The outlook for the global poultry industry is improving in most regions of the world, according to Rabobank. The improvement will be driven by better market balances, ongoing high competitive protein prices and lower grain costs.
The strongest bullish factor, according to Rabobank's Food Agribusiness Research and Advisory Team, is an expected further reduction in grain and oilseed prices, which should relieve some cost pressure for poultry producers. Poultry prices will see price support from ongoing high prices of beef, which is poultry's main substitute.
"The global industry is benefiting from improved global market conditions, although significant regional differences exist," explained Rabobank analyst Nan-Dirk Mulder. "Companies operating in markets with a well-balanced supply-demand situation, such as the United States, are expected to benefit from these positive developments. However, the likes of Russia and South Africa are still suffering from oversupply, driven by structural changes in market conditions".
Global trade volumes remain negatively influenced by continued economic slowdown in key emerging economies, currency depreciation in Japan and volatile demand in China and Hong Kong. As a result, Rabobank believes global trade volume growth will remain relatively flat for the rest of the year. Consequently, Rabobank anticipates a temporary shift in trade streams away from Asia and towards the Middle East and Africa.
On a regional basis, while conditions in the United States are expected to remain positive, the rapid recovery of Mexican domestic production combined with its decision to allow Brazil access to its markets will be of mild concern to U.S. exporters. The EU is expected to follow its current path of margin recovery and will face some additional price support from reductions in pork production later this year. Asian markets, such as China and Thailand, are expected to continue recovery, although this, in the case of China, is dependent on their ability to limit further H7N9 avian influenza outbreaks.
"In this environment, we expect industry consolidation to continue," said Mulder. "Many producers are currently in better shape than in recent years and further consolidation could help local industries to better balance local markets. Consolidation could take the form of regional cross-border consolidation, as has proved successful in Europe, or global consolidation, for example, between companies from low-cost grain surplus countries in the Americas and companies from grain deficient countries, such as China."
