Henmania: Chicken is set to rule the roost in the global meat market

Henmania: Chicken is set to rule the roost in the global meat market

Sep 14th 2013 |From the print edition

ROASTED, fried or served with noodles, chicken is on its way to becoming the world’s favourite meat. Diners currently chomp through more pork—some 114m tonnes a year compared with 106m tonnes for poultry. But chicken consumption is growing faster—by 2.5% a year compared with 1.5% for pig meat—and is on track to overtake pork before 2020. And much more chicken is traded across borders: some 13.3m tonnes a year compared with 8.6m tonnes of beef and 7.2m tonnes of pork, according to the UN’s Food and Agriculture Organisation. Chicken is on a roll.The growing taste for fowl is a result of increasing prosperity in emerging markets, meaning that people can afford to put more meat on the table. Chicken tops the pecking order as the most affordable. It takes far less feed to produce a kilo of chicken than the equivalent amount of pork or beef. And religious strictures that bar beef and pork from cooking pots around the world do not apply to poultry.

The taste for chicken will boost production to 128m tonnes a year by 2020, according to Rabobank, a Dutch bank. The proportion hitting global markets will grow too, from around 14% to 17% of total output. The main impediments to faster cross-border growth are consumers’ preferences for fresh chicken and government policies to protect domestic agriculture, but rising food prices should stoke the appetite for cheaper, imported meat.

The business of raising chicken is generally concentrated in countries where grain is plentiful. Canny chicken farmers have also focused on places like Brazil where poor infrastructure makes it harder for grain producers to get their goods to market and to fetch global prices. That suppresses feed prices, which make up 50-70% of total costs. Production costs in America and Brazil, the world’s biggest producers, which between them provide two-thirds of chicken exports, are 30% below those in Europe and China, according to Nan-Dirk Mulder of Rabobank.

Trading chicken is far more complicated than merely plucking, freezing and dispatching the birds. Chickens don’t get sold whole; exporters have to optimise the “break-up value” of their fowl. The Western palate much prefers white breast meat. Asian consumers prize the more flavoursome brown meat from the thigh and leg. White meat may fetch four times more than brown in the West but costs much the same in China. Europe, a net exporter of chicken, sends legs and feet to Asia but imports white meat.

Wings, irritatingly limited by evolution to two per bird, are in short supply worldwide and prices are high. McDonald’s is rumoured to have been stockpiling them in preparation for the roll-out, which began this week, of its “Mighty Wings” range in America. But the dynamics of the global market is good news for rich-world consumers. The growth in Asian demand for chicken should mean a glut of white meat and lower prices in years to come.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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