Rabobank has issued a new report on the international poultry industry, examining how avian influenza (AI) is impacting world commerce, and stressing the need for a coordinated approach to manage the challenge, particularly in biosecurity and adjusted business models.
According to the Utrecht, Holland-headquartered financial services company’s analysis, global trade streams and prices are expected to remain under pressure for the remainder of 2015, and long-term fallout may be significant due to several trade bans on breeding stock in importing countries. The bank predicts that producers in countries with balanced markets are continuing to enjoy healthy margins, and stresses that global approaches to deal with avian flu are more important than ever.
“Poultry industry fundamentals are facing meaningful headwinds with stronger than expected feed prices due to a strong US dollar, increased competition from falling pork prices and restrictions on trade,” said Nan-Dirk Mulder, Rabobank’s animal protein analyst. “Prices for whole chicken, leg quarters and chicken feet are declining further, while breast meat prices remain relatively strong.”
Supply growth discipline is important under such worsening conditions. This has been proven by countries with healthy market balances in their markets like the US, Brazil, South Africa and Japan, where the industry is still making good margins.
Rabobank believes that global approaches to deal with avian flu are more important than ever, with strict biosecurity standards and adjusted industry business models to deal with the new market reality. Governments should follow international guidelines regarding avian flu-based trade restrictions. Many countries in Asia, including China, which have implemented restrictions on trade on breeding stock, might be affected by low supply next year due to expected future shortages in local breeding value chains.
The bank has summed up regional outlooks for the poultry industry as follows:
- EU – slight margin recovery. Improved trade position due to weak euro and possible lifting of avian flu-related trade restrictions.
- US – wave of HPAI outbreaks, but broiler sector less impacted. Margins still strong on robust local market demand.
- Brazil – maintains competitive position in global trade. Weak currency and avian flu bans for competitors.
- Russia – less bullish market, with ongoing higher feed costs and removal of wheat export tax.
- China – fewer avian flu cases, but still big impact. Margins to lowest level in five years.
- Thailand – oversupply despite strong exports.
- South Africa – improved margins, but outlook more clouded on likely return of EU exporters.