Key fundamentals are positive for the global poultry outlook, suggesting a good year ahead for the poultry industry, according to a recent Rabobank report. Feed prices are expected to remain low, while competitive protein prices for beef and pork will be relatively high. This provides chicken with a potentially significant price advantage, especially with a weaker macroeconomic outlook. Under these conditions, demand for chicken is usually strong, as consumers tend to trade down to cheaper proteins.
However, whether the industry can actually benefit from these positive fundamentals depends highly on supply rebalancing to new market circumstances and on further developments surrounding avian influenza.
The threat of avian influenza remains a real “wild card,” that has the potential to impact supply, trade, and consumer demand. Well-balanced markets will better protect the industry for a potential negative impact of AI outbreaks, such as trade restrictions, and they provide the industry with more pricing power to achieve better margins. The threat of avian influenza will require further investments in biosecurity, improved industry structures, and business models. Joint approaches between industry and governments are particularly important in this regard.
The extent to which the global poultry industry will benefit from these positive fundamentals very much depends on balancing supply and demand. After a relatively long bullish market situation, many global markets have entered a period of oversupply at the end of 2015 and this needs to be solved in the next months in order to make the industry profitable again.
Following are Rabobank’s predictions in global poultry markets:
- United States: Chicken prices are expected to slide as the industry reduces supplies to rebalance the market. Overall, the 2016 outlook is challenging, with heightened avian influenza concerns in the winter months.
- Brazil: The domestic market continues to be strong but export growth is lower than expected. The general outlook is positive, but supply growth needs to be balanced.
- European Union: Prices are down after a supply expansion in Eastern Europe. The third quarter noted a weak export performance despite the weak euro. The outlook is moderately positive, although concerns exist about AI following recent H5N1 cases in France.
- China: China experienced record low prices in the third quarter due to oversupply. On-going low day-old-chick prices are expected until at least early 2016. The market has been negatively affected by the economic downturn. Although the outlook for the first half of 2016 is challenging, a recovery is possible in the second half of the year as the impact of the breeding stock import ban will affect supply.
- Russia: Russia has experienced an improved performance due to lower feed costs and price support from high beef and pork supply. The sector will be influenced by the prolongation of the export ban and the consolidation process is expected to continue.
- Rest of the world: South Africa is facing a rising oversupply of poultry as the number of imports continues to rise. Thailand is expected to resolve its oversupply situation in the second half of 2016 and, in Indonesia, it is thought that the supply control mechanism will pay off in 2016.
