring its domestic marketing plans by rebranding and expanding distribution to include more hypermarket retailers.
According to Suphat Sritanatorn, vice-president of marketing for CPF, the company distributes about 30 brands of processed foods made from chicken, pork, shrimp and fish on the domestic market.
"We need to review the status of each brand to see whether they are strong enough to stay in the market or not,'' said Mr Suphat.
The rebranding is aimed at promoting stronger sellers to represent a core competence for the company's business. Repackaging would also be necessary to achieve brand recognition not only in Thailand, but also in overseas markets to match with the company's drive to expand the food business under its own brand abroad.
"We do not want people to recognise CP only for chicken but also other food items such as eggs, pork and shrimp,'' he said.
CPF plans a rebranding to stress its presence in both chicken and pork. At the same time, it plans to bring more processed and ready-to-eat meals to modern retail trade outlets.
Pisit Ohmpornnuwat, president of CP Merchandising Co, a subsidiary of CPF, said the move would show that the group had become a full-spectrum food product company, and was no longer in the business of merely selling bulk commodities.
Saha Farms Group, the country's largest chicken exporter, which has seen sales plummet since the outbreak was first officially detected in Thai poultry in January of 2004, plans to use direct marketing to distribute its chicken products locally.
The company estimated that its sales in 2004 have fallen by 70%, leaving annual sales revenue at around eight billion baht. Saha Farms, with more than 40,000 tons of frozen chicken meat in its storage freezers, plans to shift to producing cooked products rather than exporting only raw meat.
Chairman Panya Chotitawan said direct sales of chicken products would be added alongside with the group's cosmetics and food supplements subsidiaries.
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