The global poultry industry’s outlook continues to improve, according to the latest Rabobank Poultry Quarterly, published in June 2021.
The main driver behind this improvement is ongoing vaccination campaigns. In developed counties, economies are reopening while, in emerging markets, vaccinations rates are rising, the bank points out.
Vaccine roll-outs are aiding the recovery globally and regionally. It will be the consequent return of foodservice demand that will be particularly beneficial for the poultry industry given that it accounts for approximately a third of global demand.
Yet the outlook is not completely positive. As in any other industry, supply cannot respond to stronger demand immediately and significant price inflation may occur as the year progresses. Additionally, the industry is not only working with high feed prices but the global trade in breeding stock continues to be interrupted to avian influenza.
Markets expected to see the strongest improvements are those with a local focus. For producers with a global focus, demand growth will be dependent on the successful reopening of their export markets. The gradual return of international travel over the months ahead will act as a further stimulus.
Regional variation
In most markets, demand is continuing to outstrip supply. Avian influenza, for example, is keeping supply low particularly in Europe, the Middle East and Africa, nevertheless, improvements are expected for most regions.
The U.S., Mexico, Russia and Japan have particularly strong market conditions, characterized by healthy demand and relatively low supply growth or even contractions. Some markets that entered 2021 in a weak or volatile position are now witnessing improvements.
The gradual loosening of COVID-19 restrictions and reopening economies are not the only factors influencing individual markets, each has its own set of circumstances.
South Africa, for example, is benefitting from a shift to more local supply along with lower domestic feed prices, while Europe is experiencing supply discipline and the impact of avian influenza, both contributing to healthier local conditions.
Producers in China, India and Brazil, however, continue to face challenges. Growing meat supplies in China are causing downward price pressure and this is also impacting global trade. While India is expected to recover as the year progresses, it has been markedly hit by lockdowns.
Global trade
The improvements in local markets and concurrent upturn in foodservice demand should benefit international trade. This is expected to be particularly beneficial for Brazil and Thailand, which have been negatively affected by weaker overseas demand. Volumes are predicted to gradually improve, particularly where trade with Europe and Japan are concerned.
However, China’s demand for imports is expected to gradually weaken, and this will impact the U.S. and Brazil, in particular.
Similarly, the Middle East and Africa are gradually becoming more self-sufficient. Following South Africa’s adoption of a poultry master plan, Saudi Arabia began restricting market access for several major Brazilian exporters. The country has been an important export market for Brazil, which will need to refocus its strategy, Rabobank argues.
The industry will have to continue to cope with high feed prices, however, they are forecast to be below those of this year’s second quarter.
While not all markets are experiencing dramatically higher feed costs, some poultry producer markets are being significantly squeezed. | Edwin Tan | iStockphotom.com
U.S.
Production has continued to rebound in the U.S., reaching a new record in early June 2021. A combination of higher slaughter numbers and heavier weights are expected to sustain current production levels.
Chicken prices are at record highs seasonally, and continue to outpace expectations as consumer demand strengthens. The recovery in foodservice and retail support along with consumer stimulus are supporting prices.
Producers have had to work with strongly rising feed costs, however, these have been offset by strong prices. Margins have been at their highest level in four years.
Peaking prices for boneless, skinless breast meat and wings are contributing to a 42% year-on-year increase in carcass values. Labor issues have limited the availability of some boneless items, and contributed to a drop of 25% in frozen inventories.
While labor market difficulties, along with hatchability issues, are constraining output, their impact will lessen as the year progresses.
While exports to the year end are expected to be broadly flat, a weaker dollar could boost volumes. However, high prices, along with strong competition and logistical constraints will make growth difficult.
Brazil
While Brazil’s first-quarter 2021 production may have been 5.3% higher compared with the same period in 2020, production has since slowed in response to higher feed prices and the withdrawal of financial support packages. Both of these factors are expected to negatively impact third quarter production.
Feed prices dropped in May 2021, while chicken prices rose by 23% between January and May 2021. Ongoing high freed prices, however, along with uncertainty surrounding COVID-19, are expected to hinder recovery.
Brazil’s poultry exports in May 2021 reached their highest volume since mid-2018. However, with Saudi Arabia’s import restrictions coming into force in late May 2021, and an 11% decline in shipments to China, the country’s main export market, international trade remains challenging. The strengthening of Brazil’s currency is making Brazil’s exports less attractive.
Europe
The European market is witnessing improving conditions due to lower supply. Various factors are contributing to this decline, including lower profitability, higher feed prices, avian influenza and greater adoption of lower-density breeds in some areas.
Over the first four months, output across the region’s six major poultry producing countries fell by 3.5%. Europe’s production is expected to end 2021 2% lower.
With the easing of lockdowns, and upturns in both food service and travel through the remainder of this year, Europe’s demand outlook is broadly positive,
So far in 2021, the region’s imports and exports have been lower. Brexit has had a notable impact on trade, with exports to the U.K. falling by 28% over the first four months of the year. Avian influenza also negatively impacted overseas sales. The European Union’s exports contacted by 16% over the period.
China
Demand is slowly improving, however, COVID-19 remains an issue in some parts of China. Despite this demand uptick, producer margins remain tight due to rising feed costs. Boiler prices are fluctuating around breakeven.
Breeding and hatching activities, however, remain profitable, as parent and day-old chick (DOC) prices remain high due to short supplies. However, as production of DOCs catches up with demand prices will be affected.
While imports were sharply higher during the first four months of 2021 they are expected to slow as the year progresses, responding to rising local production and downward price pressure.
Thailand
The Thai industry’s outlook is gradually improving following a difficult first half. The collapse in tourism, ongoing COVID-19 problems and weak global markets all hit the country’s producers.
Where exports are concerned, the country witnessed a strong increase in volumes during the second quarter, but by value exports were lower.
The biggest issue for the country’s exporters now is ongoing weak demand from the EU and U.K. Shipments to both contracted during the first four months of the year, however this should improve. Demand from Japan and South Korea is expected to remain relatively strong over the months ahead, while China has become a major purchaser of Thai wings and legs.
An advantage for the country is that feed prices have not increased by the same degree as those in China and Brazil, which is helping the industry to remain competitive.
