Rabobank: Global poultry trade requires fresh market strategies

The study says that since 2011, global poultry markets have moved to a new reality of slower growth and higher volatility.

Global poultry growth has fallen to only 1-2% per year and the share of trade in global markets had fallen from 11.5% to 10.9% – the first fall in many decades, reflecting the new reality of global markets.

The study says that global trade has increasingly been challenged by ongoing avian influenza outbreaks, rising protectionism, changing standards in import markets as well as local supply issues in exporting countries, such as China and Brazil, making trade much more complex.

Rabobank’s senior analyst animal protein Nan-Dirk Mulder says he expects markets to change even further in the coming years.

“Specifically, we see more growth in emerging markets, which will essentially be locally supplied, and we see growing supply from relatively new exporters, such as Russia, Ukraine and Vietnam, which will capture some share of trade from existing exporters.”

The report says poultry companies such rethink their strategies, citing four that are well-suited to the new market reality:

• Shifting emphasis to growth in local markets
• Investing in new export markets
• Focusing on the fastest growing, high-value trade markets for processed poultry
• Establishing leadership on changing social and customer concerns to secure trade access

Refocus to more global approach

Global market growth is moving towards emerging markets – 90% of global growth is here and 65% of growth is in Asia. New opportunities are increasing but a lot of the fast-growing new markets are closed to trade, such as Indonesia, India, Myanmar, Pakistan, East Africa and Bangladesh). So, an export-focused strategy is not going to deliver the same growth in global markets as in the past. Rabobank expects in the next 5 years for more international companies to shift focus from being “exporter only” to becoming a direct investor in these fast-growing markets.

Alternative platforms

Global companies should look to invest in export platforms that diversify origins and reduce risks and create more flexibility in global trade. This is likely to help countries such as Russia and Ukraine who are well positioned to supply in the raw-chicken segments, like whole or dark meat, because of their low input costs. Vietnam has opportunities to supply the processed chicken market, where it can leverage its competitive feed grain supply and availability of low cost labour to produce labour intensive poultry products. Global companies will increasingly take leadership here, says Rabobank, by teaming up with local players or by establishing greenfield projects.

Investment in the growing processed poultry trade market

Global meat companies are increasingly focused on supplying value-added products but there are large differences in the value of different poultry trade streams. For example, this ranges from US$1,000/tonne for US poultry exports of dark meat, to over US$4,000/tonne from processed poultry from Thailand. Investing in the high value processed poultry segment is a logical business strategy for companies.

Changing market requirements

Social concerns will keep rising up the agenda in the coming years with sustainability, animal welfare and locally sourced products high on consumer concerns. Exporting countries will need to follow relevant developments in their export destinations and there is a need for investment in leadership in this area to balance out the trust that is often given to local industries. It will likely require more direct investment from big exporters into their destination markets to allow them to get closer to their final customers.

The conclusions are based on Rabobank’s new 2018 Global Poultry map, which provides an updated overview of global poultry trade.