This article is taken from our IEG Policy platform dated 01/05/20.

In a letter sent to the EU's Directorate General for Agriculture (DG AGRI), EU farmers' and cooperatives' association Copa-Cogeca warns that the closure of hotels, restaurants and catering services is already causing problems for the industry.

Without this channel, some high-quality segments have been strongly affected: duck, pigeon, quail, rabbit, guinea fowl and goose.

Even though consumers are still buying chicken and turkey meat in retail outlets, these markets have also been impacted.

As previously reported by IHS Markit, broiler prices have fallen sharply in recent weeks - most notably in Poland, the EU's largest poultry producer.

Signed by Copa and Cogeca secretary general Pekka Pesonen, the letter says retail sales are not sufficient to offset the loss of the HORECA channel.

"This situation will cause an oversupply crisis from the moment restaurants, hotels and catering are open again, as consumers will not go to eat out of home twice as much as they did before the crisis. This will put tremendous pressure on price" - Charles Bourns, Copa and Cogeca

Markets for egg products have also been hit by the closure of out-of-home food services. At the same time, demand has risen for shell eggs sold in retail, leading to some shortages.

The sector has also signalled problems with transport for hatching eggs and day-old chicks, and limited availability of some types of feed, such as organic soy.

With large volumes of frozen chicken still being imported from third countries, Copa and Cogeca say poultrymeat is piling up in freezers across the EU.

"This situation will cause an oversupply crisis from the moment restaurants, hotels and catering are open again, as consumers will not go to eat out of home twice as much as they did before the crisis. This will put tremendous pressure on price," warns Charles Bourns, chairman of Copa and Cogeca's poultrymeat and eggs working party.

The letter calls on the Commission to manage tariff rate quotas (TRQs) in a way that avoids an 'oversupply crisis'. For eggs, it suggests trade flows could be constrained by ensuring that third countries strictly comply with the aim of existing trade agreements.

The EU is already in the process of opening up private storage aid for beef and dairy and Pesonen wants the Commission to consider doing the same for poultry. He also calls for specific measures to help maintain parent and grandparent stocks to avoid disruptions within the sector.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.