Rabobank Global Poultry Quarterly: Promising Outlook for 2018—Although Avian Influenza Concerns Are Rising
The outlook for the global poultry industry in 2018 is promising, with relatively positive fundamentals, according to Rabobank’s Poultry Quarterly Q1 2018 report. But a disciplined supply growth strategy will be needed, especially as uncertainties are rising—such as the possible return of avian influenza (AI) during the northern hemisphere winter and a rising supply of competitive meat proteins like pork and beef.
“The outlook for the global poultry industry for 2018 is promising”, says Nan-Dirk Mulder, Senior Analyst – Animal Protein at Rabobank. “This promising outlook includes ongoing demand growth in most markets, except China, and low(er) feed prices in 1H 2018, if not longer. But a disciplined supply growth strategy will be needed, especially as uncertainties are rising.”
The main concerns for 2018 are a return of AI during the northern hemisphere winter and the increasingly competitive market conditions due to rising red meat supply.
Global prices for chicken have remained strong, especially for whole chicken and breast meat, but dark meat prices have fallen. Competition from red meat will grow next year, amid rising supply and softening prices.
Global poultry trade will again be hit by volatility, driven by AI, exchange rate volatility, and changes in traders’ procurement strategies in response to earlier scandals in trade. New suppliers will continue to enter the market. Given these growing, but uncertain and more competitive market conditions, supply discipline will be important.
China’s industry is struggling, with winter rapidly approaching and many wet markets yet to be closed. This situation could negatively affect prices and global trade. The industry needs to further reduce supply in order to rebalance supply and demand.
The Brazilian industry is recovering from the ‘weak flesh’ meat scandal, and exports have returned to 2016 levels after significant drops in Q2 and Q3. However, the risk of Brazilian imports being substituted by new suppliers remains.
The EU poultry industry is performing relatively well. This is based on a favourable supply/demand balance in the European market (given restricted production growth in the aftermath of AI earlier in 2017), along with constrained growth in north-western Europe due to environmental regulations, which restrict expansion. Eastern Europe—especially Poland—will keep growing fast, becoming a major trade hub.
Currently, the fastest-growing global regions are South-East Asia and Eastern Europe. South (-East) Asia will remain very bullish in the next year, with ongoing growth of more than 5% in most countries like Indonesia, India, the Philippines, and Thailand, driven by strong local demand and Thailand’s clear leadership when it comes to global trade. However, recent expansion of the industry, at 7%, has probably occurred a bit too fast, when taking the current margin pressure into account.
The US poultry industry is expected to keep performing well, driven by ongoing strong local market conditions and improved exports, combined with a predicted record-high US corn and soybean harvest. This will likely push feed prices down.