Poultry Demand and Production Displacing Beef in Europe

Frozen Whole Chicken

Italy

Published Oct 20, 2023

Chicken production and consumption in the EU are expected to grow annually in 2023 and 2024, contrasting with both measures for beef. One of the main reasons is that a shrunken income, in real terms, of the average European, has led to a substitution effect benefitting the cheaper protein, chicken.

According to the latest United States Department of Agriculture (USDA) Poultry and Products Annual Report for the European Union (EU), chicken meat production in the EU is expected to grow 1.4% year-on-year (YoY) this 2023 and 0.6% YoY in 2024. Domestic production will be driven by strong demand growth, expected to be 1.8% YoY in 2023 and 0.8% in 2024.

In contrast, the USDA’s Livestock and Products Annual Report for the European Union, released a couple of weeks earlier than the Poultry report and reported by Tridge in this previous Opinion, stated that beef production is expected to decline by 3.3% YoY in 2023 and by 0.9% YoY in 2024. Production is projected to decline for the seventh consecutive year in 2024.

Lower production is expected to result in lower consumption as well, expected by the USDA to fall by 2.7% YoY and by 0.6% in 2024.

In the context of generalized inflation, European consumers are shifting to cheaper protein substitutes.

Compared to pre-pandemic levels, overall high prices seem to be putting the most pressure on domestic beef demand. Stronger prices are coming from the supply side, which is facing a “structural unprofitability” and ongoing regulatory requisites that are driving costs up.

Source: EU Commission, Tridge

However, chicken prices are also trading considerably higher than their five-year average. In fact, in percentage terms, the difference between current chicken prices and their five-year average levels is higher than the same comparison with beef prices (33% vs 22%). Nonetheless, in comparison with beef, stronger demand is one of the drivers behind higher chicken prices.

Why one product is doing better than the other is that the difference between the two proteins’ prices remains considerable. As measured by the European Commission (EC), current chicken prices stand at EUR 2.68 per kilogram (kg), compared to beef’s EUR 4.85 kg, representing a difference of 80%.

This is especially true in the context of generalized high prices. Poultry and beef are not the only things that have become more expensive in Europe over the past year. According to Eurostat data, September’s harmonized index of consumer prices (HICP) was 4.9% above last year’s levels and 17% above its five-year average for the month.

According to Euronews and OECD Data, wages haven’t increased as much as prices, resulting in less income in real terms for the average European. In a situation like that, the consumers’ preference toward poultry in lieu of beef is growing.

Source: Eurostat, Tridge

Some implications for trade. The USDA chicken report mentions that the EU's trade surplus is expected to decline this year and the next due to demand growing faster than consumption, fostering the need for further imports. The report mentions that the hotel, restaurant, and institutional (HRI) sector, in particular, is increasing its consumption and increasing the imports of less expensive chicken parts from countries such as Brazil, Thailand, and Ukraine.

For exports, the report mentions that they are expected to remain constrained due to remaining bans due to outbreaks of Highly Pathogenic Avian Influenza (HPAI) but also because European chicken export prices are higher than other producers, such as Brazil.

For 2023, beef exports and imports are expected to decline as both domestic production and consumption are falling. For 2024, the ongoing decline in production will be sharper than the drop in consumption, thus leaving expected imports at the same levels as 2023.

Moving forward. The regulatory environment is expected to keep both beef and poultry prices high. In the case of chicken, strong demand will continue to boost prices. In the case of beef, diminishing domestic production will continue to keep prices relatively high for some time. While overall inflation is expected to continue subsiding – the graph above suggests there is ample downside room –the high levels seen in 2022 seem to have left a substantial change in the market dynamics of both products.