French poultry sector must review ‘fixed’ feed contracts and consolidate for scale: analyst

By Jane Byrne

- Last updated on GMT

French poultry sector must review ‘fixed’ feed contracts and consolidate for scale: analyst

Related tags Poultry farming European union

French poultry production businesses must invest at the farm level and increase scale via mergers and acquisitions at home and abroad or lose further ground to the competitive German, Dutch and Belgian producers, who, using more efficient models, are taking a large slice of the French poultry market, says an industry expert.

Rabobank analyst Nan-​Dirk Mulder told us: “Feed costs in France are some of the lowest in the EU but broiler production costs are some of the highest. This disparity underscores the lack of efficiency in the French model and shows the serious under-investment in the sector compared to chicken farming in Germany, Belgium, the UK or the Netherlands.”

He was speaking to this publication after French group, LDC, which accounts for some 50% of poultry production in France, announced an alliance with agricultural group, Sofiprotéol.

The deal sees LDC acquiring five poultry production sites in Brittany from the agri-group, in a move it claims will make it more competitive and stem the tide of imports.

LDC chief executive, Denis Lambert, said the alliance would “reconquer”​ the French market and chase “the 40% of poultry that is imported".

Feed contracts said to mitigate risk for French poultry sector

But, according to Mulder, o​ne of the fundamental reasons for the lack of dynamism in the French poultry sector is the fact that producers there have not really been exposed to the massive volatility in feed prices in recent years unlike their Dutch, German, Belgian or UK counterparts.

“The fixed pricing contract system that French poultry farmer co-operatives have negotiated with feed manufactures means the margin risk is all on the feed side. However, this has left poultry producers over the past few years somewhat cushioned against feed price instability and not fully aware of the need to invest for greater efficiencies to reduce their exposure to such risks.

Whereas say broiler producers inthe Netherlands or in Germany have had to face large year-on-year fluctuations in feed costs and subsequently they saw the absolute need to invest in new housing and technologies to streamline production and increase their margins,” ​said the poultry sector analyst.  

Loss of export markets

The French poultry industry, which had been one of the biggest EU exporters of whole chickens to the Middle East region, has also been considerably weakened by the phasing out of the EU export subsidies. The scheme, which ended in July 2013, had supported the price of poultry sent outside the trade bloc.

That development has left large French exporters in a precarious state, with the Doux Group emerging from a period of court administration, and Tilly-Sabco currently in liquidation.

“The loss of major export markets means French poultry production businesses need to find a different strategy. They need to raise the bar in terms of efficiency, invest in feed additives for lower FCR, upgrade facilities and review their feed contract model.

They also should follow international trends by consolidating for greater scale and expand, through acquisition, beyond the French market. The European poultry sector is increasingly about a producer’s regional positioning and not its domestic market performance only,” ​said the Rabobank poultry specialist.

However, despite the structural challenges, the analyst says the fundamentals of the French poultry industry are still strong. “The chicken market is growing at 3% a year and the rate of broiler production is increasing,”​ added Mulder.

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