Current Scenario and Growth Prospects for Meat and Raising Indias Share in Global Markets.

Presentation at the Agriculture Summit 2005 at Vigyan Bhavan, New Delhi, 9th & 10th April 2005. by

Irfan Allana
Chairman Allanasons Limited President All India Meat & Livestock Exporters Association (AIMLEA)

In the Summit proceedings so far we have heard many distinguished speakers cover statistics of world trade, world trade in agro products, Indias share in world trade and Indias share in agro products trade. In view of this, I am sure, you will permit me to straightaway cover the assigned subject, which I propose under following heads: Meat Export Trend World bovine meat scenario Livestock Health Existing markets New markets Governments crucial role Raw material Allana Groups Corporate philosophy Conclusion Advantage India

Meat Export Trend: Indias agro export products trend over the last 10 years and the share of meat products within this is: Figures in Rs. crores Agro products export (APEDA) 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 7915 7723 7271 9682 7365 9213 10169 13828 14184 Meat Export as % of agro products 8 9 11 8 11 16 12 10 12 in slide include both, figures & graph

614 690 792 770 797 1453 1177 1345 1647

source: APEDA World bovine meat scenario: Opportunity for India to grow its international Buffalo meat trade very rapidly is indeed encouraging. Historically, there have been 4 major bovine meat producing clusters: North America (USA and Canada) South America (including Brazil, Argentina and Uruguay) Oceanic countries (Australia and New Zealand) Europe (British Isles and continental Europe). FAOs estimate of world bovine meat production in 2003 is 62 million t Carcass Weight Equivalent (cwe). World statistics of bovine meat is always denoted as Carcass Weight Equivalent. Carcass Weight Equivalent is roughly 1.66 times boneless meat weight, the form in which India exports. The four bovine meat producing clusters in 2003 produced 35 million t. Due to the Mad Cow Disease or Bovine Spongiform Encephalopathy (BSE) crisis of the 90s, Europe as a major force in bovine meat export has declined substantially. Further as a result of EUs decision to reduce agro subsidy gradually and eliminate it over the next 5-10 years, bovine meat prices in Europe have already risen and with a strengthening Euro, are just not viable for exports. Infact with declining production in Europe, Europe for the first time in 2003 became a net importer of bovine meat. The total production of EU in 2003 was 7.3 million t (with net imports of 73,000 t). Net exports in 1993 was 832,000 t. It is expected that in next 5 years the biggest new market for bovine meat will be Europe with expected annual imports towards the end of this decade of over a million t.
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North America with one incidence each of BSE in USA and Canada in 2003 and a further 2 in Canada later lost most export markets, importantly Japan, but after political intervention at the highest level, conditional exports have resumed recently. It is not expected that North America will come out of the crisis, with more incidences of dormant BSE likely to surface and investments in the sector not increasing. However USA and Canada continue to be very large bovine meat consumers, majority of which is produced domestically. The total production and consumption of USA and Canada in 2003 is 13.3 million and 13.5 million t respectively. That leaves two of the original four supply clusters viz. South America and Oceanic countries. Both have abundant grasslands and its a major boon to their bovine meat industry. Bovine meat production in South America, particularly Brazil has expanded substantially to fill the world bovine meat supply gap. The total production in South America in 2003 is 12.7 million t (in 1993, 9.7 t) out of which Brazil accounted for 7.2 million t which included 1.2 million t export. But there are serious apprehensions that Brazilian bovine meat supply will not be able to keep pace with export demand, under their current bovine meat production structure. Further, due to their improving economies, domestic demand in the South American countries is growing even more rapidly, leaving exportable volumes lower, whilst firming up prices. Similarly, though to a lesser extent, the Oceanic countries (total production in 2003 1.8 million t v/s. 1.6 million t in 1993). Draughts in recent years affected production in Australia but is likely to rise in next few years. Interestingly, the following table shows per capita consumption is very high in countries where production is high. Countries in the Middle East, West Asia, North Africa and South East Asia have a comparatively low per capita consumption but expected to grow substantially in the next few years resulting from economic growth and changing lifestyles and eating habits. This is good for Indias future exports since are our major markets.

India South East Asia China Middle East & North Africa CIS Contries European Union Canada Brazil Australia, New Zealand America Argentina 0 10 20 30 40 50 60 70

2003 per capita consumption ( kg cwe )

Central America and the Caribbean, Russia and CIS, Africa, Middle East, and East Asia constitute the chief bovine meat deficit regions. Future aggregate increases in global bovine meat demand is expected primarily from South East Asia, Russia and CIS countries, Middle East, North and West Africa and EU. Livestock Health: Livestock health status plays a major role in world meat trade. The livestock health situation in India is definitely improving. India has always been free from the dreaded Mad Cow Disease (BSE) and has been free from Rinderpest since 1995. There has not been a single incidence of Contagious Bovine Pleuro Pneumonia (CBPP) in India during the previous 12 years. Foot and Mouth Disease remains the only issue of concern, though better controlled. However, due to newer developments in vaccination and diagnostics, importing countries are adopting at least a Lets evaluate the risk policy. AIMLEA is playing a leading role in this important change in world thinking, through various submissions and data, including through the Office International Des Epizooties (OIE) (WHO equivalent for all Terrestrial Animals) Importantly, a major programme has been initiated by the Central Government since August 2003 through the FMD-Control Programme (FMD-CP) covering 54 districts across the country. With the Indian Veterinary fraternitys successful accomplishment of eradication of Rinderpest, a more difficult and dreaded disease, it will not be wishful thinking to believe given the right resources, substantial and relevant areas in India could become FMD free, duly recognized by the OIE, in the next 5-6 years.

Uttar Pradesh and Maharashtra, the prominent States where Buffalo meat is processed for export, have covered most of the balance districts in their States under Assistance to States for Control of Animal Diseases (ASCAD) where the Centres contribution is 75%. Already Uttar Pradesh and Maharashtra have not reported FMD for several consecutive months, which is excellent progress. Some specific additional districts need to be covered both under FMD-CP and in 2 states (Andhra Pradhesh and West Bengal) under ASCAD. The involvement of AIMLEA and FMD specialists from the private sector can help fine-tune the implementation vis a vis industrys requirements. The vaccine quality also needs to be assessed to confirm efficacy over a prolonged period in the Indian environment. Existing markets: The good growth of the Indian Buffalo meat export industry from 1,67,291 MTS (FOB value Rs.797 crores) in 1999-2000 to 3,43,817 MTS (FOB value Rs.1647 crores) in 2003-2004 has largely been achieved through nurturing the traditional markets / countries with good quality, competitively priced, frozen Buffalo meat. The traditional countries include, Malaysia, Philippines, Mauritius, UAE and other GCC countries and Jordan. In last few years, there have been increasing sales to countries in Africa (including Gabon and Angola), some CIS countries and intermittent supplies to Iran and Egypt. In the last one year, newer markets which have emerged and are growing include Afghanistan, Iraq (through Jordan and Kuwait) and most importantly Saudi Arabia. The industry recognizes the lead role of the Ministry of Commerce, WANA Division, in pursuing opening of the Saudi Arabian market for both, Sheep / Goat meat and Buffalo meat. I may mention at this stage that I have not spent more time in covering the export performance and potential of the sheep / goat meat export, because the volumes are inherently small and approx. 5% of the Buffalo meat export, as also we do not have a competitive advantage. Export is thus restricted to countries primarily in the Middle East, with large ethnic Indian population who prefer it. The projected growth in sales in existing markets based on the past growth trend and harnessing the potential of the recently opened markets is reflected in the following table. Existing Markets growth projection 2005-06 2006-07 2007-08 2008-09 2009-2010 MTS Rs. in MTS Rs. MTS Rs. MTS Rs. MTS Rs. crores in in in in crores crores crores crores 400,000 1840 450,000 2115 500,000 2400 550,000 2700 600,000 3000 It may be noted that, however, number of issues need to be addressed to fructify and ensure the above growth for the current markets and will be reviewed later in my presentation.
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New Markets : Some of the countries which are major importers of bovine livestock / meat and could be targeted for supply of frozen Buffalo meat from India are shown, alongwith our best estimates of their equivalent bovine meat imports. Some of them like Egypt and Iran have previously intermittently sourced Buffalo meat from India. Country Egypt Iran Algeria Syria Indonesia Thailand Philippines (retail segment) Russia Ukraine Kazakhastan Krygystan Tajkistan Current imports of potential markets 100,000 30,000 50,000 30,000 50,000 30,000 80,000 100,000 50,000 25,000 25,000 25,000 ---------595,000

A position paper and suggested action plan with regard to each of these countries has been submitted to the concerned Ministries in Delhi. It will be difficult to cover even a few in the limited time we have today but if there is interest, I could elaborate on this during the discussion which will follow. They are in the same geographical area we operate in today. The strategy, in general to open each market (country) should be a closely coordinated effort between APEDA, the Indian Mission in the respective countries, the Ministries of Commerce and External Affairs and AIMLEA, duly supported by the Central and State Departments of Animal Husbandry, for best and speedy results. If final official interventions, where required, could be elevated to the Secretary level, if not Ministerial level, it would be definitely helpful. It may not be out of context to mention agri trade and livestock / meat trade internationally very often has attracted the attention and intervention of Prime Ministers and Presidents. Based on the Industrys experience of quickly gaining substantial share of new markets in the past, we project the total market for Indian Buffalo meat to be as follows in the next five years.

Projected overall market growth 2005-06 2006-07 2007-08 2008-09 2009-2010 MTS Rs. MTS Rs. MTS Rs. MTS Rs. MTS Rs. in in in in in crores crores crores crores crores Existing 400,000 450,000 500,000 550,000 600,000 markets New markets 25,000 50,000 100,000 150,000 200,000 Total 425,000 1950 500,000 2350 600,000 2900 700,000 3400 800,000 4000 Governments crucial role: In India, the growth of the Buffalo meat export industry (since pioneered by Allanasons Ltd in 1969) has been largely undertaken by the exporters and AIMLEA. However, the support of APEDA and the Central and State Animal Husbandry Departments must be singularly recognized. Recently, Government support has been forthcoming. Positive Government support / intervention, is the industrys expectation, particularly since the meat export industry touches rural development at the very basic level of the poor, marginal, landless farmers whose primary source of livelihood and existence comes from small livestock holdings. This is in line with and supports the progressive, pro-farmer, rural development oriented policies of the Government of India. One of the most important virtues of Indian Buffalao meat, we must emphasise, is its competitive price. Its a real value for money product and is also its Unique Selling Proposition (USP). For continued success, competitive price must be maintained. A number of issues from time to time affect the economics of the meat export industry detrimentally and are immediately taken up with the Authorities concerned. Issues which persist and currently affect the industry, many of which were projected at the first meeting of the Monitoring Committee on Agriculture held on 27th December 2004, are listed below. Inclusion of meat as an eligible item in the Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme) Restoration of APEDA Financial Assistance for upgradation of export oriented abattoirs / processing plants as was applicable during 1997-2002 Inclusion of Buffalo meat under APEDAs Transport Assistance Scheme for new markets in Africa / CIS where freight cost from India for reefer containers is much higher than from competing countries Restoration of DEPB rates for frozen Buffalo meat Exemption from Service Tax on transportation of meat products processed for exports. This is presently applicable only for fruits, vegetables, eggs or milk even for domestic consumption Ministry of Food Processing Industrys grants as per their published Schemes (currently being denied)

Most of these points pertain to steps which would help Indian Buffalo meat retain its competitive price. It will be seen that the meat export industry does not desire any special or out of the way benefits / subsidies. What it seeks is legitimate application (and non-denial) of existing schemes / policies to the meat export sector, wherever it is logical for eg. In announcing the Vishesh Krishi Upaj Yojana in 2004, the Honble Minister of Commerce and Industry mentioned Since Agriculture has the potential to bring prosperity to millions of our rural citizens, and also the largest potential for enhancing employment in some of the poorest regions of our country, we have prepared a special package for it. Unfortunately, the coverage is restricted to flower, fruit and vegetable products, not covering the livestock sector which is the primary source of livelihood and existence to the poorest of the poor, marginal landless farmers, is difficult to understand. The meat export industry paid approx. Rs.8 crores cess to APEDA in 20032004 and none of the Schemes under APEDA benefited the meat industry whilst all other products under APEDA was cross subsidized by the cess. I will not take up any further time on this subject. Raw material: India has 52% (93 million) of the worlds largest Buffalo population. Even as per the latest census of 2003 there was a growth of 7.5% of Buffalo livestock during the previous 5 years, which is a happy situation. Since the growth of Buffalo meat for domestic consumption is low (less than 2%), the potential for export increases substantially. As mentioned, one of the biggest virtues of Indian Buffalo meat is its competitive pricing; since the meat industry in India is a by-product of the dairy industry wherein livestock, which have completed its useful contribution are used for meat, the cost is low and hence possible to be competitive. Male Buffalo usefulness primarily for draught power in agriculture is by and large reducing, so is the male Buffalo population. Male calf therefore is unfortunately not cared for and resultantly does not survive. A major potential exists for male calf rearing for meat purposes. A practical and uniform policy of male calf rearing needs to be enacted and implemented in the 5 states with maximum potential of Buffalo meat exports. The issue of extensive and intensive male calf rearing vis a vis economics and practicality, including availability and supply of adequate quantity fodder at a defined price needs to be addressed. It is expected that over a period a new, niche market, with a premium price realization for Buffalo calf meat, would emerge and in that case even intensive male calf rearing could be self sustaining.

Allana Groups Corporate philosophy I have been asked to highlight the strategies adopted by our organization to reach the current level of success. Without taking much of your time, with pride and humility, I present for your understanding the key factors, which I believer are responsible: Trusted enterprise since 1865 Continued and concerted efforts to build on this trust Customer focus timely deliveries, timely feedback People, Systems and Quality focus and recognize interdependence Focus on specialization food products State of the art infrastructure, large capacities Careful management of growth Integrity with all stakeholders, including customers, suppliers, service providers, employees and Government. Conclusion: The Buffalo meat export industry has grown well. The potential for rapid growth is high, particularly if a specific time bound plan of action between the various wings of the Government and the meat export industry is drawn up. However, livestock health issues need to be further addressed. Quality and more importantly traceability issues, will need to be addressed carefully in the emerging scenario, even for continued supplies to the traditional markets, leave alone meet stricter requirements of the newer markets; if not, not only will it be difficult to fructify the increased potential but even the current export levels would be in jeopardy. It is possible that in the next five years, the meat exports could move up the value chain in a significant manner. Thrust on value added, processed meat products Premium priced Buffalo calf meat for niche markets With improved livestock health, access to upper end markets like the EU could be possible It is useful to mention that the meat export industry not only processes meat for export but provides a range of raw materials like hides, offals (for crucial pharmaceutical and pet food application) and finally renders all inedible meat tissues and bones to give important by products such as gel bones (for gelatin production) and meat & bone meal and technical fat used in poultry feed. I leave you with a display summarizing some points under Advantage India. I thank you for your patience and look forward to our interaction.

Advantage India Excellent Veterinary Infrastructure Vet Hospitals/Polyclinics Vet Dispensaries Vet aid centres Veterinarians Para vets Exclusive Veterinary Universities Veterinary colleges 1,715 14,473 23,682 50,000 45,000 4 65

One National and four regional disease diagnostic labs working as referral labs. Large livestock population BSE and Scrapie never reported in India Availability of modern and integrated meat processing facilities Livestock reared naturally free from growth promoters and harmones Lean meat and genuine HALAL Competitively priced India situated in good proximity to ASEAN and Middle eastern countries

Buffalo milk has higher solids and fat (SNF) and hence fetches a higher return to the farmer for a given input of fodder / feed. Infact it is being increasingly realised that Buffalo livestock is virtually black gold, using discarded / low value resources (like agricultural crop residues) and turning it into good quantity and quality milk output.

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Major bovine meat producing areas Europe Production and export declined substantially due to : BSE or Mad Cow Disease Rising prices due to reducing agro subsidies Net importer in 2003 for the first time Biggest new market in the next 5 years. North America Lost most export markets, including Japan due to BSE Will not overcome crisis due to o Surfacing of dormant BSE incidences o Investments in bovine meat sector not increasing South America Production expanded substantially to fill world supply gap esp. Brazil Will not keep pace with future demand as per current structure Domestic demand growing rapidly, hence o Lower exportable volumes o Higher prices Australia and New Zealand Production expanded substantially to fill supply gap to a lesser degree than South America

Future increase in demand: East Asia production constrained due to limited land availability Russia consumption will outstrip production.

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