2021 should be a good year for the U.S. broiler industry as increased COVID-19 vaccination revives foodservice demand.
In a WATT Poultry Chat interview, Christine McCracken, executive director for animal protein at Rabobank, reviewed the company's outlook for the second quarter of 2021. Better times should be ahead, thanks to increased vaccination in the U.S., which should mean the industry, on average, will be profitable in 2021. However, it will need to monitor feed supplies and prices, too.
Austin Alonzo: Rabobank just released its second quarter outlook and I wanted to have you review it for our viewers today.
Christine McCracken: I think it's a pretty exciting time to be in the poultry industry, a lot going on, obviously, with global trade and feed costs rising. But the most exciting news, I think, is that the demand is starting to come back as we start to get a rollout of these vaccines and food service really starts to pick up certainly the case here in the U.S. But I think more broadly: Asia is doing quite well, as it responds to, obviously more favorable economic growth and a lot of that helping lift the sector and offset some of those feed costs that we've seen here lately. So great news, I think for the overall industry. And from a demand perspective, it's helping to boost exports, but still a struggle, obviously, to offset some of these costs. And a lot of uncertainty around these feed cost expectations for the year. So I think it's helping to keep production growth under control. And that really should lead to a fairly good year at least for U.S. broiler companies and as I look more broadly at the global market, pretty supportive overall.
Austin Alonzo: What more can you tell us about the outlook for feed prices? Those are very important for poultry producers.
Christine McCracken: Yeah, and I always get into trouble when I start to become a grain and oilseed analyst, I try to stay in my lane a bit. But what our team at Rabobank is seeing is a huge incentive to plant as much as you possibly can. I think there are some constraints around, planting conditions, it is a bit dry in some areas. But, we've got planters out already, and I think the crops are getting in the ground. So, fingers crossed that we'll get continued favorable conditions through the spring here. And I guess we'll have to wait until June to really know how it all turns out. But then, you know, we've got to have good growing conditions, too, moisture is going to be something to watch this year. And I think our team is, is pretty focused in on that. We need a successful crop year and yet another successful crop in South America again next year to kind of refill the bins. So it's going to be an ongoing struggle until we can kind of build up that safety stock that's been worked down over the past year. And I think that's a struggle, because China and its needs for concentrated feed are higher as they've rebuilt their hog herd and move toward a more commercial diet. So, a lot of imports going into China, they have fairly low stocks. It'll be kind of this ongoing battle with global grain markets. And I think that's going to lead to the uncertainty that keeps production kind of under control here in the US.
Austin Alonzo: Okay, are you expecting profitability to return in 2021?
Christine McCracken: I think on average, it'll be a profitable year. We're certainly seeing good breast meat markets and good exports. You know, I think there's a lot we don't know about the second half in terms of what could happen with demand. I'm hopeful that we return to kind of a normal travel schedule, and as schools reopen, that'll really strengthen the overall market. It should keep pricing pretty stout. But again, it's all about the cost. And at this point, we just don't know how the crop will turn out. For now, though, I am looking for a profitable year on average for the US global industry.
Austin Alonzo: Wonderful. Any final thoughts before we go?
Christine McCracken: No, I'm just optimistic that we can keep things in balance and that everybody stays safe and healthy.
This transcript is edited for length and clarity.
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