Drought, debt and politics drive economics and poultry according to the theme of the Milton L. Dendy keynote address at the 2013 International Poultry Science Forum.
Dr. Terry Barr, senior director of industry research, Knowledge Exchange Division, CoBank, examined the general economic outlook over the next couple of years, and how the difficulties that lie ahead will impact on the poultry industry.
In relation to commodity prices, he started by asking: “What is the new normal?” He noted that, up until 2002, there had been relative stability, but that this had been followed by ramping up in prices reflecting global growth. Since 2008, there has been economic turmoil, sovereign debt and crop shortfalls, and so there has been no opportunity to see how things will settle.
The last five years have been characterized by recession, rising fiscal deficits, massive liquidity infusions and low-interest rates, rapid growth in emerging markets and their middle classes, rising energy prices, a rapid growth in biofuels, multi-year crop shortfalls and low grain stocks.
So what of the next five years? The sovereign debt crisis in Europe is likely to continue, accompanied by subdued growth/fiscal austerity and interest rates are expected to remain low until late 2014. Overall, European growth is expected to remain weak until at least 2015.
Growth in emerging markets will be tempered, yet China will remain the driver of global growth, with its economy forecast to achieve a growth rate of 8 percent. Despite this role, the new government in China could introduce some policy changes, and what these will be remains unclear.
Weather-permitting, there should be a rebuilding of grain stocks, which is positive. While the global economy is expected to stay in positive territory -- expanding by 3 percent -- it is ill-prepared for further shocks.
There will be a shift in purchasing power, with China and India accounting for 70 percent of the growth in middle classes between 2000 and 2030. Yet this is unlikely a smooth upward curve, and fluctuations in their ability to pay will dictate the market.
In the U.S., virtually every sector of the economy is expected to witness change, and investment strategies will remain subdued while risk remains. The economy is expected to grow by only 2 percent. Employment in the U.S. is expected to remain an issue.
Gains in U.S. meat production will be focused on poultry and pork, yet will be dependent on export markets. The growth in U.S. poultry exports has been dramatic since the early 1990s, yet now there is far greater competition in the international arena. Nevertheless, U.S. producers have responded well to this by diversifying the geographic spread of the export destinations.
While the outlook for growth remains positive, albeit low, for the next couple of years, Barr pointed out that we are dependent on Mother Nature to “give us a break” if feed costs are to come down, and even so, it will take some time for things to even out.