Rabobank: Bullish poultry market despite AI effect

Avian influenza (AI) remains a major concern for the global poultry industry, with new outbreaks in most regions in the world except Australia and South America. However, the industry is benefiting from ongoing bullish market fundamentals, according to Rabobank’s latest Poultry Quarterly Q3 report.

The number of AI outbreaks has been lower in the previous months however, and this offers the industry in these regions some time to recover. Despite the global AI challenge, the margin outlook for the global poultry industry is still strong.

Balanced poultry supply

The industry is benefitting from ongoing bullish market fundamentals, with balanced supply in most regions, high beef prices and low feed costs. With China as major exception, the industry is profitable in almost all major regions in the world.

“The performance in most regions is currently improving, but the industry should have optimal biosecurity as its first priority, as avian influenza pressure is still significant. Any new case can have a big impact on regional and global trade streams, as we have seen in the past months, in which Brazil and Thailand have taken further market share in global poultry trade from the US and China,” says Nan-Dirk Mulder, animal protein analyst at Rabobank.

Chicken still the cheapest protein

The current worsening of economic conditions—especially in emerging markets in Asia and Latin America—has little serious negative impact on the chicken industry. Chicken is the cheapest meat protein, and consumers logically shift from more expensive proteins like beef and pork to chicken in times of economic downturn. This sort of trend is currently visible in Brazil, Thailand, Indonesia, India and Russia.

Rabobank believes the outlook for late 2015 and 2016 is bullish, as feed prices are still expected to remain at low pricing levels and global breeding stock supply will be very low in countries with AI-related import restrictions, such as China and South-East Asia. The expected spread of AI to key US chicken production areas is a major wild card for the industry outlook.

Regional outlook for the poultry industry

EU: Strong market conditions with healthy market balance and restrictive supply growth.
US: Strong margins despite avian influenza trade bans.
Brazil: Weak local economy leads to trading-down effect, lifting poultry consumption.
China: Some improvement in poultry markets due to increasing pork prices.
Russia: Improved performance due to lower feed costs and price support from high beef and pork supply.