Monday, 22 October 2012

Iraq Poultry Production, Supply and Demand

Iraq’s domestic poultry production in 2012 is expected to hold steady at the 2011 level of 150 thousand metric tons (TMT) while the amount of imported poultry is expected to reach 603 TMT, up three percent from 598 TMT in 2011.  Increased production of poultry occurred during the first half of 2012 but subsequent high feed prices and serious disease problems that have not been addressed have curtailed growth. The Iraqi Poultry Producers Association (IPPA) estimates that the average mortality rate on poultry farms is approximately 30 percent and these high mortality rates combined with sharply higher feed costs suggest either weak or negative returns during the remainder of 2012 and through at least the first half of 2013. Potential expansion of domestic poultry production is not anticipated until the fall of 2013 and will only take place under a scenario of lower feed costs and improved feed availability, as well as some degree of industry success in addressing the currently high mortality rate.
Disease problems continue across all areas of Iraq and are particularly severe across central and southern areas. Bio-security and bio-safety protocols are not strictly adhered to by most producers making it difficult to separate disease problems from those arising from poor overall care and management. The IPPA and Iraq’s Ministry of Agriculture officials are well aware of the problem but have been slow to react and formulate effective measures to counter the problem.
Feed Availability:
Domestic availability of poultry feed declined during 2012 as a result of a drop in available domestic supplies of wheat and corn. Corn is harvested and shucked by hand and then sold/delivered to Mesopotamia State Company for Seeds, part of the Iraqi Ministry of Agriculture, where it is shelled. Poor quality of domestic corn is pervasive and results from a lack of shelling grain, poor storage and failure to thoroughly dry corn leading to growth of mold and potential aflatoxin issues. Larger, integrated poultry operations have indicated that past experience with Iraqi corn was problematic and that they no longer use it. Protein meal continues to be a major constraint, as Iraq produces only very limited quantities of oilseed crops and has no facilities for processing the cotton saeed it produces and which could be used for feed production.
Imports of feed for the poultry sector remain constrained by cumbersome import requirements and seasonal import bans while the conflict in Syria has cut the supply chain for both imported bulk feed products and finished feed products such as pellets. Prices worldwide have risen sharply since May 2012 yet the imported feed costs within Iraq remain well above what might be expected, assuming efficient market transactions, since traders/importers deal in relatively small quantities and rarely use bulk shipment. Corn, soybean meal, and feed pellets are generally shipped to Iraq in 50 kilogram bags. The IPPA reported that at end of July prices were $525 per metric ton for corn and $950 per metric ton for 44 percent protein soybean meal, suggesting ample opportunity existed for increased imports and lower feed prices, under a more relaxed regulatory and market structure.
The Ministry of Agriculture’s poultry initiative, announced in the spring of 2010 appears to be inactive. Under the proposal/plan the Ministry of Agriculture would have purchased corn and soybean meal then resold the imported feed products at subsidized prices of approximately 25 percent less than their total procurement and handling cost. A tender for corn was issued during the fall of 2011 but with specifications so restrictive that no offers were received. No follow-up activity is taking place. U.S. corn was excluded due to a ban on imports of genetically modified organisms. The Ministry of Agriculture needs to better understand that lower-cost imported feed products along with better producer practices are necessary in order to generate growth of the domestic poultry industry.
With domestic production flat and imports of poultry products increasing during 2012, per capita consumption is expected to decrease slightly from the 2011 level of 24.6 kilograms to 24.2 kilograms per capita. Continued economic growth across Iraq fueled by oil revenues should lead to continued gains in personal income and maintaining poultry meat consumption. The outlook for continued high consumer prices in the red meat sector adds to a generally favorable outlook for poultry consumption and in the absence of growth in the domestic production import levels will rise. While imported poultry prices may increase during 2013, the relative price advantage that imported poultry holds over domestic poultry and red meat products will remain solidly in place.
Total Iraqi poultry imports are increasing steadily in response to population growth and rising incomes due to increased economic activity and oil revenues. Imported poultry is the most economical meat available to consumers in Iraq, priced at about one third the cost of imported and domestically produced beef and lamb. Total imports for 2012, including transshipments through regional countries, are expected to be 603 TMT up three percent from 598 TMT in 2011.
U.S. poultry exports to Iraq in 2012, including transshipments, are expected to decline moderately to 137 TMT from 160 TMT in 2011, because of difficulties with precertification requirements and increased competition from other suppliers, including Turkey. The outlook for the import of U.S. poultry products remains positive and is expected to rise as the market continues to grow. Precertification, which requires inspection and certification of shipments in the country of origin by a private sector contractor hired by the Iraqi government, continues to be an impediment to U.S. poultry exports to Iraq. It is important to note that the northern Kurdish region did not implement precertification for food products, so poultry enters Iraq from Turkey without this burdensome requirement. Precertification also appears to be distorting normal trading patterns and routes, resulting in increased transshipments to Iraq through regional countries.
Precertification was proposed by the Ministry of Planning/Central Organization for Standards and Quality Control (COSQC), approved by the Council of Ministers in December 2010, and implemented on July 1, 2011. Under this new requirement, COSQC contracted with two private sector companies, SGS and Bureau Veritas, to inspect and certify, in the country of origin prior to shipment, that products meet Iraqi import requirements. Products arriving at Iraqi ports in the lower 15 provinces during 2011 and early 2012 were required to have a certificate of conformity issued by one of these two companies in the country of origin. The KRG has also implemented precertification of imports, but did not include food products. In March of 2012, the contract with SGS in the lower 15 provinces was canceled by COSQC leaving Bureau Veritas as the only provider of precertification services worldwide.
The new pre-import inspection and certification scheme came about in an effort to control imports of substandard and unsafe products. This was a legitimate and serious problem that needed to be addressed. However, precertification has proven to be a major technical barrier to trade for U.S. exporters, including poultry, and ineffective at controlling the quality and safety of imports. With the cancelation of the SGS contract, the ability of the one remaining company, Bureau Vertis, to provide certification services in the entire United States appears limited. Outdated and problematic import standards for food products are also a fundamental problem that further complicates the precertification system.

Produced by:USAID/VANO/IPP

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