Upturn for global poultry market, but tougher trade conditions remain

09-09 | Market trends/analysis | Article

Agricultural specialists at Rabobank note that global growth of poultry meat production has been driven by strong local market conditions rather than trade. Photo: Ruud Ploeg

Global poultry markets are moving towards more ‘normal’ market conditions following 4 years of highly disruptive conditions. A rise in poultry meat consumption of between 1.5% and 2%, coupled with disciplined supply growth, is boosting the sector with consumers having more spending power, plus lower feed prices.

Agricultural specialists at Rabobank said most of this global growth has been driven by strong local market conditions rather than trade, especially in the emerging markets in Southeast and South Asia, Africa and Latin America. For example, Thailand is seeing record high demand, matched by low supply, due to climatic conditions. Exports are also at a record high, mainly due to raw chicken, although the cooked chicken market is recovering. Strong tourism figures are also aiding domestic consumption. Mexico is seeing smaller domestic supplies, which should support prices and imports through the third quarter of this year.

US and Europe

Rabobank’s Global Poultry Quarterly Q3 2024 report says the European Union and the United States are performing well this year with relatively strong demand, controlled production growth and rising prices. In the US, productivity issues will limit supply growth, but the sector is seeing strong demand from the retail, foodservice and processing segments which is driving price improvements. However, export demand remains soft due to the strong dollar and high local prices of dark meat.

Europe is enjoying a balanced market with strong demand. Supply growth has slowed due to lower placements and fewer Ukrainian imports. At the same time, EU exports are recovering after the lifting of avian influenza restrictions in many countries. The sector is also benefitting from more expensive competing proteins (beef and pork) supporting prices. However, there are some concerns over feed price developments in the upcoming quarters. Relatively wet crop conditions in Europe have led to feed prices rising, especially for wheat. Additionally, the implementation of the EU Deforestation Regulation on 31 December 2024 could disrupt the feed market. Soybean supply chains do not yet appear to be ready for the regulation, which could potentially result in significant price increases for European protein meal.

China and Japan

The main exceptions to the relatively strong market environment can be found in China and Japan, where the industry has experienced overly ambitious growth rates of about 3% this year that have negatively impacted local profitability. The challenge for China is oversupply, which is putting prices under pressure. However, there are signs that local production is beginning to self-correct, which should balance out the market. Imports dropped significantly in the first 4 months of 2024, but are expected to pick up modestly in the second half of the year. In Japan there are oversupply concerns that are expected to weaken the supply-demand balance, while inflation will also weigh on chicken consumption.

Brazil

Brazil had been heading towards an oversupply, but recent production cuts by producers due to weaker demand are expected to help balance the markets. Exports remain strong, particularly in the spring/early summer, with more meat going to the Middle East at the expense of China. Feed prices have started to increase again after several months of decline.

Global trade issues

Looking ahead, Rabobank lead author Nan-Dirk Mulder said global trade will become more competitive than in the past 2 years due to shifts in trade flows. Rising production, low prices and sharply dropping imports in China will significantly impact global trade. The US, Brazil and Russia are expected to seek alternative markets to offset the impact of reduced Chinese trade, particularly affecting the chicken feet and leg markets.

Indeed, the recent decline in Chinese imports has affected global trade. Both the US (-7.7% YOY) and Brazil (-7.9%) suffered major drops in export volumes in the first quarter. By contrast, regions less focused on China, such as the EU (+7%) and Thailand (+10%), have seen relatively strong export demand. Additionally, the new EU import quota for Ukraine, which is approximately 20% lower than in 2023, will impact global trade in breast meat and whole chicken, especially as Ukraine will increasingly look for alternative markets, such as the Middle East and the Americas.

Avian influenza

Bird flu is expected to remain a major challenge for the industry even though commercial production in some regions, such as Europe, was less impacted during the recent winter season than in previous years. The US winter season saw major outbreaks in the layer industry. As poultry production increases in the northern states, pressure is rising and several farms have recently been affected.

Mulder said there were growing concerns in the southern hemisphere: “The most impacted country is currently South Africa, where cases in Q4 2023 resulted in a drop of 30% in breeding flocks and more than 40% in layer flocks. While the industry is recovering, risks of new outbreaks persist, particularly as South Africa approaches its winter. Lurking outbreaks are still a concern, especially in the province of Gauteng. Additionally, the risk in other southern hemisphere countries is likely to rise in the coming months, as we observed in June with outbreaks in Australia.”

Interest in vaccination continues to grow and several Latin American and Asian nations have already started to vaccinate their birds. France is the first exporting country and EU member state to begin vaccinating and so far the results look promising, says Rabobank, with a significant reduction in cases in high-risk areas in the southern hemisphere. The trend may encourage other EU countries to adopt vaccination as a valuable tool for vets and farmers to mitigate risks of avian influenza.

A continued focus on operations will certainly be needed, the report says. Feed costs have reached their lowest point and grain prices have started rising. A strong emphasis on procuring feed ingredients and optimising feed formulations will be necessary, particularly considering the risk of a La Nina season on global crop harvests, which could affect major grain producers.