Improving outlook for Europe's poultry sector

The European poultry sector may currently be facing both disease and market challenges, but longer term the outlook is positive

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The European Union is expecting exports to rise over the decade ahead, in part driven by chicken substituting port. (Derick Hudson | iStock.com)
The European Union is expecting exports to rise over the decade ahead, in part driven by chicken substituting port. (Derick Hudson | iStock.com)

For Europe’s broiler producers, still struggling with largely closed catering and foodservice channels, avian influenza outbreaks and the problems associated with controlling COVID-19, there may appear to be little light at the end of the tunnel.

Nevertheless, a reasonably positive future for the European poultry industry would appear to be ahead, according to forecasts in the European Union Agricultural Outlook 2020-2030.

Looking to the longer term, broiler producers can expect not only slowly rising demand and higher prices on their home market but also to higher export sales.

The Outlook forecasts that, by decade end, European poultry meat production will be 4.6% higher, with the 27 Member States producing an additional 620,000 metric tons.

The industry will benefit not only from rising demand and prices – the only animal protein sector in the bloc where demand is expected to grow over the next 10 years – but also from investments that capitalize on Eastern Europe’s lower production costs.

Higher prices will be driven by increased consumer preference for poultry meat. Per capita consumption of poultry meat is forecast to increase by 1.2 kg from its current level to stand at 24.6 kg by 2030, a slightly lower forecast than previous projections.

Changing tastes

Changing consumers tastes in the European market are expected to favor chicken meat over other sources of animal protein.

The report notes that difficulties in the swine sector – environmental concerns, African swine fever, and high demand from overseas resulting in higher prices for pig meat – have resulted in European consumers opting for cheaper poultry.

It continues that even when demand from Asia weakens and prices fall, not all of those European consumers that have substituted pork with chicken are likely to return to consuming pig meat – they will favor poultry.

Total per capita meat consumption in Europa is expected to fall by decade end by 1.1 kg to 67.6 kg. Poultry meat, however, will be the exception, as it better aligns with consumers’ changing health and convenience demands. Additionally, sustainability is expected to be of growing importance both for consumer and producers.

The convenience and affordability of chicken have been important demand factors during Europe’s COVID-19 lockdowns, and the lockdown experience is expected to result in lasting changes to consumer perceptions.

Exports to grow

European Commission data reveals that the bloc’s exports by volume contracted by 3.4% over the first nine months of last year, however, exports are expected to expand steadily over the next decade.

In particular, demand is expected to grow in key export destinations where poultry meat is expected to replace less abundant and more expensive pig meat.

Not all export destinations, however, are seen as remaining strong. Demand from Ukraine and China is expected to soften, and risks to the global recovery will continue.

Additionally, the bloc is expecting to face ongoing strong competition from Brazil in export markets. While exports are forecast to grow by 7.6% over the period, the EU’s share in global export markets is expected to decline from 16.2% in 2020 to 15% in 2030.

Imports over the decade ahead are also expected to gradually increase.

Short term difficulties

As 2020 drew to a close, the European market was in oversupply with production still rising. Consumption, however, had fallen due to foodservice disruptions.  Overall, consumption is thought to have contracted by 2.6% last year. This put pressure on prices, which in December 2020 were 3.6% down on December 2019, and margins.

COVID-19 restrictions, which it had been hoped would be gradually being lifted in January have, in reality tightened, offering little immediate hope for a re-opening of hospitality channels.

While some may have pinned their hopes on a rapid deployment of vaccines in the EU leading to some restoration of the eating out of home market, the vaccine roll-out in the bloc has been progressing more slowly than had been planned and restrictions have had to be tightened.

The short-term outlook for the European market has also been deteriorating due to the spread of avian influenza.

Poland, Europe’s largest poultry producer, accounting for approximately 20% of total output, ore example, slaughtered close to 2 million birds to control the disease between its emergence in the country in late November and the end of January.

With affected poultry flocks ranging from Sweden in the North to Italy in the South, the avian influenza situation in the bloc is leading to trade restriction, putting further downward pressure on prices.

At the same time as losing access to export markets, European producers, like others, are having to cope with rising feed prices, further dampening the outlook for 2021, notes Rabobank.

It continues that the only way stabilize markets and margins in the region is through cuts in production.

European-poultry-production-by-Member-State 2019

Six European Member States account for almost three quarters of the European Union’s poultry production. With the exception of Spain, all have reported outbreaks of avian influenza over recent months.

 

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