Rising demand for chicken meat, along with tight supplies, should help the world’s poultry producers to compensate for rising production costs and weaker than predicted economic growth this year. Passing higher costs on to consumers, however, will not be possible in all regions.
The global poultry industry started the year with the expectation that COVID-19’s drag on the world economy would gradually disappear as the pandemic appeared to be coming under control and economies re-opened. While most governments’ attitudes to managing the virus have changed, fostering consumption and trade, Russia’s invasion of Ukraine has presented the industry with new difficulties.
According to Rabobank’s Global Poultry Quarterly Q2 2022, chicken meat supplies in most of the world’s regions are tight and prices remain strong, but the war in Ukraine, in addition to slowing economic growth, is exacerbating a number of difficulties already present in the market and creating new ones. The war, for example, has already led to global grain prices rising by 20-40%, while transport costs have continued to rise and logistics remain disrupted.
Low global chicken meat supply and high prices will help the industry to overcome its own supply challenges, while relatively high competitor protein costs will also boost demand for chicken. However, while the outlook remains positive, challenges and uncertainties are growing.
Rising prices compensate rising inputs
Along with rising corn prices, sunflower oil, fertilizer, gas and oil prices have all risen. Some input price increases are already being felt while the effects of others will be more gradual.
All markets are being affected, but particularly those that are import dependent, such as Europe, the Middle East and Africa, where short term feed availability is a growing concern. While Europe may be facing concerns about feed supplies, at least chicken supply is tight.
Other markets experiencing tight conditions are the U.S. and Mexico, while Thailand and the Philippines report tight supplies as markets are reopening.
Challenges are greater in China and Brazil. China will need to ease its COVID-19 restrictions if demand is to recover, while Brazil is enjoying strong overseas demand but has failed to be disciplined with its production.
In some markets it may not be able to pass costs on to consumers and there are fears that in less-developed, poorer markets, food crises may emerge.
Supply challenges
Producers’ main challenges will be supply side. Low levels of global grain and oilseed socks, high fertilizer prices, La Niña’s impact on Latin American production and disruptions in the Black Sea region will all impact production costs.
Crop plantings in Ukraine are likely to be less than half those of normal years, and with Russia and Belarus being key fertilizer suppliers, difficulties are expected for some time to come.
In addition to high feed costs, gas, oil, transport and construction costs are all rising.
Global poultry trade
Trade should remain strong. Economies are reopening as governments change their approach to COVID-19 and this, in particular, will boost demand from food service. The major beneficiaries are expected to be Brazil, China and Turkey.
The start of the year saw particularly strong trade in poultry meat, with the last quarter of 2021 reaching the record set in the final quarter of 2019. Brazil, Turkey and Ukraine were the main beneficiaries for trade in raw meat, while China notably increased its further processed chicken exports, gaining ground from Thailand in particular.
The outlook may have weakened since, but countries where local supplies are weak will help to support global prices. With Ukraine currently unable to export and Thailand’s industry experiencing a variety of problems, Brazil and China are expected to be the winners.
Avian influenza
Europe has recorded its highest number of Avian influenza (AI) cases ever. Outbreaks have also been high in Asia, the Middle East and Africa, while cases have been rising in the U.S.
AI will remain a major challenge, but pressure should lessen in the northern hemisphere summer. From a global perspective, AI in regions such as Europe will continue to disrupt trade in hatching eggs.
2022's global poultry production higher, despite headwinds
