Report suggests brighter outlook for poultry in 2012

Poultry producers face a positive outlook in 2012, according to international analysts at Rabobank, with margins expected to improve for both farmers and processors.

However, with fragile market conditions persisting in the wider economy, experts say supply discipline will be required to aid the EU meat industry’s performance.

According to the Rabobank report, “swing factors” such as feed prices, the economy, export markets and exchange rates could easily shift and create uncertainty in 2012. “Predictions show the industry will yet again experience major challenges in the year ahead,” the researchers said. “More disciplined supply growth will make the industry more flexible in times of unfavourable cost-price developments.”

Reduction in supply last year has restored the market balance, they added, resulting in better prices and margins, and projections for this year are positive. Low production in the red meat sector also means beef prices are expected to remain high, which will support prices for poultry – the main competing meat.

Unlike other mea-producing sectors, a downturn in the economic conditions within the EU is likely to benefit the poultry industry as consumers trade down and poultry consumption is expected to increase between 0.7% and 1.5%.Rabobank also predicts the sector will benefit from increased demand in world markets, with the main growth areas being Hong Kong, Africa and Middle Eastern countries.

The tight supply of global meat markets is expected to lead to a 5-7% increase of poultry export volumes, albeit at a slower pace than 2010/11. Pork and beef exports are expected to decline due to lower production levels. But volatile exchange rates could impact on trade in 2012, depending on economic developments within the EU, Rabobank has warned.

Economic developments also remain a key swing factor for grain and oilseed prices, with a possible downturn affecting the demand for grain and fuel. Although the outlook for these markets remains fragile, predictions indicate a slight decline in prices. This is particularly positive for the poultry industry, with research showing feed costs account for 50-70% of total production costs.

Overall Rabobank predicts EU poultry production will rise by 1.2% this year to support demand growth and export potential. “In the poultry sector, the integrated structure and opportunities to easily adjust production will support 2012 margins.”

Source: FWi