The two biggest countries in the Pacific rim are Australia and New Zealand. When it comes to poultry production these count. Consolidation is the current trend, and consumption of both meat and eggs is on the increase. Prices are under pressure, however. And animal welfare considerations are gaining ground.
By Pete Bedwell, Australia
According to recently published Australian Bureau of Agricultural and Resource Economics (ABARE) statistics in its ‘Poultry-Outlook’ to 2015-16, poultry production is expected to increase in 2011-12 to 910,000 tonnes. In a report prepared by analysts Andrew Haylen and James Fell, “this increase is in response to higher demand for poultry as a result of forecast price increases for red meats.”
Over the medium term, poultry production is projected to increase by 3% a year to around one million tonnes by 2015-16. “This is consistent with a projected easing of grain prices, a continuation of increasing slaughter weights, as a result of productivity improvements, and consumer preferences for poultry,” the report stated.
“Poultry consumption is forecast to rise by 1% in 2011-12 to around 38 kilograms per person per year. “Over the outlook period, annual consumption per capita is projected to increase steadily to around 40 kgs by 2015-16. “Poultry is projected to maintain its position as the most consumed meat on a carcass/weight equivalent basis,” the ABARE report concluded.
In July 2009 when the Australian Competition and Consumer Commission (ACCC) approved the takeover of the Bartter Steggles organisation (No. 2 by market share) by Baiada (No. 3 by market share), the deal relegated Inghams, the Australian market leader for over half a century to second position in volume of production. It would be fair to state that this situation would not be tolerated by Inghams who have recently embarked upon a programme of growth through acquisition and projected expansion of their existing and long established contract grower network.
In early May 2011, Inghams took over the operations of Sunnybrand Poultry based in Byron Bay, NSW. Though only a small player by market volume (2-3%) Sunnybrand is strategically located in one of Australia’s fastest growing regions- northern NSW and SE Queensland. The nearby Gold Coast is now the state of Queensland’s second largest urban population hub and opportunities for the expansion of this family owned enterprise, established in 1972, would be considerable. Currently Sunnybrand processes 300,000 birds a week grown by 15 contract grower farms, almost all of which have modern tunnel ventilated sheds.
Beyond the acquisition of smaller concerns in Australia’s broiler sector, Inghams have embarked upon an interesting strategy to expand their contract grower network. Firstly they have opened up their operation to public scrutiny by appearing on the Australian national broadcasters (ABC) ‘Landline’ programme as part of an appeal to rural landholders and farmers to consider joining Inghams contract grower network.
So what’s revolutionary about that? The Australian chicken meat production industry is operated almost entirely by family businesses, notoriously private about their affairs but Inghams northern region farming manager George Schlatiych went on the front foot and explained to a national rural and farmer based television audience the advantages of being a broiler chicken contract grower, and in particular a grower for Inghams. He is even more optimistic about the growth of the chicken meat sector than ABARE. “We could see this industry double in size in the next 10 to 14 years as consumption rises to 42 kilograms,” he suggested.
Other critical developments in the supply of chicken meat in the fiercely competitive Australian retail market has been the growth of ‘welfare friendly’ production. This has come about through a perceived consumer demand reflecting in the fact that Australia’s major retail chains Coles and Woolies, who control over 70% of the total retail food shopping market, want more free range and free range organic poultry product. This demand has resulted in the fact that up to 10% of broiler chicken meat may come from free range and free range organic production by the end of the 2010/11 period, according to Andreas Dubs, executive director of the Australian Chicken Meat federation (ACMF).
One of the more interesting aspects of the increased free range production has been that growers with older sheds have the option of upgrading them to a free range operation rather than the often more costly alternative of constructing new enclosed tunnel ventilated sheds.Recently a 10 shed farm built by Inghams on the outskirts of Brisbane, Queensland, as a breeder operation back in the fifties, after a period as a contract broiler growing enterprise, has been resurrected as a free range broiler farm, by its current owner: the farm still grows chickens for Inghams.
In another ‘welfare friendly’ initiative the Bendigo Victorian based operation Hazeldenes opted to adopt a Royal Society for the Prevention of Cruelty to Animals (RSPCA) approved broiler rearing code. According to managing director John Hazeldene speaking on the ABC Rural radio network they have converted about 5% of their broiler production to RSPCA approved production methodology. This involves 25% less stocking density than their conventional broiler housing and other measures include perching equipment and straw bales placed in the RSPCA approved sheds. RSPCA approved production of free range and barn laid layer systems have proved to be popular with consumers, who are often confused by various production systems but recognise the value of an RSPCA based audit system in contributing to bird welfare.
Eggs hitting record
Also egg sales are on the increase in Australia, hitting a record high in 2010 according to the Australian Egg Corporation Limited (AECL). “AZTEC Synovate figures (based on consolidated scans from major retailers) show that more than 122 million dozen eggs were sold in Australia during 2010; a rise of nine million dozen on the 2009 figures when the previous record was set,” said James Kellaway, managing director of AECL.
“The 2010 figures represent an increase in sales of 7.8% from 2009, the second highest year on year percentage increase behind 2000-2001, compared to Australia’s population growth of less than 1.7%. “The average price of a dozen eggs in 2010 was A$ 4.00, a drop of more than 2% on 2009 retail prices,” Kellaway added.
In November 2010, major retailer Coles announced that it would move out of its house branded line of caged produced eggs by 2013 and reduce the price of free range eggs by at least 18%.
This move resulted in the Coles brand reduce from A$ 4.89 per dozen to A$ 4.00 in NSW, Victoria and Queensland. This predictably caused concern to egg farmers who feared that their returns would drop as a result of the Coles initiatives. In a statement on the subject Coles stated that it believed lower prices could significantly grow sales of free range eggs as customers switch (from caged production), thus ‘providing significant opportunities for Australian egg producers to expand this area of their business’. Free range eggs currently account for just over 25% of Australian egg production according to AECL statistics.
EU example for NZ
Significant developments in the New Zealand poultry industry include the takeover of Tegel Foods by the Asia/Pacific based private equity group Affinity. The sale of Tegel by its previous owners Pacific Equity Partners for a reported sum of NZ $650 million was reported in the Australian financial media in January 2011 but only approved by NZ’s Overseas Investment Office in early May 2011. Tegel hold an estimated 50% market share for chicken meat in NZ and it was previously acquired by PEP in 2005 for an estimated $NZ 250 million.
“The key issue for the NZ layer industry is the review of the Code of Welfare, which will ban the current cages, but is proposing that enriched colony housing, based on the EU requirements to take effect in Europe from 1 January 2012, will also apply here,” according to Michael Brookes, executive director, Egg Producers Federation of New Zealand. “The date for change has yet to be fixed, as the consultation process is still being worked through. The transition time frame is the critical issue as to when the current cages have to be phased out.”
No broiler code yet
Brookes who is also executive director of the Poultry Industry Association of NZ revealed that the Code of Welfare review for Broiler Chickens is also underway, but it appears at this stage that there will be no fundamental change to the existing code. “The chicken meat consumption figures show that, after growth year on year for many years up until 2006, there then was a period of production/consumption decrease or flat lining, but in 2010 we saw a return to the 6% plus growth that had previously applied in the rapid growth years of the industry,” Brookes explained.