For anyone who watches economic indicators, a number of positive announcements for the global economy over recent months have shown steps in the right direction for most developed economies, and for the most part, good outlooks for developing markets, even if not as strong as previously. But, how will recent conflict in Ukraine and Russia affect the poultry industry, global markets and the people of the world?
Take, for example, the latest Organization for Economic Co-operation and Development (OECD) Economic Outlook interim report. It says that “most signs currently point to a continued underlying strengthening in the pace of growth in the major advanced economies.” This means that unemployment should be falling, incomes rising and investments showing more healthy returns in those markets. All good signs for production.
The report goes on to say: “The pickup in growth in advanced economies has been reflected in an acceleration of world trade volumes, after an extended period of unusually sluggish growth. This may signal a rebound in business investment.”
This upturn in developed economies should build on what has been achieved in developing markets, which now account for some half of the global economy. Growth in many of the latter may be set to slow, but the OECD still predicts that it will be “moderate,” a classification many developed economies would have been more than happy to have been given over recent years.
So, the global economic outlook has been starting to look a little more balanced and a little more positive.
Preparing for the unexpected
Few, if any, could have missed what has been going on in Crimea, though many may have trouble forecasting what will happen in the region's near future.
Both Russia and Ukraine have seen their economies undergo major change, and both have seen major investments in their poultry industries, including by overseas investors, and in related sectors, such as feed. While sanctions announced against Russia have, to date, been limited, they could, of course, go much further. Perhaps an early example of things to come is the suspension of talks between the European Free Trade Association and Moscow.
While the Russian economy may not be in the best of health, in an interconnected world, restrictions on a market of 144 million consumers makes a big difference. And what if Russia decides to retaliate? No one wants to see restrictions placed on their assets, or worse, still see them seized.
Opinions vary as to who would be the greatest loser in a major trade dispute, but Europe, for example, where the economic recovery is still weak, has become rather fond of Russian fuel exports. One only has to think back to the early 1970s and the problems that occurred in the oil market to see the impact that fuel shortages can have.
The hardest hit region may well be Europe – a market of 500 million inhabitants – but it will not be the only region affected. Demand for fuel has grown enormously around the world, and let us not forget that those struggling economies now showing signs of growth are doing so only sparingly – their recoveries may not be resilient enough to suffer a major shock.
The poultry industry, and other livestock producers, may have become accustomed to high input prices in the form of high feed costs, and one could say that such hardships drive efficiency. But what will happen if fuel prices now start to rocket? All sectors of the global economy will be affected once again – producers will have to continue to work with high input prices, and consumers will have less money in their pockets.
And what about long-term confidence? The recent indicators I referred to earlier suggest confidence in the global economy is growing, which is highly important for investment and such sentiment tends to build on itself. Confidence is just as important where consumer spending is concerned. But what happens to this confidence when the outlook suddenly turns unclear or dark?
An unstable world is not good for anyone. For the poultry industry, as for the rest of us, it will be case of wait and see, with the hope that trade restrictions are the extent to which the situation further deteriorates.