Report Highlights:

Japan will post new records for broiler meat production, consumption, and importation in 2015 as poultry sales outpace relatively higher priced pork and beef in both the retail and food service sectors. Raw broiler imports from Thailand resumed in 2014 and continued to pick up steam in 2015, displacing a significant volume of prepared poultry product imports as well as some raw broiler imports from Brazil. The expansion of imports from Thailand is expected to continue through 2016, however poultry products will face stiffer competition from chilled pork as ample supplies of Japanese and imported pork put significant downward pressure on price offers. Relatively small imports of U.S. poultry should recover in the last quarter of 2015, as Japan begins to remove highly pathogenic avian influenza-related bans on U.S. poultry producing states.

Broiler PS&D Table

Poultry, Meat, Broiler

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Inventory (Reference)

106

136

106

137

0

137

Slaughter (Reference)

655

661

655

665

0

665

Beginning Stocks

102

102

121

118

0

136

Production

1360

1365

1360

1375

0

1375

Total Imports

888

888

895

900

0

875

Total Supply

2350

2355

2376

2393

0

2386

Total Exports

11

11

12

12

0

12

Human Consumption

2218

2226

2240

2245

0

2240

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

2218

2226

2240

2245

0

2240

Total Use

2229

2237

2252

2257

0

2252

Ending Stocks

121

118

124

136

0

134

Total Distribution

2350

2355

2376

2393

0

2386

(MIL HEAD) (1000 MT)

Preface:

Data have been adjusted to reflect recently published actual numbers including full year 2014 (Jan. – Dec. 2014) and the first half of 2015 (Jan. – Jun. 2015). 2016 forecast numbers represent Post's preliminary projections.

Broilers comprise over 90 percent of Japan's domestic poultry meat production, with spent hens comprising most of the remainder. Very few other poultry species are produced commercially. Total consumption in the PS&D table accounts for domestic broiler meat output (dressed whole bird, bone-in), imported broiler meat (raw meat of bone-in as well as boneless cuts mixed with a high percentage of boneless cuts), and imported prepared and processed broiler meat products (cooked boneless meat). Stocks data includes domestic poultry meat as well as imported broiler meat (accounting for roughly 70 – 75 percent of total stocks), but does not include imported prepared and processed products.

The quantities discussed in this text use a product weight basis. Conversion rates are not used for import (customs cleared weight) numbers in the text. A conventional conversion rate (0.7015) is used to convert domestic production from live weight to dressed whole bird, bone-in.

Broiler:

2015 Market Situation Summary and Update

The April 1, 2014 consumption tax hike (from five percent to eight percent and the weakness of the yen (relative to major import suppliers) contributed to upward pressure on Japanese food prices in 2015. Within Japan's animal protein market, persistently high beef prices and record high pork prices in 2014 (on reduced national output and reduced imports) have accelerated the consumer trend to trade down the value spectrum and consume increasing volumes of relatively low-priced poultry (domestic and imported broiler meat). Even as pork prices have begun to soften, this trend has continued through the first half of 2015.

Beef prices are projected to climb higher through 2016, tempering consumer demand. However, as pork prices continue to trend downward in 2015 (as domestic production recovers and global exportable supplies remain ample), poultry and pork will compete directly for a greater share of consumer spending on proteins. In particular, the improved supply outlook for chilled pork cuts could begin to check potential broiler meat sales growth in the retail market in 2015.

Broiler Production, Imports, Consumption to Set New Records in 2015

Driven by record-breaking levels of both domestic production and of imports, Post projects Japan's 2015 total broiler consumption to reach a new record high at 2.245 million MT, exceeding the previous record set in 2014. Climbing slightly higher, Japanese broiler production (at 1.375 million MT or 665 million broilers) and Japanese broiler imports (projected up slightly to 900,000 MT) should both set new records. Incidentally, 2015 year ending stocks are expected to rise 15 percent to 136,000 MT (see Notes 1, 2 and 3).

Growing Demand for Breast Meat Drives Record Consumption, Production in 2015

In spite of climbing market prices for Japanese domestic fresh/chilled broiler meat, retail demand remains strong as broiler meat remains relatively inexpensive compared to fresh/chilled pork and beef. Japan's 2015 total domestic broiler production is projected to exceed the 2014 record high, reaching a total slaughter of 651 million broilers at an average live weight of 2.95 kg. per broiler.

Household consumption data for the first half of 2015 reveal that consumers spent more money to acquire approximately the same quantity of chicken and pork purchased over the same period in 2014. Higher outlays for pork and poultry, have come at the expense of reduced household spending on beef, as tight global beef supplies and a weaker yen have driven beef prices up practically across the board. 2015 first half data reveal a novel trend of double-digit price increases over 2014 levels, as Japanese fresh/chilled breast cuts remain relatively low-priced compared to prices for the dark meat cuts (thighs and legs) preferred by Japanese consumers. Compared to the same period of 2014, farm gate prices for live birds rose four percent in the first half of 2015 to 227.9 yen per kg, encouraging Japanese integrated producers to place even more broiler chicks on feed in 2015.

Record Broiler Import Forecast Masks Shift Away from Prepared Products

Japan's total broiler imports in 2015 are projected to reach 900,000 MT, surpassing 2014's record high. Raw broiler cut imports are projected up six percent from 2014 to 505,000 MT, supported by solid demand from food service and ready-to-eat food manufacturers. Increased availability of broilers from Thailand coupled with a widely publicized food safety scandal involving imported prepared poultry products, have contributed to expanded production of Japanese domestic prepared poultry products and reduced prepared product imports. A significant decline in imports of prepared products from China has led the trend, driving imports down four percent to 395,000 MT (see Note 1). Year-ending stocks are projected to climb 15 percent to 136,000 MT.

Post projects raw broiler imports from Thailand will reach 87,000 MT in 2015, nearly doubling since 2014, when the country regained access to the Japanese market after resolving lingering avian influenza concerns. Though Brazil remains the dominant supplier to the Japanese market with an imposing 77 percent market share (down seven percentage points from 2014), Thailand's market share is projected to reach 17 percent in 2015 (up 10 percentage points from 2014) as Japanese importers look to diversify their supply sources and shorten delivery times. As imports of raw broiler meat from Brazil are expected to fall only slightly in 2015 (to 390,000 MT), much of the growth in imports from Thailand so far have come at the expense of reduced imports of prepared products (mostly from China). Industry sources expect that imports from Brazil will remain at relatively high levels through the third quarter of 2015, due to earlier contracts, but slacken afterwards in the face of competition from Thai raw broiler cuts and of rising monthly ending stocks. Japan's imports of U.S. broiler cuts (mainly bone-in leg) are expected to fall in 2015 (projected down 12 percent to 23,000 MT), partially as a result of Highly Pathogenic Avian Influenza (HPAI) related import bans on major poultry producing states (see Note 3).

Note 1: Thailand resumed commercial shipments of raw poultry meat to Japan in February 2014 shortly after Japan lifted its HPAI-related import ban on raw poultry meat from Thailand for the first time in ten years. Capitalizing on increased exportable supplies in 2014-2015, Thailand boosted its exports to Japan in the latter part of 2014 through to June 2015. By the end of June 2015, imports of raw broiler cuts from Thailand were 41,211 MT, nearly eclipsing the 2014 total in just six months. Raw imports from Brazil through the first half of 2015 were slightly higher than 2014 at 194,854 MT, catering to fairly solid food service demand.

Note 2: In late July 2014, there was a major food safety incident in China, involving alleged misconduct at a Shanghai poultry processing facility owned by a major U.S. corporation. The plant in question allegedly used expired frozen broiler meat and frozen beef, in the production of chicken nuggets, hamburger patties, and other products that were widely distributed to major fast food chain restaurants across China and, to a limited extent, in Japan. While several Japanese companies, including major retail, convenience, and fast food restaurant chains, had reportedly been sourcing limited volumes of cooked chicken products from the Chinese manufacturer (up to 6,000 MT from July 2013 – July 2014), all have since dropped the company as a supplier. Some Japanese end users of Chinese products began sourcing some of the prepared products (cooked nuggets, fried chicken, etc.) from Thailand, while others have increasingly utilized raw broiler cuts imported from Thailand to prepare some food service and ready-to-eat foods domestically. Through the first half of 2015, imports of processed poultry products from China plunged 27 percent to 77,805 MT, while imports from Thailand shot up 17 percent to 106,986 MT.

Note 3: On August 28, 2015, Japan announced the lifting of HPAI-related import bans from nine U.S. states, including major poultry producer Arkansas. This development should support the recovery of U.S. bone-in leg exports to Japan towards the end of 2015.

2016 Outlook

Post projects Japan's record high 2015 broiler meat consumption to hold steady at around 2.44 million MT in 2016. While upward pressure on poultry prices should remain moderate in 2016 on projected lower feed costs, ample supplies of fresh/chilled pork on retail shelves could challenge further growth in poultry consumption as the two proteins attempt to claim additional market share from beef, which will continue to struggle against tight supplies and high prices.

Higher year-beginning stocks (primarily imported broiler cuts) could further reduce imports from Brazil in 2016, while imports of highly portion controlled raw broiler cuts from Thailand may continue to grow. Industry sources anticipate demand for price competitive Chinese prepared products may recover in 2016, as the impact of 2014's food safety scandal on consumer purchasing begins to dissipate. If the one-year extension of Russian import bans on food and agricultural products from the United States, the European Union, and Oceania (initiated in August 2014) sustains significant Russian demand for Brazilian bone-in legs and leg quarters, Japanese importers could see corresponding upward price pressures on Brazilian export offers of bone-less leg meat in 2016.

Post projects that Japanese poultry production will remain flat in 2016 at 1.37 million MT, while total broiler imports will be slightly lower at 875,000 MT as stocks accumulated in 2015 begin to unwind. In the face of strong competition from domestic production in 2016, Post anticipates raw broiler imports will decline by five percent to 480,000 MT, while imports of prepared products remains level at 395,000 MT. Post expects imports of raw broiler meat will continue to make up a larger share of total poultry imports, as Japan's food service and ready-to-eat businesses expand their use of semi-processed raw broiler meat from Thailand.

2014 Demand and Supply Situation Summary

Significantly higher beef and pork prices, combined with relatively strong consumer demand for low-priced broiler meat across the board (retail, food service and ready-to-eat foods), spurred Japan's 2014 total domestic broiler consumption to a new record high of 2.226 million MT (breaking previous records set in 2012 and 2013). Japanese producers responded to consumer demand and strong market prices by expanding domestic production to a new record level of 1.365 million MT (culling 651 million broilers).

End users responded to strong market signals by increasing total broiler imports, which were up four percent from 2013 to 880,000 MT. In the wake of the Chinese food safety scandal, imports of prepared products fell six percent to 413,000 MT, raw broiler cuts rose crisply to 475,000 MT (up 15 percent), and stocks increased 16 percent to 118,000 MT. Raw broiler meat's share of total imports grew by five percentage points in 2014 (reaching 53 percent market share), reversing the trend in earlier years that had increasingly favored importation of prepared products (largely from China). As Japanese food service and prepared food businesses turned to highly portion controlled raw broiler cuts from recently eligible Thai exporters, the Japanese import ratio of raw to prepared products swung by five points from 48 percent raw and 52 percent prepared in 2013 to 53:47 in 2014.