Global poultry industry on road to recovery

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The margin outlook for the global poultry industry is gradually improving after challenging conditions including a significant oversupply in Q4 2015, a recent report from Rabobank states.

The main factors driving recovery are increasing demand, lower supply growth in key regions like the US, China, Thailand and Europe, and price support from recovering red meat markets.

Asian poultry supply a big factor

According to the report the biggest factor to watch for in 2016 is Asian supply, given that restrictions on breeding stock will reduce production—primarily in China, and also in Thailand and Korea—in 2H 2016.

Rabobank’s animal protein senior analyst, Nan-Dirk Mulder, suggests this will have a strong short-term local and global market impact and will lead to local tight market conditions, increased Chinese imports and pressured Thai exports.

Effects of avian influenza

Global poultry meat trade will remain highly affected by avian influenza (AI) and FX volatility. Prices for the main traded poultry cuts have dropped—by 20% for breast meat, whole birds and processed, and up to 50% for leg quarters. This freefall has now stabilised and will gradually recover in 2016, although AI outbreaks in key export markets are a wild card.

Although the global outlook for feed costs is for corn and soybean to be range-bound at current levels, big differences exist between regions, depending on FX and local crop harvest conditions. Regions like India and South Africa are hit by adverse crop conditions, while Brazil and Russia feel the impact of negative FX impacts; in Brazil, this means a more than 30% increase in feed costs compared to last year.

New players in global poultry market

Brazil and Thailand are the big winners in trade in the short term, but changes are in the pipeline, with newcomers like Malaysia, Russia and Ukraine are currently being approved for exports to key import markets.

In the case of breeding, there will be a mixture of more local breeding programmes (China and Russia) and inter-nationalisation among GPS suppliers worldwide.