Prospects for the global poultry industry in 2018 are promising, with relatively positive fundamentals, according to Rabobank’s Poultry Quarterly Q1 2018 report. But a disciplined supply growth strategy will be needed, especially as uncertainties are rising – such as the possible return of avian influenza (AI) during the northern hemisphere winter and a rising supply of competitive meat proteins in the pork and beef sectors.
“This promising outlook includes ongoing demand growth in most markets, except China, and lower feed prices in the first half of 2018, if not longer. But a disciplined supply growth strategy will be needed, especially as uncertainties are rising,” said Nan-Dirk Mulder, senior analyst of the animal protein sector at Utrecht, Holland-headquartered Rabobank.
Global prices for chicken have remained strong, especially for whole chicken and breast meat, but dark meat prices have fallen. Competition from red meat producers will grow next year, amid rising supply and softening prices. Global poultry trade could again be hit by volatility, driven by AI, exchange rate volatility, and changes in traders’ procurement strategies in response to earlier scandals in trade. New suppliers will continue to enter the market. Given these growing, but uncertain and more competitive market conditions, supply discipline will be important.
Additional Highlights
China’s industry is struggling, with winter rapidly approaching and many wet markets yet to be closed. This situation could negatively affect prices and global trade. There needs to be a further reduction in supply in order to rebalance supply and demand.
The Brazilian industry is recovering from the “weak flesh” meat scandal, and exports have returned to 2016 levels after significant drops in Q2 and Q3. However, the risk of Brazilian imports being substituted by new suppliers remains.
The EU poultry sector is performing relatively well. This is based on a favorable supply/demand balance in the European market (given restricted production growth in the aftermath of AI earlier in 2017), along with constrained growth in northwest Europe due to environmental regulations, which restrict expansion. Eastern Europe – especially Poland – will keep growing fast, becoming a major trade hub.
Currently, the fastest-growing global regions are Southeast Asia and Eastern Europe. Southeast Asia will remain very bullish in the next year, with ongoing growth of more than 5% in most countries including Indonesia, India, the Philippines and Thailand, driven by strong local demand and Thailand’s clear leadership when it comes to global trade. However, recent expansion of the industry, at 7%, has probably occurred a bit too fast, when taking the current margin pressure into account.
The US poultry sector is expected to keep performing well, driven by ongoing strong local market conditions and improved exports, combined with a predicted record-high US corn and soybean harvest. This will likely push feed prices down.
