Global poultry outlook gradually improving: report

The latest poultry report from Dutch banking company Rabobank notes the industry is facing major challenges due to Covid-19-related market disruption, very high and volatile feed prices, avian influenza (AI) in the northern hemisphere, and volatility coming from a bumpy recovery in countries affected by African swine fever (ASF). As countries reopen foodservice, the poultry industry will start to recover, considering that on average 35 per cent of global poultry consumption is via foodservice.

“Key for producers in 1H 2021 will be to have a very disciplined supply growth, a focus on cost reduction via procurement, production efficiency and feed formulation, as well as being prepared for big swings in demand driven by Covid-19-related government decisions,” says Nan-Dirk Mulder, Senior Analyst – Animal Protein at Rabobank.

Some countries who have been disciplined under these challenging conditions have seen significant improving market conditions, for example the U.S., Mexico, Russia and Japan. Others, however, still face oversupply, such as the EU, South Africa, and Thailand. As we expect more control over Covid-19 in 2H (through lockdowns and vaccination), poultry markets are expected to gradually recover, with local producers especially seeing the benefits. Global traders will also gradually benefit when foodservice reopens and stock levels fall.

Global grain and oilseed prices increased further in Q1 2021, driven by La Niña-upended weather in key producing countries and an unprecedented and long-lasting import demand generated from China. This is a big challenge for chicken producers, as feed represents 60 per cent to 70 per cent of the cost of production. Rabobank expects ongoing high prices during 2021, but slightly down from the current Q1 2021 level.

ASF’s impacts on pork production also have an ongoing impact on poultry, regionally and globally. The two countries in Asia most affected by ASF, China and Vietnam, are both in recovery mode, with China expected to increase pork production by eight to 10 per cent this year and Vietnam by eight per cent to 12 per cent. This recovery mode could impact local poultry producers and global trade.

“China’s lower-than-expected pork production in Q1 2021 and low chicken production levels supported a chicken price recovery in Q1, but we think that the ongoing expansion of pork, together with further growth of chicken production, will deflate prices later this year. This will also impact import volumes in China,” explains Mulder.

Regarding AI, Japan, South Korea, Russia, the EU, and the UK have been heavily impacted. This is already leading to relatively short supplies in South Korea, Japan, and Russia, while it also pushes producers in the EU to place fewer birds, damaging local businesses in these countries.

From a market perspective, it has led to some upside pressure on prices. Beside the impact on local supply, AI also disrupts global trade in poultry meat, DOC, and hatching eggs. This is especially the case for restrictions put on key exporters from Europe, like Netherlands, Poland, France, and the UK.

Further down the year, this context might lead to price rallies in several regions if disrupted supply chains with high feed prices cannot adequately follow recovering markets. This is already happening in Russia, South Korea, and the Philippines, where governments have started to intervene to curb price inflation worries. It might also occur in other markets and is certainly a concern in developing countries.

Global trade is still highly competitive, with trade levels still down four per cent and low prices. This market will recover slowly due to its high dependence on foodservice and the still high stock levels in import markets. We will see bigger swings in this market, with upside benefits from recovering foodservice and potential short-term market openings due to government interventions, while imports in ASF-recovering China and Vietnam will fall.