Zootecnica International - World Poultry Journal

Hans-Wilhelm WINDHORST

Director of the Institute of Spatial Analysis and Planning in Areas of Intensive Agriculture (ISPA), University of Vechta, Germany

Introduction: The setting

The United States of America (USA) play an important role in global poultry production and trade with poultry products. As can be seen from Table 1, they contributed about 9% to global shell egg production, almost 23% to chicken meat production and had a share of nearly 47% of the production of turkey meat in 2004. Even though the contribution to the global production volume has been decreasing during the last decade, the USA are still ranking as the number 1 chicken and turkey meat producer and are only second to China as one of the leading egg producing countries.

The USA are also holding top positions in the global trade with poultry products. In 2004 they were number 7 in the export of shell eggs and ranked as number 2 in the export of chicken meat behind Brazil and in turkey meat behind France. Table 2 shows, however, that the contribution to the global trade volume has changed considerably over the last two decades.

From the role that the USA are playing in the global setting of poultry production and trade, it can be expected that the poultry industry is also one of the leading sectors in U.S. agricultural production. According to 2002 Agricultural Census data, the sales value of poultry products was as high as 24 billion US-$.

[The Census of Agriculture (2002) shows a sales value of poultry products of 23.9 billion $, the National Agricultural Statistics Service (NASS) of the USDA gives a value of only 20.5 billion $. The reason for the difference is the fact that the Agricultural Census calculates the possible sales value of all farms even though they may not sell any poultry products to the market, whereas in the NASS publications only the value of the products that reach the market is published.]

It ranked third behind cattle and calves (45 billion $) and grain, oilseeds and beans (40 billion $) and had a share of 11.9% of the total sales value of agricultural products.

From the data in Table 3 one can see that the value of poultry production increased from 11.8 billion $ in 1984 to 28.9 billion $ in 2004 or by 146%. This dynamic growth is mainly a result of the rapid increase of the value of broilers in the same time period. The value of egg production has not changed very much during the past two decades.

A comparison of the growth of the poultry industry and of agriculture in general shows that the value of poultry products increased much faster than that of all agricultural products (Table 4). The result was a growing contribution of the poultry sector to the total sales value of agricultural products. Whereas in 1974 it contributed only 7.6% to the overall value, its share was as high as 11.9% in 2002. However, the data also show that it has not been a continuous growth. Beginning in the late 1990s, the value of poultry meat began to decrease because of an oversupply on the domestic market and low prices. When the export volume of broiler and turkey meat began to increase again in 2003, prices recovered and the market value reached an all time high for broiler meat in 2004 (Figure 1).

The main topics of this analysis are:

• A time-spatial analysis of the development of egg and poultry meat production in the USA between 1984 and 2004;
• A characterisation of the recent spatial pattern and of the regional shifts of the U.S. poultry industry between 1984 and 2004;
• A time-spatial analysis of the development of U.S. exports of eggs and poultry meat and a characterisation of the recent trade flows;
• Projections for the development of the poultry industry to 2014.

Development and regional patterns of the U.S. egg industry

In a first step, the development and regional patterns of U.S. egg production and trade with eggs will be analysed.

During the last century, U.S. population increased continuously from 92 M. in 1910 to almost 294 M. people in 2004. Egg production, in contrast, did not show such a continuous growth, as for almost two decades, starting in the early 1970s, egg production either stagnated or even decreased (Table 5, Figure 2). This is mainly due to the controversial discussion about the health risk in connection with a high cholesterol intake resulting from egg consumption. When it could be shown in the early 1990s that the risk is much lower than expected and the industry was able to transmit these new insights, egg consumption began to increase again in the second half of the 1990s (Figure 3). The new slogan, one egg per day is o.k., expresses the altered attitude towards shell eggs in a short and convincing form.

Because of changes in the definition of farms and of layers in the Censuses of Agriculture it is difficult to get a complete data set for the development of layer stocks. For 1982, the Census shows 212,608 farms with laying hens, they held 310.5 M. birds. In 2002 the Census counted 334.4 M. layers in 98,315 farms. From these data one can see that the number of farms with laying hens decreased rapidly and that because of the growing population and the recent increase in egg consumption the total layer flock showed an upward trend. The result was a sectoral concentration process. Table 6 shows that in 1982 farms with less than 10,000 layers (97% of all layer farms) had a share of 8.9% of the total layer flock. On the other hand, less than 1% of the farms contributed 59%. Twenty years later, the share of farms with less than 10,000 layers had decreased to 2.3% whereas farms with 50,000 and more layers then contributed 82% to the total laying hen population of the USA. Quite obviously, in particular smaller farms quitted egg production as they were no longer competitive in a market with low egg prices in the 1970s and 1980s.

The ongoing sectoral concentration process becomes also obvious from the data in Table 7. Whereas in 1974 farms with 100,000 and more layers had a share of only 33.5% of the total layer flock, it had increased to 75.6% in 2002.

The dramatic increase in the per capita consumption of eggs during and after World War II (c. f. Table 5) began to cause problems, as the demand could not be fulfilled with the then existing forms of egg production. Comparatively small farm flocks and an insufficient marketing and distribution system were the main deficits. In the late-1950s, the organisation of egg production in vertically integrated agribusiness companies began. From the mid-1970s on, large integrations expanded rapidly (Martinez, 2002). Currently their share of egg production is as high as 70%, the ten leading egg companies alone held 119.3 million layers in 2004 which is 34.5% of the total laying hen population of the USA (Table 8). The consolidation process continued in 2005 by several acquisitions.

Parallel to the consolidation process and the formation of vertically integrated agribusiness companies, a regional shift in laying hen husbandry and egg production occurred. From the data in Table 9, which shows the ten leading states in laying hen husbandry for the census years 1982, 1992 and 2002, one can easily see that the regional concentration remained fairly stable over the two decades.

This does not mean, however, that the ranking of the states did not change. In 1982 and 1992 California ranked number 1 followed by Georgia respectively Pennsylvania. Ohio, only number 10 in 1982, jumped to rank 3 in 1992 and even rank 2 in 2002. However, the most dramatic development occurred in Iowa. This state did not even rank among the top ten states in 1992 but was number 1 in 2002 and could even further expand its leading position until 2004 when 43.6 M. laying hens were counted, a share of 12.7% of the total layer flock of the USA.

In 2004, Iowa was not only number 1 in laying hen husbandry but with a share of 26.1% of the U.S. pig herd also the leading state in pig husbandry (Windhorst, 2004). Quite obviously, the excellent feed basis and a favourable location to the major markets for eggs in the Midwest and the Atlantic states were the main steering factors behind this development. Surprisingly enough, however, none of the leading egg companies has their headquarters in Iowa.

Figure 4 shows the spatial pattern of laying hen husbandry in the USA in 2004. Apart from California, where a constantly growing population creates a high demand for shell eggs, two centres become obvious. One strip reaches from Pennsylvania via Ohio to Iowa, the other from North Carolina to Texas. The northern strip is based on the feed supply of the former corn belt and the closeness to the urban agglomerations south of the Great Lakes and along the Mid Atlantic, the southern strip supplies the urban centres in the Southeast, the Delta States and Texas. In addition to the production of shell eggs for consumption, parent stocks produce hatching eggs for the broiler industry.

As could be expected, the regional shift in laying hen husbandry has a parallel in the shift of egg production (Figure 5). The data in Table 10 show that the regional concentration process is going on. In 1984, the ten leading states contributed 59.7% to the overall production in the USA; in 2004 their share was 63.8%. Until the mid-1990s California was the leading state in egg production, but from then on the production volume decreased continuously. Whereas in 1984 laying hens in California produced 8.3 billion shell eggs or 12.2% of the USA, in 2004 there were only 5.4 billion eggs or 6.0% left. This dramatic decrease is mainly due to the constantly growing feed cost in the Pacific border state. The reason for the increase of the cost for feed components is closely related to the water shortage problem in California. The lasting drought from 1987 to 1992 had far reaching impacts on the development of water rights, water distribution and water cost. This caused a shift away from annual crops to permanent crops, especially nuts, almonds and pistachios, as these could stand higher irrigation costs. Poultry farmers had to import feed components via rail from the Midwest and the Plains states with high additional freight costs. Especially smaller farmers, but even large companies, quit egg production. To import shell eggs for consumption and egg products which can stand the higher freight costs from the eastern and southern Plains is cheaper than to produce them in the Central Valley. California only ranked number 5 among the top egg producing states in 2004. It can be expected that the production volume will further decrease.

The two major winners over the past two decades were Ohio and Iowa. Iowa was not to be found among the top ten egg producing states in 1984, in 1994 it ranked number 7 and in 2004 number 1. Egg farmers in Iowa contributed 2.6% to the overall U. S. egg production in 1984 (rank 12), 5.2% in 1994, and 13.0% in 2004. It is remarkable that in the first decade the production volume doubled, in the last it even increased by 205%. This rapid increase is based on the construction of large farm units, especially in the north-western and north-central counties by DeCoster Farms, Michael Foods, and the Sparboe Companies. Whereas in 1992, according to census data, only 18 farms had 100,000 and more layers, in 2002 48 farms had this size. Several of the new farm complexes that were built by DeCoster Farms (headquarter in Alexander, Iowa) over the last years can house up to 2 M. layers in one location. A favourable feed base, closeness to the agglomerations south of the Great Lakes and the Mid Atlantic as well as to the headquarters of two of the leading egg breaking and processing companies were the main steering factors behind this success story. The growing demand for egg products (Table 11) led to very large companies with own layer flocks. Michael Foods and Sparboe, both located with their headquarters in Minnesota, held 14 M. respectively 12.5 M. layers in 2004 (c. f. Table 8). Both companies are playing an important role in the expansion of egg production in adjacent states. Presently, about 70% of the shell eggs produced in Iowa go into breaking plants.

Egg production in Ohio increased from 3.4 billion eggs in 1984 to 7.4 billion eggs twenty years later. This growth is mainly based on the dynamic development of two companies, Ohio Fresh Egg, headquartered in Croton, and Fort Recovery Equity, with its headquarter in Fort Equity. Ohio Fresh Egg changed its ownership and name several times between 1984 and 2004. It started as Croton Egg Farm, a company founded by the German investor Anton Pohlmann, was then renamed to Agri General and Buckeye Egg Farm from which Don Hershey and Orlan Bethel bought the company in February 2004 and renamed it to Ohio Fresh Egg. In December 2003 DeCoster Farms got financially involved in Ohio Fresh Eggs which made DeCoster Farms the largest privately owned egg company for some time. However, when Cal-Maine Foods acquired Hillandale Egg Farms of Florida in July 2005 and announced a joint venture with Green Forest Egg Company in January 2006, the company became the leading egg producer in the USA again.

A major factor behind the consolidation process has been the development of egg prices. Figure 6 shows that egg production increased from 74 billion in 1994 to 89 billion pieces in 2004. The continuous expansion of the production volume led to lasting low prices between 1998 and 2002. In 2003 the prices recovered, but the higher egg prices did not stabilise and in July 2005 prices dropped again to a new low (Table 12). This may have initiated another consolidation process. A second steering factor is also quite obvious. Egg production is moving to states with a good feed base as feed is still the major cost factor in egg production.

The main results of this step of the analysis can be summarised as follows:

• U.S. egg production has shown a remarkable dynamic over the past two decades. The continuous upward trend was interrupted for almost two decades, starting in the early 1970s, by the discussion about the high cholesterol content of eggs and resulting health risks.
• When it became obvious that the risk was not as high as proclaimed, a new growth period began. However, production grew faster in some years than demand. Lasting low prices were the result. They accelerated the ongoing consolidation process. In 2004, the ten leading egg companies held almost 120 M. laying hens or 34.5% of the total hen population of the USA.
• Egg production in the USA has three spatial clusters. The smallest is California where a separated egg producing industry was formed because of the continuous population growth. However, this cluster is losing ground because of the high feed costs resulting from cost intensive irrigated agriculture. The former Corn Belt and the eastern states of the northern Great Plains are dominating egg production in the USA with Iowa and Ohio in a leading position. A third cluster originated in the Southeast and the eastern states of the southern Great Plains. Besides market eggs, hatching eggs for the broiler industry are produced in these states.
• Closeness to the urban agglomerations as well as to a safe and cheap feed base are the main steering factors behind the regional shifts that occurred during the past two decades. Quite obviously, part of the egg production is returning to the location where it started, the former Corn Belt.

Development and regional patterns of the U.S. broiler industry

In a further step, the development of broiler production and broiler meat consumption in the USA will be analysed.

To better understand the dynamic in poultry meat production, the development of the per capita consumption for the main meat types has to be studied. Figure 7 shows how the per capita consumption for beef, pork, broiler and turkey meat changed between 1970 and 2004 and what the National Chicken Council expected for 2005 and 2006. Beef consumption has been decreasing since 1976. The ups and downs, which characterised pork consumption until the early 1980s, have been replaced by a more even development, even though no upward trend can be observed.

Broiler meat consumption has grown continuously since 1975 with the exception of 2001, in 1985 it surpassed pork and in 1992 beef consumption. Per capita consumption of turkey meat grew until 1990; from then on it has remained almost on the same level with a slight downward trend since 2000. Quite obviously, broiler meat producers have been able to meet the demands of the consumers and to set standards in the development of new products. The success is mainly due to the organisation of broiler meat production in large vertically integrated agribusiness companies which were able to deliver a safe and healthy food to the consumers at a reasonable price. In 2005, broiler meat contributed almost 40% to the total meat consumption in the USA, in 1970 it had only been 21% (Figure 8). During the last decade, the share of broilers used for further processing increased from 24% to 60% (Figure 9), this indicates the growing preference of the consumers for cut up ready to cook parts and convenience products.

What impacts did this dynamic development have on the sectoral and regional pattern of broiler production?

U.S. broiler production can be characterised by a more or less homogeneous growth from 1 billion birds in 1954 to 8.7 billion in 2004 (Figure 10). Only two plateaus in the mid-1970s and mid-1980s can be observed. From 1985 on the growth rates increased. The continuous upward trend came to a halt in 2003 because of a sharp reduction in the export volume (see also Figure 11) but recovered again in 2004.

Parallel to the remarkable dynamic, broiler farms increased in size. In 1982, farms that sold 500,000 and more broilers per year contributed 15.7% to the total number of produced broilers, in 1992, they had a share of 35.5% and in 2002 of 53.6% (Table 13). On the other hand, the contribution of farms, which sold less than 100,000 broilers per year, decreased from 10.8% in 1982 to 1.3% in 2002.

The sectoral concentration process in broiler production can also be documented by the growing share over time of farms which sold 100,000 or more broilers per year. From the data in Table 14 it becomes obvious that in 1974 less than 30% of the broiler farms had reached this size, in 1997 it were 68.1%. Because of a new farm definition, the number decreased to only 59.4% in 2002. The contribution of farms that belong to this size class to total broiler sales increased from 70.0% in 1974 to 98.5% in 2002. According to census data, very large farms which sold 750,000 and more broilers per year, in 1987 had a share of 24.3% of the total number of marketed broilers, until 2002, it had increased to 53.6%. Smaller farms quit broiler production as they were no longer competitive, often a result of old growing houses.

Between 1970 and 2004, broiler meat production in the USA increased from 3.5 M. t to 15.3 M. t or by 340%, the result of a population growth by almost 90 M. people and an increase of the per capita consumption from 16.6 kg to 38.5 kg. The highest absolute increase occurred between 1990 and 2000 with 5.3 M. t (Table 15). This was not only a consequence of the growing per capita consumption but also of the fact that from the mid-1990s on more than 15% of the production were exported (Figure 11).

In spite of the rapid growth, the spatial pattern of broiler production and processing has remained fairly stable over the past five decades with the Southeast and the Mid Atlantic states in a dominating position (Figure 12).

The regional concentration of broiler growing and processing in the Southeast and along the Mid Atlantic has several reasons. Until 1950, chicken meat was mainly produced on farms close to the urban agglomerations. When the per capita consumption increased, this organisational form was no longer able to meet the year round demand. Within a very short time, vertically integrated agribusiness companies originated in the Mid Atlantic States and in the Southeast. They owned the parent stock for the production of hatching eggs, the hatcheries, feedmills, and the processing plants. In most cases, contract farmers grew the broilers.

Many of the small farmers had lost their economic basis when cotton growing moved westward as a result of soil erosion and the disastrous losses caused by the cotton boll weevil. They were interested in contracts from agribusiness companies as they guaranteed them a relatively safe income. This organisational form was so effective that it spread over the whole Southeast within a very short time. Low labour costs for the workers in the processing plants and favourable freight rates for the feed components from the Midwest to the Southeast were additional steering factors. Once this production system was installed and had demonstrated its effectiveness, a lasting success story without a parallel in U.S. agriculture began (Windhorst, 1989). The industry was able to convince the consumers that broiler meat was lean and healthy, could be used in a large variety of meals, easy to cook and cheap. When fast food restaurants used more and more broiler meat in their meals and a large variety of cut up and microwave-ready convenience products were offered in the retail stores, white meat became the preferred meat of the U.S. consumers.

Table 16 shows, however, that between 1994 and 2004 some regional shifts occurred. Kentucky, Missouri, and Oklahoma which were not ranked among the top ten broiler producing states in 1994 occupied ranks seven, eight and ten in 2004. Even though in the production system of broiler meat labour costs in the slaughterhouses and further processing plants are an important cost factor, about 60% of the costs to grow a broiler are feed costs. This explains why some of the production moved closer to the feed base in the former Corn Belt.

The regional concentration has decreased, as the share of the ten leading states fell from 87.6% in 1984 to 78.6% in 2004. This also documents that, similar to egg production, the feed basis is gaining in importance as a factor for the location of the primary production units.

The sectoral concentration in broiler meat production is much higher than in egg production. Between 1995 and 2004 the number of broiler production companies fell from 52 to 40. Most of the firms that are no longer existent as independent companies have been acquired by other companies. Some of the major acquisitions between 1995 and 2004 were the purchase of McCarty Farms in 1995 and Hudson Foods in 1998 by Tyson Foods or WLR Foods in 2001 and ConAgra Poultry by Pilgrim´s Pride Corporation in 2003. The latter one was the biggest acquisition that ever occurred in the broiler industry.

The data in Table 17 show that the top three companies had a share of 46.8% of the total broiler production in the USA in 2004 and that the top 20 companies contributed over 90% to the production volume. The other 20 firms that are left have a market share of less than 10%. It can be expected that some of these companies will disappear during the ongoing consolidation process within the next years.

Table 18 lists the top ten U.S. broiler companies in 2004. Together, these companies had a weekly slaughtering capacity of 228,688 t or 73.3% of the installed capacity. Tyson Foods is still dominating the industry with a share of 22.0%, followed by Pilgrim´s Pride Corporation and Gold Kist. The acquisition of ConAgra Foods by Pilgrim´s Pride in 2003 narrowed the gap between the two leading companies. The location of the headquarters shows that with the exception of Foster Farms (California) and O.K. Foods (Arizona) all other leading companies are either located in one of the Mid Atlantic states or in the Southeast. This also documents the dominating position that these two regions are still having in the U.S. broiler industry.

Of the 220 processing and further processing plants that were operating in the USA in 2004, 184 were located in the Southeast or in one of the Mid Atlantic states (Table 19). One can also see from the data that the three leading companies had most of their facilities in one of these states.

The future of U.S. broiler production and further processing will not only depend on the development of the per capita consumption but also on the development of the world market for chicken meat. It could be shown that the almost continuous increase of broiler meat production reached a plateau in 2002 and even decreased slightly in 2003.

Figure 13 compares the development of the production volume with the production value between 1994 and 2004. One can easily see that the value decreased in 2000 and then sharply in 2002. This is mainly due to the growing competition on the global market for broiler meat. Table 20 shows that Brazil almost tripled the export volume between 2000 and 2004 whereas the USA lost about 70,000 t.

The outbreak of Avian Influenza in East Asia led to a rapid reduction of Thailand’s export volume from 465,000 t to only 215,000 t. This offered new chances for U.S. companies to stabilise the exports of broiler meat and even expand it in 2005. It has to be assumed, however, that the competition on the global market will become tougher and that especially Brazil will be able to gain market shares in East and Southeast Asia as well as in Russia. In a later chapter this aspect will be analysed in more detail.

The main results of this step of the analysis can be summarised as follows:

• The U.S. broiler industry is the most dynamic sector of U.S. agriculture. Over decades, the production volume has increased almost continuously.
• A high sectoral and regional concentration is typical of this branch of animal production. The ten leading companies contribute over 73% to the overall production volume and about 90% of the broilers are grown in the Southeast and the Mid Atlantic states.
• The industry is very innovative and has been able to make chicken meat the leading meat within a very short time period by adjusting to the changing demand of the consumers and by developing new products that consider the socio-economic developments in a post industrial society.
• The future of the broiler industry will depend on its ability to further increase the per capita consumption of broiler meat in the USA und to remain competitive in the global market.

Development and regional patterns of the U.S. turkey industry

In a third step, the development of turkey meat production and consumption will be analysed.

Figure 7 showed that the per capita consumption of turkey meat increased from 3.7 kg in 1970 to 8.0 kg in 1990. From then on it has more or less remained on this level, even though in 2003 and 2004 a slight decrease could be observed. The development of U. S. turkey production over the past 50 years has not been as homogeneous as that of broiler production.

From Figure 14 one can see that the number of produced turkeys increased from about 70 M. birds in the early 1950s to over 300 M. in 1996 and 1997. The highest growth rates can be observed in the second half of the 1980s, in 1992 a plateau was reached, and from 1997 on production even decreased. One has to consider, however, that a decrease in the number of produced birds does not necessarily mean that the production volume of turkey meat also decreased.

Table 21 shows that in spite of the reduction of grown turkeys, turkey meat production further increased. This is mainly a consequence of a constantly increasing slaughter weight of the turkeys, which again is a result of the fact that the market share of whole turkeys as a meal at Thanksgiving and Christmas is decreasing and cut up parts as well as convenience products with turkey meat as a component are gaining in importance.

Parallel to the dynamic increase from the mid-1980s to the mid-1990s turkey farms increased in size. Whereas in 1982 only 5.3% of all turkey farms sold 100,000 and more birds per year, 9.5% of all turkey farms reached this size in 2004. Their contribution to turkey production increased from 52.8% to 65.3% in the same time period (Table 22) and has further grown. The number of turkey farms was higher in 2002 than in 1982. This is mainly due to a new farm definition, but the data also show that farms which sold 60,000 and more turkeys has increased rapidly, especially the very large farms that sell 100,000 and more birds per year.

The sectoral concentration process in turkey growing becomes also obvious from the increasing contribution of the large farms, which sold 100,000 and more turkeys to the overall turkey production in the USA (Table 23). Whereas they had a share of only 43.3% in 1974, they almost contributed two thirds to the total turkey production in 2002. The share of smaller turkey farms, which only sold up to 16,000 birds per year, decreased from 3.2% in 1982 to only 0.7% in 2002. Because of higher production costs they have not been able to compete in a stagnating or even shrinking market. Unfortunately the data published in the Census of Agriculture do not permit a further differentiation in the highest size class, so that no comparison can be made with broiler production.

In spite of the ups and downs in turkey production, the spatial pattern of turkey growing has remained rather stable over the past two decades. From Figure 15 one can see that, except for California, turkey production is concentrated in the states at the Mid Atlantic, south of the Great Lakes and in a strip reaching from Minnesota to Arkansas. The two steering factors, feed basis and closeness to the market, become obvious. It is worth mentioning that turkey growing does not play an important role in some of the major broiler producing states in the Southeast. This is mainly due to the location of the leading turkey processing companies.

Table 24 shows that the regional concentration has also remained fairly stable over the past two decades even though it has slightly increased again between 1994 and 2004. Minnesota and North Carolina are the two leading states in turkey growing. Their share of U. S. turkey production has been hovering between 32% and 34%. California contributed 11. 5% to the total production in 1984 but only 5.9% in 2004, the number of produced turkeys fell from 19.7 M. to 15.7 M. or by 20%. Here, too, the constantly growing water costs for irrigation have been the most important steering factor.

In the USA, the number of grown turkeys fell from 289 M. to 264.2 M. or by 9% between 1994 and 2004.

A closer look at the ranking of the top ten turkey producing states and the development of their production volumes reveals that the turkey industry in North Carolina was severely hit by the decreasing per capita consumption and the resulting reduction of turkey production. In this state alone, the number of grown turkeys decreased by 21 M. birds or by 35%. In contrast, in Minnesota, the production volume increased by 5 M. turkeys, an increase could also be observed in Missouri and Pennsylvania. The oversupply in the turkey meat market had far reaching impacts on the value of production, as can be seen from Figure 16. Within two years, between 1996 and 1998, the production value decreased by almost 400 M. $.

The sectoral concentration process in turkey slaughtering and processing is even higher than that in the broiler industry. Table 25 lists the ten leading companies for 2004. Together these companies processed about 2.5 M. t of turkeys (live weight) or about 81% of the total production volume of the USA. The four leading companies had a share of more than 55%.

Jennie-O Turkey Store, headquartered in Wilmar (Minnesota), has been the dominating company for several years, followed by Cargill, Inc. and ConAgra Foods, Inc. It is a still open question what impacts the most recent development in per capita consumption will have on the turkey industry. One consequence of lasting low prices could be a further consolidation. The future perspectives will, however, also depend on the ability of the industry to further increase the export volume. Table 26 shows that Brazil and some European countries have been able to increase their export volume considerably since 2000, on the other hand, several EU member states had to face a sharp reduction of their export volume, especially France, Italy, and the Netherlands.

The main results of this step of the analysis can be summarised as follows:

• The U.S. turkey industry is a very dynamic sector of U.S. agriculture. Until the second half of the 1990s the production volume has increased almost continuously, then, a plateau was reached due to a decreasing per capita consumption and export volume.
• A high sectoral and regional concentration is typical of this branch of animal production. The ten leading companies contribute almost 81% to the overall production volume. More than 82% of the live turkeys are grown in the ten leading states, which are mainly located in the former Corn Belt and at the mid Atlantic.
• The future of the turkey industry will depend on its ability to stabilise or even increase the per capita consumption of turkey meat in the USA und to remain competitive in the global market.
• In order to reach this goal, the industry will have to be very innovative also in future to make turkey meat a product that is consumed over the whole year and not mainly in the fourth quarter.

 

Development and present patterns of U.S. poultry exports

In a further step, the development of U.S. poultry products exports will be analysed. The analysis will be carried out separately for eggs and poultry meat. This part of the study will cover the time period between 1989 and 2004 as not for all products detailed data are available for earlier years.

In spite of the high production value, the contribution of the poultry industry to the agricultural exports of the United States is comparatively low. From the data in Table 27 one can see that this is especially true for egg and egg products exports, as they only had a share of 0.2% to 0.4% in the analysed time period. On the other hand, the export value of poultry meat is much higher and these commodities contributed between 1.3% and 4.1% to the overall agricultural exports. It is worth mentioning that in contrast to the fairly stable share of eggs and egg products that of poultry meat shows considerable ups and downs from one year to the other.

Development and recent patterns of U. S. egg and egg products exports

The value of U.S. egg and egg products exports increased from 90.7 M. $ in 1989 to 221.1 M. $ in 1998, then it decreased by more than 50 M. $ within one year and hovered around 170 and 180 M. $ per year until 2003. It was not before 2004 that it again reached a value similar to that in the late 1990s, mainly a result of the fast increase of Canadian imports (Table 28). The leading importing countries were Canada and Japan, the latter, however, only in the 1990s.

In 1989, the ten leading countries of destination had a share of 86% of the total exports of eggs and egg products; the leading four countries alone contributed 66.7%. Fifteen years later, the concentration of exports had not changed very much, but the composition of the leading countries and their share had changed considerably (Table 29).

In 1989, Canada and Japan were the leading importing countries. Together they had a share of about 39% of the total exports. Germany was the only EU member state thank ranked among the top ten countries. In 2004, Canada was in an absolutely dominating position with a share of 35.6%. Quite obviously, the formation of NAFTA had far reaching impacts on the export pattern as the two NAFTA partners, Canada and Mexico, imported about 43% of all U.S. egg and egg products which reached the world market.

Two other major importing regions were East Asia (Japan, Hong Kong, and South Korea) as well as Latin America (Jamaica, Brazil, and Trinidad and Tobago). It is worth mentioning that the United Kingdom ranked second and France ninth among the top ten countries in 2004. It can be expected that a reduction of trade barriers for egg products as a consequence of the ongoing WTO negotiations would open new export possibilities for the leading U.S. egg processing companies and strengthen their position in the EU because of considerably lower prices for breaking eggs.

Development and recent patterns of U.S. poultry meat exports

In 2004, the value for poultry meat, exported by the USA, was about ten times as high as that of egg and egg products. This figure alone gives a first impression of the importance that exports play for the slaughterhouses and further processing companies. Table 30 shows that the export value increased constantly between 1989 and 1996, from then on considerable ups and downs can be observed. These fluctuations are mainly due to rapidly changing imports of Russia.

In 1996 the value of the Russian imports was as high as 912 M. $, in 2000 it only reached 317 M. $ and then recovered to 530 M. $ in 2004. Whereas in the late 1980s and early 1990s Japan, Mexico, and Canada were the leading countries of destination, Russia has been the leading importing country from 1995 on with the exception of 1999 when Hong Kong ranked number one.

Chicken meat has contributed between 80% and 82% to the total poultry meat exports in the analysed time period as can be seen from a comparison of the data in Tables 30 and 31. So it is not surprising that the development in poultry meat exports has a parallel in chicken meat exports. In the late 1980s and early 1990s, most of the exported poultry meat was sold in Japan and Hong Kong, in the mid 1990s Russia became the dominating country of destination with a share of 26% to almost 40% of all exports. The impact that Russian imports had on the development of prices and production value for broilers can be seen from Figures 1 and 13 (see Zootecnica International, July-August 2006 issue).

In 1989, the ten leading countries of destination had a share of 86.6% of total chicken meat exports (Table 32), Japan and Hong Kong alone of 49%. The USSR only ranked as number eight with an import value of less than 9 M. $. The regional concentration of poultry meat exports was very high and was considered as a risk for the future development of broiler companies in the USA. Therefore, the companies tried to find new markets where their products could be sold. These efforts have been successful, as in 2004 the ten leading importing countries only had a share of 73.6%. Nevertheless, Russia and Eastern European countries are still in a dominating position. Canada and Mexico, the two NAFTA partner countries, received almost the same share of the total chicken meat exports as in 1989.

It is worth mentioning that 1997 was the last year when the USA was able to export larger amounts of poultry meat to the EU. Then, total poultry exports fell drastically and have remained on a much low level ever since (see Figure 17). An explanation for this development is on the one hand the EU expansion and the increasing imports from Hungary and Poland, on the other hand Council Directive 97/79/EC which was issued in April 1997. It banned the use of antimicrobial treatments for decontaminating poultry carcasses. Even though their use has been approved by the U.S. Food and Drug Administration (FDA), U. S. authorities were not able to sign certificates certifying compliance with the directive requirements.

The result is that U.S. poultry meat exports have been blocked since that time. Brazil, Thailand, and Poland benefited most from this situation (c. f. Nelson 2005).

The future development of US broiler meat exports will depend on the ability of the companies to compete with Brazil in the global market, the control of Avian Influenza outbreaks in East and Southeast Asia, especially in Thailand, and marketing restrictions resulting from Avian Influenza outbreaks, as well as the expansion of broiler production in Russia, the world’s leading broiler meat import market.

Up to 1990, the value of U.S. turkey meat exports was still very low, with the rapid expansion of Mexican imports the export value increased to 289 M. $ in 1997. From then on the value fluctuated between only 161 M. $ in 2002 and 251 M. $ in 2004. Table 33 shows that the ups and downs are mainly due to the amount of turkey meat that could be exported to Mexico. In a previous chapter it could be shown that a stagnating or even decreasing per capita consumption had far reaching impacts on the price development for turkey meat and the value of production (see Table 21 and Figure 16). Only because of the comparatively high export volume, prices and value of production could be stabilised, even though on a comparatively low level. If this had not been possible, the processing companies and the turkey growers might not have been able to overcome this critical situation. That such a critical situation did not only occur in the USA but also in other parts of the world could be shown by this author in two other publications (Windhorst 2005a, b).

In 1989, the export value for turkey meat was still very low with only 22 M. $. The ten leading countries of destination had a share of about 71% of the total exports with Mexico and Canada in a leading position. East Asian as well as some Latin American and African countries were also ranked in the top positions. It is remarkable that in spite of the large production volume in some EU member states (France, Italy, United Kingdom), Switzerland and Greece imported turkey meat from the United States. Between 1989 and 2004, the export value increased to more than 251 M. $. Mexico was now in an absolutely dominating position with a share of 67.1% of total U.S. exports, followed by Russia and Canada. Several other Latin American and East Asian countries were also to be found in the top ranks. The regional concentration of the exports increased to almost 91% for the ten leading countries of destination. The fact that US turkey companies are dependent to a high degree on the Mexican imports is considered as a risk, but the growing competition of France and Brazil (c. f. Table 26) in the global market has reduced the ability of the USA to develop new markets in Europe and East Asia. In particular the already mentioned regulations of Council Directive 97/79/EC, which banned the use of antimicrobial treatments for decontaminating poultry carcasses, will make it almost impossible to export turkey meat to EU member states in the near future. This explains the concentration on the two NAFTA partners.

The main results of this step of the analysis can be summarised as follows:

• Poultry products contribute about 4% to the agricultural exports of the USA, the share of poultry meat is ten times as high as that of eggs and egg products.
• Egg and egg products are mainly exported to the two NAFTA partners, with Canada in a dominating position, as well as to some Latin American and East Asian countries. The United Kingdom is the only major buyer in Europe.
• Chicken meat contributed more than 80% to the poultry meat exports in 2004; Russia has been the main country of destination since the mid 1990s. EU member states are no longer importing chicken meat as the EU banned the use of antimicrobial treatments for decontaminating poultry carcasses, a method approved by the U.S. Food and Drug Administration (FAD).
• More than 73% of the turkey meat exports go to Mexico and Canada with Mexico in an absolutely dominating position. Because of the competition of France and Brazil it is very difficult for the USA to develop new markets, especially in the EU.
• If Brazil should be able in future to gain higher market shares in Latin American countries, Russia, and East Asia, the U.S. turkey industry will hardly be able to maintain the present production volume.

Perspectives for the U.S. poultry industry for the next decade

In a final step, perspectives for the U.S. poultry industry until 2014 will be analysed. The data base for this analysis is the USDA Agricultural Baseline Projections to 2014, published by the Office of the Chief Economist, and the FAPRI 2005 Agricultural Outlook, prepared by the Food and Agricultural Policy Research Institute at the Iowa State University in Ames.

Only in the USDA Baseline Projections data about the expected development of the per capita consumption of eggs and the overall egg production are published. Quite obviously, it is very difficult to project egg consumption and production, for neither the FAO nor FAPRI has published any data so far.

Table 35 shows that the USDA estimates an increase of only 2.5% in the per capita consumption of eggs here egg products are included. Because of the expected population growth, the production volume of eggs will increase by 12% between 2004 and 2014 according to the projections in the above-mentioned publication.

The consumption of breaking eggs will grow much faster (+ 6.9%) than that of shell eggs in the analysed time period and the share of breaking eggs of total egg consumption is projected to increase from 30.5% in 2004 to 31.8% in 2014. The estimates do not consider, however, any impacts that may result from a further dissemination of Avian Influenza, either in Europe or North America.

The data base for the development of poultry meat production and trade is more detailed so that a better scenario for the next decade can be presented.

The future of poultry meat production in the USA will depend on the development of per capita consumption and of exports. From Table 36 one can see that the USDA expects an increase of the per capita broiler meat consumption from 38.7 kg in 2004 to 43.7 kg in 2014. The estimate of FAPRI (FAPRI 2005, p. 113) does not differ significantly, for 2014 the institute predicts a consumption of 43.5 kg. Not before 2007, turkey meat consumption will recover from the present downswing, from then on an increase to 8.4 kg is expected. Beef consumption will decrease by 3% and that of pork increase by only 3.1% in the next decade. FAPRI is more optimistic for beef as the institute estimates that per capita consumption will increase to 30.2 kg. On the other hand their projection for pork consumption is more pessimistic with only 23.4 kg.

Quite obviously, both institutions are convinced that the success story of poultry meat, especially broiler meat, will continue. The USDA estimates that the contribution of poultry meat to the overall meat consumption will increase from 46.4% in 2004 to 49.5% in 2014 (Table 37), so that the projected increase of the per capita meat consumption from 101.1 kg in 2004 to 106.3 kg in 2014 will be mainly due to poultry meat.

The projected increase of the per capita consumption of broiler and turkey meat and the population growth in the USA will together with the estimated development of poultry meat exports result in a continuous increase of the production volume. From the data in Table 38 one can see that FAPRI projects an increase of broiler meat production from 15.3 M. t in 1994 to 19.4 M. t in 2014 or by 26.6%, the growth rate estimate for turkey meat is much lower with only 14.8%. The institute expects that the exports of broiler and turkey meat will increase by about 40% each in the analysed time period.

FAPRI also presented projections for the development of the net exports and net imports of broiler meat between 2004 and 2014. Table 39 shows that the institute projects an increase of the net exports by the major exporting countries from 5.1 M. t to almost 7 M. t or by 36.7%.

With the exception of the EU (25), for which a decrease by 18.4% is projected, all other exporting countries can increase their export volume considerably.

Brazil, which surpassed the USA as the leading broiler meat exporting country in 2004, will rank second again in 2014 according to the FAPRI estimate. The high growth rate for Thailand is a consequence of the dramatic decrease in 2004 and 2005, caused by the Avian Influenza outbreaks. Figure 18 shows that the market shares of the major exporting countries will change remarkably between 2000 and 2014. Brazil will be the only winner whereas the USA and the EU (25) will be the losers.

FAPRI also projected the development in the major net importing countries (Table 40). Russia will increase the net imports from 929,000 t in 2004 to 1,049,000 t in 2006, from then on, because of a strict quota level; imports will not surpass 1.05 M. t until 2014. Japan will rank second, followed by Saudi Arabia, China, Mexico, and Hong Kong. The six leading net importing countries will then have a share of 51% of the global net imports.

The main results of the concluding step of this analysis can be summarized as follows:

• In spite of an only moderately growing per capita consumption of eggs, total egg production in the USA is predicted to increase by 12% between 2004 and 2014. This is mainly due to the population growth.
• In contrast to beef and pork consumption which will either decrease or only slightly increase, broiler meat and turkey meat consumption are expected to grow by 12.9% respectively 7.7% until 2014. According to USDA projections, the contribution of poultry meat to total meat consumption will increase from 46.4% to 49.5% in the same time period.
• The projected increase of the per capita consumption will, together with a growing population and an increase of the export volume by about 40% between 2004 and 2014, lead to a continuous increase of the production volume of broiler and turkey meat by 26.6% respectively 14.8%.
• The Food and Agricultural Policy Research Institute (FAPRI) estimates that in 2014 about 19.4 M. t of broiler meat and 2.8 M. t of turkey meat will be produced in the USA.
• In 2014, Brazil and the USA will each contribute about 41% to the global net exports of broiler meat; Russia, Japan, Saudi Arabia, China, Mexico, and Hong Kong will be the major net importing countries.
• Both, the USDA and FAPRI, show in their projections that the poultry industry will be a very dynamic sector of U. S. agriculture also in the coming decade.

 

References:

FAPRI (ed.): FAPRI 2005 Agricultural Outlook. Ames, Iowa 2005.

Martinez, S. W.: Vertical Coordination of Marketing Systems: Lessons from the Poultry and Pork Industries. (Agricultural Economic Report, no. 807). Washington, D.C.: USDA 2002.

Nelson, R.: Analysis of US poultry trade with the EU: Past, present, future. (USDA, FAS GAIN Report Number: E 35166). Washington, D.C. 2005.

USDA, Office of the Chief Economist (ed.): USDA Agricultural Baseline Projections to 2014. (= Baseline Report OCE-2005-1). Washington, D.C. 2005.

O´Keefe, T.: Watt Poultry USA´s rankings: Turkey. In: Poultry USA 6 (2005), no. 1, p. 56-60.

Thornton, L.: Processing, further processing plants. In: Poultry USA 6 (2005), no. 1, p. 74-77.

Thornton, G.: Watt Poultry USA´s rankings. Top 10 broiler companies. In: Poultry USA 6 (2005), no. 1, p. 18-26.

Windhorst, H.-W.: Die Industrialisierung der Agrarwirtschaft. Frankfurt/M.: Verlag Alfred Strothe 1989. 247 p.

Windhorst, H.-W.: Gesetze zur Staerkung der Familienfarmen und ihre Auswirkungen auf die Schweinehaltung in den USA. In: Berichte ueber Landwirtschaft 82 (2004), Heft 4, p. 585-601.

Windhorst, H.-W.: EU turkey meat production and trade in perspective. In: World Poultry 21 (2005a), no. 9, p. 10-11

Windhorst, H.-W.: Changing regional patterns of turkey production and turkey meat trade. In: H. M. Hafez (ed.): Turkey Production: Prospects on Future Developments. Berlin 2005b, p. 25-41