poultry sector in turkey and market climate
DESCRIPTION
POULTRY SECTOR IN TURKEY AND MARKET CLIMATE. PREPARED BY : AYHAN KINDAP / CP TURKEY JUNE 23 2009. TURKISH POULTRY SECTOR IN BRIEF. The industrialization of Turkish poultry sector goes to 1955 and has grown enormously recently - PowerPoint PPT PresentationTRANSCRIPT
POULTRY SECTOR IN TURKEY AND MARKET CLIMATE
PREPARED BY : AYHAN KINDAP / CP TURKEY JUNE 23 2009
2003 2004 2005 2006 2007 2008 (1) 2009 (1)
GROSS DOMESTIC PRODUCT (GDP) (2) (3)
At current prices (TRY Million) 454.781 559.033 648.932 758.391 843.178 950.144 ...
At current prices ($ Million) 304.901 390.387 481.497 526.429 648.754 655.271 ...
GDP - GROWTH RATES OF GROSS DOMESTIC 5,3 9,4 8,4 6,9 4,7 1,1 ...
PRODUCT IN CONSTANT PRICES (%)
POPULATION ( OOO ) 67.123,0 68.000,0 68.867,0 69732 70.586,0 71.419 72.240
GDP PER CAPITA 4.542 5.741 6.992 7.549 9.191 9.175
INFLATION ( %)
consumer 18,4 9,4 7,7 0,1 8,4 10,1 7,5
producer 13,9 15,4 2,7 0,1 5,9 8,1Source: TSI, SPO, Ministry of Labour and Social Security
ANNUAL
BASIC ECONOMIC INDICATORS OF TURKEY
2000 2001 2002 2003 2004 2005 2006 2007 2008 2008 2009 % Chan.
EXPORTS (FOB) 27.775 31.334 36.059 47.253 63.167 73.476 85.535 107.272 132.002 44.500 32.075 -27,9
IMPORTS (CIF) 54.503 41.399 51.554 69.340 97.540 116.774 139.576 170.063 201.961 67.066 38.910 -42,0
FOREIGN TRADE VOLUME 82.278 72.733 87.613 116.593 160.707 190.251 225.111 277.334 333.963 111.566 70.985 -36,4
FOREIGN TRADE BALANCE -26.728 -10.065 -15.495 -22.087 -34.373 -43.298 -54.041 -62.791 -69.959 -22.567 -6.835 -69,7
EXPORTS / IMPORTS (%) 51,0 75,7 69,9 68,1 64,8 62,9 61,3 63,1 65,4 66,4 82,4 24,2
EXPORTS / GNP (%) 10,5 15,9 15,6 15,5 16,2 15,3 16,2 16,5 17,8 … … …
IMPORTS / GNP (%) 20,5 21,0 22,4 22,7 25,0 24,3 26,5 26,2 27,2 … … …Updated : June, 02th 2009
FOREIGN TRADE $ MILLION
ANNUAL JANUARY-APRIL
TURKISH POULTRY SECTOR IN BRIEF
• The industrialization of Turkish poultry sector goes to 1955
and has grown enormously recently
• There are app. 12,500 broiler houses and over 500,000 people are employed in the sector including producers, farmers, traders, feed manufacturers, medicine producers, transportation companies
• Some 2 mln. people rely on the poultry sector to make a living
• Annual turnover of the sector is about US $ 3 bln.
• Poultry meat production capacity of Turkey is 4500 mt/day and 1,400,000 mt currently
TURKISH POULTRY SECTOR IN BRIEF (continued)
• Capacity utilization rate at the slaughter houses and breeding poultry houses is approx. 80 %
• Turkey per capita consumption is around 17 kg while it was 3.8 kg in 1990 .This trend shows that there is a big increase potential in the sector .
• The owners are using their own capital in order to survive . Inspite of all difficulties , the sector continues to grow by a great sacrifice .
• Sector needs export incentives and per capita income increase for further growth
CHICKEN MEAT TURKEY MEAT LAYER AND OTHER TOTAL POPULATION CONSUMPTION
YEARS PRODUCTION PRODUCTION MEAT POULTRY MEAT PER
PRODUCTION PRODUCTION GROWTH CAPITA
(Ton) (Ton) (Ton) (Ton) (%) (thousand) (kg)
2000 662.096 23.265 67.021 752.382 18,7% 64.259 11,72001 592.567 38.991 41.813 673.371 -10,5% 65.135 10,32002 620.581 24.582 60.043 705.206 4,7% 66.009 10,72003 768.012 34.078 51.255 853.345 21,0% 66.873 12,82004 940.889 46.248 58.295 1.045.432 22,5% 67.734 15,42005 957.416 53.530 52.850 1.063.795 1,8% 68.582 15,52006 945.779 45.750 40.240 1.031.779 -3,0% 69.421 14,92007 1.012.000 33.000 55.000 1.100.000 6,6% 70.256 15,72008 1.150.000 27.000 55.000 1.232.000 12,0% 71.419 17,32009* 1.200.000 30.000 60.000 1.290.000 4,7% 72.276 17,8
Source :BESD-BİR *: 2009 estimation
PROJECTION FOR POULTRY MEAT DEMAND AND PER CAPITA CONSUMPTION
2010 1.345.000 4,3% 73.143 18,42011 1.413.000 5,1% 74.021 19,12012 1.487.000 5,2% 74.909 19,92013 1.562.000 5,0% 75.808 20,6
and new population statistics
POULTRY MEAT PRODUCTION
Source: SPO 9. Development plan
POULTRY MEAT EXPORTS
CHICKEN MEAT TURKEY MEAT CHICKEN PAW TOTAL VALUE
YEARS POULTRY FOB
(Ton) (Ton) (Ton) (Ton) (USD)
2000 1.817 38 8.672 10.527 5.932
2001 12.342 285 11.790 24.417 14.394
2002 6.252 695 12.695 19.642 12.026
2003 8.547 805 15.818 25.170 16.480
2004 11.096 615 17.339 29.050 19.756
2005 27.278 1.929 15.767 44.974 34.647
2006 20.411 428 18.971 39.810 28.187
2007 24.775 808 26.175 51.758 44.412
2008 47.895 1.297 30.660 79.852 87.269
2009* 31.903 539 9.529 41.975 42.528(*jAN-May 2009)
BROILER MEAT PRODUCTION
TURKEY IS THE 14TH BIGGEST CHICKEN MEAT PRODUCER WITH 1,150,000 MTS OF CHICKEN MEAT PRODUCED IN 2008
SOURCE :USDA
TURKEY WITH 17 KG PER CAPITA CONSUMPTION RANKS 17TH WORLDWIDE
TURKEY’S FINANCIAL STANDING
• Turkish banking sector not affected by the financial crisis as much as the US and European banks because they did not have any toxic instruments .
• The financial crisis in 2001 lead Turkey to make some financial reforms and to re-structure the banking sector in a sound way . Those structuring now has helped the sector passing this period relatively better than the other countries .
• Turkey’s position looks better than the average global situation
• A positive growth is expected after the last quarter in 2009.
TURKEY’S FINANCIAL STANDING (continued)
• Amongs the trade volume , credit lines and portfolio investments , Turkey has been affected more by the trade volume drops as can be seen in export and import figures .
• IMF agreement has not been signed yet . But the government does not see it as a must.
• Turkey’s interest rates have been recently decreased to more reasonable levels .
• Credit lines by the banks are still very tight to the real sector.
CHRONOLOGY OF CRISIS IN CHICKEN MEAT SECTOR
-The sector accused of using hormons in 2004 , which caused substanstial sale drops
-Bird-flu outbreak in October 2005 and continued in 2006 , which caused sale volumes to drop down by 95 % .
-Outbreak of tick bite in the fields transfering crimean-congo hemorrhagic fever virus and many incidences of deaths in 2008
-Excess capacity operation in 2008 of the companies hoping to repeat the excellent profitable year in 2007
-Rising commodity and energy prices in 2008 could not be transfered to sale prices
- Naturally record losses at the end of 2008
- In addition to huge losses in 2008 , the sector members under the examination by the Turkish competition authority for cooperation suspician
- Finally global financial crisis in 2008 fall gave a hard hit and caused serious working capital shortages
- Devaluation of Turkish TL put additional pressure on the chicken cost because of the cost structure heavily dependent on the imported raw materials
CHRONOLOGY OF CRISIS IN CHICKEN MEAT SECTOR (continued )
ACTIONS AND EFFORTS MADE DURING THE PAST CRISIS
• Healthy Chicken Platform was established to deal with hormon crisis and then after with bird flu problems .
• A lot of publications issued and many announcements and programs made to enlighten the public media
• The poultry meat producer association (BESD-BIR) assumed an important mission to find solutions to the sector’s problems .
ACTIONS AND EFFORTS MADE DURING THE PAST CRISIS (continued)
• BESD-BIR analysed the market and made reasonable production projections for the coming years to regulate the market
• The sector improved their production facilities and invested in bio-security to attain EU standards.
• Chicken meat used to be sold at 85 % bulk before the bird flu crisis . Now all the chicken meat are packed and branded .
PRECAUTIONS TAKEN IN THE COMPANY LEVEL DURING THE FINANCIAL CRISIS
PROCUREMENT SIDE
-Increased the payment terms to suppliers -Decreased inventory to min. Level-Avoided purchases by hard currency-Decreased imports of raw materials
SALE
-Reduced collection days-No new buyers accepted-Tight collection policy implied
GENERAL
-Savings in all expenses-Over head expenses reduced-Traveling expenses reduced
SECTOR’S STRONG POINTS • The food sector is supposed to be the less affected sector in a
financial crisis.
• Chicken meat is always preferred in Turkey because of relatively cheaper price compared to red and fish meat prices which are 3-4 times higher
• Majority of the population in Turkey is muslim . They don’t eat
porc meat . Poultry meat has a great consumption potential
• Exports to Irak have reached a substantial level . That alleviates the local domestic market supply pressure . Expect more exports in 2009
• Financial crisis did not reduce the chicken meat consumption in Turkey
• Turkish poultry sector have modern and technologically renewed facilities . 60 % of the sector has export licence for EU
SECTOR’S STRONG POINTS (continued)• Turkey is ranked the 4th largest chicken producer in EU
countries after Spain , UK, and France .
• Existingly, chicken meat produced in Turkey is free from bird flu
• Almost all sector facilities have air-chillers as opposed to the existingly leading exporting countries .
• Fresh chilled chicken meat can be exported to nearby countries because of proximity
• Bio-security conditions comply with EU norms
• Turkey is increasingly attracting more tourists reaching 26 mln people yearly
SECTOR’S WEAK POINTS
• Turkey upto now could not be a major player in chicken meat market worldwide because it is competing with USA and BRASIL producers which they can procure corn and soybean at much cheaper prices .
• After the crisis oil prices and commodity prices reduced . But producers could not enjoy enough the cheap energy prices nor cheap corn prices
• Although 90 % of the corn need can be produced locally . Cost is double.
• Export is not enough to regulate surplus suply
• Turkey ranks 14th in the world chicken meat production . But only 3 % can be exported existingly
SECTOR’S WEAK POINTS (continued)• Although Turkey geographically is located at the center of
main consumption areas which are Europe , Middle East and Russia . Turkey can not be competitive in these markets since the sector can not enjoy export incentives like US producers with 600 usd/mt and European producers with 525 usd/mt . Turkey’s support is as low as 26 USD/mt
• Turkey’s poultry sector has always been in a perfect competition described in economics books .
• Ambitious Poultry companies trying to be the number 1 in the market disregarding the analytical studies showing the size of the market . Unfortunately , all sector members became the victim of over-competition.
• The global financial crisis cought the sector in their weakest period until when they had been already making loss for 14 months .
INPUT MATERIALS AND EFFECTS
ON THE SECTOR
2006 2007 2008 2009* % INCREASEWHEAT 20.010 17.234 18.000 20.000 11,1%BARLEY 9.551 7.307 5.923 7.000 18,2%CORN 3.811 3.535 4.274 4.100 -4,1%RICE 696 648 753 760 0,9%
SUNSEED 1.118 854 992 1.000 0,8%COTTON 827 675 501 400 -20,2%
HAZELNUT 661 530 800 500 -37,5%
SOURCES: TUIK,TMO,USDA* EXPECTED
TURKEY GRAIN PRODUCTION (1000 TONS ) AND 2009 ESTIMATES
MAJOR FEED RAW MATERIAL IMPORTS IN 2008 (000 MT)
000 MT 000 USD RYE 15.560 5.060OAT 4.605 1.450CORN 1.133.463 356.000
FISHMEAL 55.167 57.990
SOYBEAN 1.239.064 647.899CANOLA 189.341 129.726
SOYBEAN MEAL 359.555 158.425SUNMEAL 203.767 48.372CANOLA MEAL 82.279 18.823PALM MEAL 30.000 6.690
WHEAT BRAN 342.865 68.619
CORN GERM MEAL 26.219 7.500CORN GLUTEN FEED 530.971 130.567
SUGAR BEET PULP 52.738 12.585
DDGS 521.855 142.296
TOTAL 4.787.449 1.792.002
TURKEY’S RAW MATERIAL IMPORTS
1
1,05
1,1
1,15
1,2
1,25
1,3
1,35
1,4
1,45
1,5
1,55
1,6
1,65
1,7
1,75
1,8
JAN FEB MAR APR MAY JUNE JULY AUG SEP OCT NOV DEC
USD VS. TL CHARTS FOR 2007-2008-2009
USD 2007 USD 2008 USD 2009
100150200250300350400450500550600
LOCAL C O R N ( TL)
2007 Corn Prices 2008Corn Prices 2009 Corn Prices
200,00
300,00
400,00
500,00
600,00
700,00
800,00
900,00
1000,00
JAN FEB MAR APR MAY JUNE JULY AUG SEP OCT NOV DEC
Pri
ce
Months
SOY BEAN PRICES ( TL/MT))
SBEAN (TL) 2007
SBEAN (TL) 2008
SBEAN (TL) 2009
200,00
300,00
400,00
500,00
600,00
700,00
800,00
900,00
1000,00
JAN FEB MAR APR MAY JUNE JULY AUG SEP OCT NOV DEC
Pri
ce
Months
SBM PRICES ( TL /MT )
SBM (TL) 2007
SBM (TL) 2008
SBM (TL) 2009
APR 2,52 2,86 2,56 3,50MAY 2,20 3,14 2,81 3,30JUNE 1,61 3,20 2,61JULY 1,76 3,10 2,33AUG 1,84 3,09 2,68SEP 2,09 3,21 2,91OCT 2,16 3,22 2,69NOV 2,10 2,46 2,33DEC 1,95 1,92 2,27
1,001,251,501,752,002,252,502,753,003,253,503,75
CHICKEN MEAT PRICES ( TL/KG)
2006 CHICKEN MEAT
2007 CHICKEN MEAT
2008 CHICKEN MEAT
2009 CHICKEN MEAT
CHICKEN MEAT CHICKEN MEAT
SALE SALE PRICE PRICE vs COSvs COST –T –22004004 – – 22009(2)009(2) ((TL/Kg)TL/Kg)
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
Jan-
04
Apr
-04
Jul-0
4
Oct
-04
Jan-
05
Apr
-05
Jul-0
5
Oct
-05
Jan-
06
Apr
-06
Jul-0
6
Oct
-06
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
SALE COST
DAMAGES OF GLOBAL FINANCIAL CRISIS ON TURKISH POULTRY SECTOR
• 3 middle sized poultry producers had to stop operation because of lack of working capital.
• Many people lost their jobs because of lay-offs
• Number of raw material suppliers are reduced . Supply and competitive raw material prices are gone .
• Increasing liabilities to banking sector presenting further financial risks
WHAT TURKISH POULTRY SECTOR SHOULD DO
• 35 % of the world chicken meat exports are made to the countries nearby Turkey . Turkey need to concentrate on these countries and find ways to be competitive in these markets.
• Companies should study market size and produce accordingly .
• Chicken meat producers and raw material suppliers should cooperate more . Both of the sectors are dependent on each other .
• Strategical alliances and partnerships need to be established to create synergies amongs those in the food chain
• Cost consiousness and savings have been never be needed so badly
WHAT SHOULD BE DONE GLOBALLY
• Commodity prices are subject to great speculations. Entry of Speculators must be limited and regulated in these markets .
• Purchasing power of consumers should be increased
• Crop Planted areas need to be increased
• Crop and yield improvements
• Cost improvements
• More information sharing amongs the related parties
• More performance-oriented and target-oriented management understanding need to be praised in the companies to raise new management teams
CONCLUSIONS
• Chicken business is a very risky business already in itself
• Capacity up and downs in the sector take long time
• Many health issues affecting the consumption substantially .
• Input raw materials are heavily dependent on wheather conditions and continously fluctuating .
• Commodity price movements after the involvement of hedge funds became out of control . They need to be regulated
• Rising demand for meat worldwhite increases the demand for grain and oil seeds , which causes them to be more expensive
• On the other hand ,chicken meat prices are almost constant .
CONCLUSIONS
• No demand rationing seen yet in spite of increasing commodity prices
• Majority of the people has either constant income or reducing income . There is not much hope for chicken meat price increase
• The business used to be cycling . Profitable years was following the loss years.
• But now , lost years are more dominating.
• New risk management systems should be utilized to maintain the sector’s future
• Collective efforts now are more needed for everyone in the food chain to have a sustainable growth in the future.
