Highlights

Romanian poultry meat production is set for another year of growth in 2016 stimulated by a positive economic environment. Trade is anticipated to rise moderately. Per capita consumption will remain on a rising trend for poultry meat as consumers show strong preference.

General Information

In 2016 the Romanian poultry meat sector is anticipated to continue growing stimulated by a boost in private consumption. Fiscal measures adopted by the Romanian Government over the past 18 months, namely a reduced Value Added tax (VAT) for food products and increases in the minimum and public wages translated into higher disposable income at the consumer level. The domestic poultry industry remains on a positive trend with continuing investments in production and processing technology, logistics and branding. These features ensure that the poultry sector remains one of the most dynamic in Romania's agriculture and food industry field.

DOMESTIC PRODUCTION AND CONSUMPTION

Poultry meat production is anticipated to grow by 5 percent in 2016, based on the production data available for the first 6 months of this year. Rising demand and competitive production costs, supported by reasonable feeding prices as a result of the generous grains and protein meal supply, represent factors which stimulated poultry farms to continue developing. Imports are expected to follow the same trend, but at a slower rate than 2014. On the other hand, the poultry meat exports are foreseen to stagnate reflecting both rising domestic market opportunities and strong competition in foreign markets.

The productivity of the sector improved for the year in 2015. The average daily weight gain grew from 53.06 grams in 2011 to 56.07 grams, average feed consumption declined from 1.885 kg feed/kg of meat in 2011 to 1.690 kg feed/kg of meat, while mortality percentage dropped from 3.5 percent in 2011 to 2.66 percent. During the past several years no major disease outbreaks hit the sector allowing the industry to progress further. Unlike other components of the livestock sector, poultry has not been included for coupled support from the European Union. However, poultry producers are entitled to receive domestic support for compensating expenses generated by implementation of the strict animal welfare rules on their farms.

The recent retail law implemented in the middle of 2016 is positively viewed by Romanian poultry producers, especially the provisions regarding the terms of payment, which require retailers pay theirsuppliers in a shorter time. In addition, the provision for shelf-taxes elimination is considered to positively affect producers' margins.

According to data released by the Poultry Producers Association, about 50-60 percent of total poultry meat production is produced by ten poultry farms. These are large and medium poultry producers with deliveries ranging from 12,500 MT/year to 65,000 MT/year. These producers are vertically integrated from feeding to hatching, slaughterhouses and processing facilities. Such a level of integration allows them to control the cost of production and marketing, ensuring their competitiveness and capacity to adapt to new market conditions. There are smaller players in the market which are concentrated exclusively on poultry growing, which makes them less profitable and more vulnerable in case of a crisis. Consequently these companies expand in general at a slower rate from one year to another compared to the larger players.

According to the data, the average price in Romania since 2013 fell from 1.74 Euro/kg (U.S. $ 1.91) to 1.51 Euro/kg (U.S. $ 1.66) in 2015 per kg of carcass, about 80 percent of the average price at the EU level.

The largest share of poultry meat produced is sold as fresh/chilled meat on the market, investments in cutting lines and packaging technologies are helping producers to ensure hygiene standards and extend product shelf-life. Large poultry operations market a sizeable volume through the modern retail outlets, both their own brands and private labels, while a few developed independent store chains. It is worth noting the constant focus of the industry to move towards higher-value products, "ready-to-eat" being one category which has developed over the past couple of years in response to consumer preferences. Per capita poultry meat consumption is foreseen to increase to 24.6 kg in 2016, ranking second after pork meat, still below the EU average of 27 kg.

TRADE

In line with expectations, poultry meat imports rose in 2015 by almost 5 percent, showing a moderated increase compared to 2014 when imports rose by 25 percent in the context of oversupply at the EU level generated by the Russian trade restrictions. Imports from EU countries rose in 2015 by almost 6 percent, while imports from non-EU countries dropped by almost 18 percent (Table 3). This trend is foreseen to be maintained in 2016. Frozen meat accounts for about three quarters of the import volume, while chilled/fresh accounts for about 25-28 percent.

In terms of market shares, Hungary is the leading supplier with 23 percent of total broiler imports in 2015 (27,196 MT). Poland (25,715 MT) continued in 2015 to gain an increasing share of the Romanian market, accounting for 22 percent of total broiler imports. The Netherlands continued in 2015 to be an important supplier (18,071 MT), although it keeps losing market share, followed by Germany (15,556 MT) and the United Kingdom (7,991 MT). Trade figures available for the first four months of 2016 indicate the same countries will continue to remain the major suppliers.

After a plunge of 13 percent in 2014 due to difficulties in maintaining markets after Russian trade restrictions were implemented, Romanian poultry meat exports recovered in 2015 (up 12 percent) but remained below the level of 2013. Exports mainly consisted of cuts, almost equally distributed between fresh/chilled and frozen. The major destinations for local poultry meat are the United Kingdom, Bulgaria, the Netherlands, Hungary and Greece.