Global Poultry Scene Volatile, but Local Markets Bullish
While the international poultry business has recently become highly volatile, there have been some major movements in trade streams and prices due to several important factors, according to the Rabobank Q3 Poultry Report issued on June 28.
In April, the European Union removed 20 Brazilian plants from the export allowance list due to violation of EU import requirements regarding salmonella control. This is affecting the global breast meat market heavily, as the EU is the world’s key importer of such products, and other potential buyers like the US are not open to Brazilian poultry imports. Although Europe reduced imports over the January-April period by only 9%, imports from Brazil were down by 45%.
Saudi Arabia is in the process of implementing new halal allowance standards, which already led to a drop of 30% in imports during Q1 2018. The Kingdom is Brazil’s No. 1 export market and a key buyer for frozen whole chicken.
China has now issued a special safeguard on imports of Brazilian poultry. This will lead to implementation of company-specific import levies and will certainly impact import volumes of Brazilian poultry in the PRC.
In response to anticipated US tariffs on Chinese imports, the Beijing government has announced a set of import taxes on agricultural products sourced from the United States, including soybeans that could go into effect in early July. Although there is still time for negotiation, should tariffs be imposed there will be a shake up global trade in the coming months, as Chinese feed prices will rise. As traders will move to Brazil to source soybeans, local soybean prices will also rise, impacting the already weak Brazilian poultry industry. Meanwhile, producers in the United States, the EU, and Southeast Asia might face lower feed prices.
Directly linked to the US-Chinese trade tensions is the introduction of a 25% tariff on US chicken imports into China, further delaying the prospect of American chicken entering the market.
Mexico has imposed import levies on US pork. This will indirectly impact North American poultry markets. Prices in Mexico for pork as well as chicken will likely rise. Aside from good performance for the Mexican chicken industry, this will also result in a more bullish market environment for imports of poultry.
As follow-up on this trade turmoil, Brazil’s poultry industry exports (-10%) and production (-3%) are set to decline this year, and this will lead to opportunities for alternative exporters in markets in which Brazil has to step back. Ukraine, Russia, Poland, Thailand and Argentina are already increasing exports, and this is set to continue during the second half of 2018.
Many local industries are still performing well, as supply in regions including the EU, South Africa, Mexico, Indonesia, and India is well balanced, creating profitable conditions. The EU and Mexico are further set to benefit from the recent tensions in trade with rising local prices.