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close this bookExporting High-Value Food Commodities: Success Stories from Developing Countries (WB, 1993, 119 p.)
close this folderAppendix The development and performance of case study commodity systems
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Thailand poultry

Poultry is one of the world's major and fastest growing sources of meat. Over the past two decades, world poultry meat production has more than tripled, while world trade has increased at nearly 9% per year. Two developing countries--Brazil and Thailand, are among the few countries which have developed large poultry processing industries involving significant international trade. We focus on the Thai poultry system as this has proven to be internationally competitive, both on the basis of low cost and of product differentiation. While the Thai industry has increasingly moved in the direction of high value added, prepared products to meet special consumer preferences, the Brazilian trade has continued to be based primarily on exports of whole frozen birds.

For many years, poultry production in Thailand was a part-time, backyard activity of small farmers who consumed their output or sold it to small rural or urban traders. Birds were slaughtered manually and no formal processing or storage activities were undertaken. Per capita poultry consumption remained low, trailing far behind that for beef, pork, and fish.

This pattern changed dramatically during the early-to-mid-1970s. During this period, several feed milling companies integrated forward into poultry production, developed contractual ties with existing producers, and established slaughterhouses and modern processing facilities to produce high quality frozen poultry for export. These firms drew upon imported technology in the areas of genetics, nutrition, and disease control and obtained technical assistance and capital from foreign investors. The Thai government offered investment incentives and research and quality control services, yet otherwise intervened little in the emergent industry.

During the 1970s, Thai poultry production nearly tripled from 64,000 to 188,000 metric tons. Exports grew from zero during the mid-1970s to nearly 25,000 metric tons in 1980, although the bulk of the expanded production went to domestic consumption. Still, the export-oriented component had a major impact on the entire industry by affecting the technologies adopted, the prices for birds and processed products, and the prevailing organizational patterns. As only a few parts of the chicken were exported (e.g. boneless breast and leg, filet, wing, and bone-in-leg), the export-oriented firms aggressively sought to further develop the local market.

Thailand Poultry

Sources: FAO Production Yearbook; UNCTAD (1986), USDA (1990,1992)

Over the past decade, Thai poultry production and exports have boomed, in response to strong demand both domestically and in its main overseas market-Japan. Thailand has become the world's fourth largest poultry exporter and the largest exporter of value-added cuts. It share of world exports of broiler meat was 7.5% in 1991, up from only 3.4% in 1980. Thailand's share of the rapidly increasingly Japanese import market rose from 23% in 1980 to 37% in 1991, and the country has since surpassed the U.S. as the leading supplier to this rapidly expanding market. Thailand's exports are predominantly of value-added products geared to meet particular Japanese preferences. In addition to achieving high product differentiation, the industry has emerged as one of the lowest cost and technically efficient industries in the world. Production costs are estimated to be 26% lower than those in the U.S., while the Thai industry matches or exceeds the performance of most national poultry industries according to feed conversion, bird mortality, and other technical indicators.

The industry's competitive advantage has derived from several factors, including the country's ample and low-cost labor force (which is especially important for the labor-intensive process required to produce deboned meat), the low-costs for slaughterhouse construction, the ample supply of domestically-produced feedgrains and fishmeal, the close proximity (e.g. low transport costs) to the Japanese market compared with most international competitors, the streamlined vertically-integrated and vertically coordinated production/processing systems which have developed, and strong involvement by Japanese companies in the industry, especially in processing and overseas distribution.