Highlights

Japan's 2016 broiler meat production, consumption and importation are on pace to break record highs established in 2015. Increased domestic production and imports of raw broiler meat in the first half have outpaced modest consumption growth, driving significant accumulation of broiler meat stocks. With ample broiler meat supply available and stiff competition from equally ample pork supplies, Post projects Japan's broiler imports to taper in the second half of 2016. Domestic producers have shown no indications of moderating current high levels of production, as lower feed costs are keeping domestic producers' profit margins positive in 2016, despite mounting downward pressure on prices. Post expects Japanese consumption and production to remain high in 2017; import levels should moderate as industry unwinds sizeable year-beginning broiler meat stocks. Keywords: Japan, Poultry, Broiler.

Executive Summary

2016 Production, Imports, Consumption Break Previous Year's Record Highs

Japan's broiler market is on pace to set new record highs for domestic broiler meat production (projected up two percent to 1.44 million MT), total consumption (up two percent to 2.635 million MT), and imports (up one percent to 945,000 MT) in 2016, breaking record high levels set in 2015. Japan's broiler meat supply and consumption have grown briskly through the first half of 2016. However, Post anticipates that high 2016 year-ending stock levels (projected up 15 percent to 157,000 MT) and ample supplies of competing proteins in the market could weigh down 2017 production, import, and consumption numbers as the market begins to unwind stocks and as broiler meat competes fiercely for consumer protein spending.

Commodities

Poultry, Meat, Broiler

Poultry, Meat, Broiler

2015

2016

2017

Market Begin Year

Jan 2015

Jan 2016

Jan 2017

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Inventory (Reference)

137

137

137

134

0

133

Slaughter (Reference)

665

667

665

680

0

675

Beginning Stocks

118

118

137

137

0

157

Production

1390

1413

1395

1440

0

1430

Total Imports

936

935

910

945

0

905

Total Supply

2444

2466

2442

2522

0

2492

Total Exports

9

12

9

12

0

12

Human Consumption

2298

2317

2298

2353

0

2343

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

2298

2317

2298

2353

0

2343

Total Use

2307

2329

2307

2365

0

2355

Ending Stocks

137

137

135

157

0

137

Total Distribution

2444

2466

2442

2522

0

2492

Preface

Broilers comprise over 90 percent of Japan's domestic poultry meat production, with spent layer 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 broiler 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.

A Note on General Consumption Patterns in Japan: The Ministry of Agriculture, Forestry, and Fisheries (MAFF) estimates that households (as measured by retail consumption data) consume approximately 40 percent of total broiler meat in Japan. Food service, ready-to-eat food businesses, and other institutional end-users (including catering, central kitchens, etc.) consume over 50 percent, with the remaining volumes utilized for processed products. While Japanese domestic chilled raw broiler meat dominates the retail market, imported raw broiler meat and cooked prepared products are extensively used in food service, ready-to-eat food businesses, and other institutional users.

The quantities discussed in this text are on a product weight basis. Conversion rates are not used for import numbers, which are reported as customs cleared weight.

Broiler

2016 Market Situation Summary and Update

High Demand, Lower Feed Costs Push Domestic Production to New Record High Japan's Agriculture & Livestock Industry Corporation (ALIC) estimates that domestic poultry production over the first half of 2016 expanded an additional three percent over the same period in 2015 to 796,001 MT (inclusive of a small volume of spent layer hen meat, but over 90 percent of the volume reported is broiler meat). Higher domestic production levels and higher import volumes suppressed market prices for domestic broiler meat, driving the farm gate price of live broilers modestly lower over the first half of 2016 to 2,233 Yen/10 kg (down two percent from 2015). However, domestic producers have shown no signs of reducing production as lower feed costs over the same period have sustained producer profit margins. According to MAFF data, the average price of formula mixed feed for broilers over the first half of 2016 fell eight percent to 70,773 Yen/MT, on ample global grain supplies (especially U.S. corn) and the Yen's relatively stronger valuation against the Dollar.

Taking into account ALIC's third quarter forecast of domestic production (up three percent) and assuming a sustained moderate increase in production over the fourth quarter, Post projects Japan's total domestic broiler production to reach another record high in 2016, growing two percent to 1.44 million MT.

Solid Consumer Demand Drives Total Consumption to New Record High

After setting a new record high for broiler meat consumption in 2015, Japanese consumption expanded even further over the first the first half of 2016. As increased supplies placed downward pressure on prices for domestic chilled broiler cuts across the board, household consumption over the first six months of 2016 grew by four percent, while household expenditures grew by only one percent. Precipitous declines in wholesale prices for domestic chilled breast meat (down 21 percent to 266 Yen/Kg), compared to negligible declines for domestic chilled boneless leg meat (down 1 percent to 664 Yen/Kg) over the same period, point towards Japanese consumers continued strong preference for leg meat cuts.

However, relatively abundant supplies of pork (both domestic and imported) at lower prices (again, both domestic and imported) should continue to fuel intense protein sales competition throughout 2016. Competition notwithstanding, Post projects Japanese total 2016 broiler meat consumption to rise two percent to 2.353 million MT, on ample supplies and lower price offers.

Growing Stocks to Curb Raw Broiler Meat Imports in Fourth Quarter

Through the first six months of 2016, Japan's raw broiler meat imports rose 12 percent over 2015 levels to 279,071 MT, with Brazil claiming 80 percent of the market (up 14 percent to 222,095 MT) followed by Thailand at 9 percent (up 9 percent to 44,785 MT). The relative strength of the Yen against the Brazilian Real helped maintain downward pressure on Brazil's price offerings, driving Japanese importers to continue to import despite a growing surplus. The average price of imported Brazilian cuts (mostly frozen boneless leg) fell 25 percent to $2,583 dollars/MT for the first half of 2016. Over the same period, Japan's imports of cooked prepared broiler meat were up five percent to 194,188 MT. According to trade sources, Japanese demand for raw broiler meat is relatively decoupled from demand for cooked prepared broiler products, which face stronger competition from ready-to-eat pork dishes sold at retail and convenience stores.

Anticipating that continued imports would result in the accumulation of even more sizeable stocks, importers reportedly began curbing orders from Brazil as early as June (orders from Brazil generally arrive in Japan two months later). The latest ALIC forecast for raw broiler meat imports in the third quarter (July – September) of 2016 envisions a substantial drop, down eight percent, driven by substantially lower volumes from Brazil in September (down nearly 30 percent). Raw broiler imports from Brazil are projected to remain lower in the fourth quarter on rising Brazilian price offers. Trade sources indicate that imports of raw broiler meat from Thailand in the second half of 2016 are expected to be moderately higher than first half import levels, despite relatively high price offers. The anticipated increase in imports from Thailand is not expected to offset overall declines anticipated over the second half of 2016.

Post projects Japanese 2016 total broiler imports to reach another record high at 945,000 MT, slightly higher than the 2015 record. Raw broiler meat imports are projected up two percent to 540,000 MT, with Brazil-origin product up three percent to 420,000 MT (78 percent import market share) and Thailand-origin product also up three percent to 95,000 MT (18 percent share). Imports of cooked prepared broiler products are projected to remain nearly unchanged from 2015 at 450,000 MT, with Thailand-origin products up slightly to 235,000 MT (58 percent import market share) and China-origin products modestly lower at 165,000 MT (41 percent share).

Stocks Continue to Climb in Spite of Abundant Supply

Despite unprecedented consumption levels, broiler meat stock levels have continued to rise as domestic broiler production expanded and raw broiler meat imports, especially from Brazil, grew substantially over the same period. Climbing above already high year-beginning stock levels of 137,396 MT, monthly ending stocks increased to 167,880 MT in June (up 36 percent over June 2015 monthly ending stock levels), with imported stocks at 141,448 MT (84 percent of total) and the remainder in domestic stocks at 26,432 MT. The considerable accumulation of stocks over the last twelve months is largely attributed to the pitched import volumes of Brazil-origin raw broiler meat through the first six months of 2016. Post projects substantially higher 2016 year-ending stocks at 157,000 MT, up 15 percent from the year beginning.

2017 Outlook

Japanese Consumption, Production Remain Strong; High Stocks Dampen Import Demand

Post projects that 2017 total broiler meat consumption will remain high, but marginally lower than 2016 at 2.343 million MT. Consumption is expected to be supported by solid sustained consumer demand and continued competition for consumer spending on proteins. As the market continues to draw down considerable year-beginning stocks (mostly from Brazil) through the first half of 2017, and possibly longer, Post projects total 2017 broiler meat imports to decline from the 2016 record highs, falling four percent to approximately 905,000 MT.

Post projects that imports of raw broiler meat will lead the downward trend, contracting seven percent to 500,000 MT in response to relatively flat demand from the food service sector. However Post anticipates imports of cooked prepared broiler meat products to remain unchanged in 2017 at 405,000 MT, based on continued solid demand from ready-to-eat and institutional end-users. Within the cooked prepared product segment, trade sources anticipate that China-origin products will begin to regain market share in 2017 as Japanese end-users put to rest food safety concerns associated with a 2014 scandal involving cooked prepared broiler products imported from China.

Japanese domestic broiler production is projected marginally lower at around 1.43 million MT as domestic producers respond to more than ample supplies of broiler meat. These supplies, coupled with chilled pork (for retail consumption) will lead to continued competition in the protein segment, placing further downward pressure on prices. As a result of import moderation and continued high levels of consumption, Post projects 2017 year-ending stocks to shrink by 13 percent to 137,000 MT.

Japanese Imports of Broiler Meat/CIF Price YTD

Partner Country

Calendar Year

Year To Date

2013

Share

2014

Share

2015

Share

Change %( 2015|2014)

06|2015

06|2016

Change %

World

414,243

100%

475,225

100%

529,458

100%

11%

249,12

279,081

12%

Brazil

387,202

93%

399,294

84%

408,923

77%

2%

194,854

222,095

14%

Thailand

0

0%

44,617

9%

92,347

17%

107%

41,211

44,785

9%

States

22,46

5%

25,874

5%

22,702

4%

-12%

10,542

9,401

-11%

Philippines

3,618

1%

4,599

1%

2,353

0%

-49%

1,143

596

-48%

Others

963

0%

841

0%

3,133

1%

273%

1,37

2,204

61%

Calendar Year

Year To date

Partner Country

2013

2014

2015

% Change

06\2015

06\2016

Change %

World

2,712

2,8

2,473

-12%

2,564

1,986

-23%

Philippines

4,556

3,791

3,76

-1%

3,907

3,752

-4%

Thailand

0

3,289

2,878

-12%

2,935

2,585

-12%

Brazil

2,722

2,769

2,403

-13%

2,508

1,871

-25%

United States

2,207

2,243

1,95

-13%

2,008

1,68

-16%