The margin outlook for the international poultry industry is gradually improving after challenging conditions in the fourth quarter of 2015, notably significant oversupply, according to Rabobank’s Poultry Quarterly Q1 2016. The main factors driving recovery are increasing demand, lower supply growth in key regions like the United States, China, Thailand and Europe, and price support from recovering red meat markets.
The biggest factor to watch for in 2016 is Asian supply, given restrictions on breeding stock will reduce production – primarily in China, and also in Thailand and Korea – in the second half of the year. According to Nan-Dirk Mulder, senior analyst in the animal protein department of Rabobank, “This will have a strong short-term local and global market impact and will lead to local tight market conditions, increased Chinese imports and pressured Thai exports.”
Global poultry meat trade will remain highly affected by avian influenza (AI) and foreign exchange volatility. Prices for the main traded poultry cuts have dropped – by 20% for breast meat, whole birds and processed, and up to 50% for leg quarters. This freefall has now stabilized and will gradually recover in 2016, although AI outbreaks in key export markets are a wild card.
While the global outlook for feed costs is for corn and soybean to be range-bound at current levels, big differences exist between regions, depending on foreign exchange rates and local crop harvest conditions. Regions like India and South Africa are hit by adverse crop conditions, while Brazil and Russia feel the impact of negative foreign exchange impacts. In Brazil, this means a more than 30% increase in feed costs compared to last year.
Brazil and Thailand are the big winners in trade in the short term, but changes are in the pipeline, with newcomers like Malaysia, Russia and Ukraine currently being approved for exports to key import markets. In the case of breeding, there will be a mixture of more local breeding programs (China and Russia) and internationalization among GPS suppliers worldwide.
About Rabobank
Headquartered in Utrecht, Holland, the Rabobank Group is a global financial services company providing wholesale and retail banking, leasing, real estate services, and renewable energy project financing. Founded over a century ago, Rabobank is one of the largest banks in the world, with nearly $1 trillion in assets and operations in more than 40 countries. Positioned as a premier lender to the food, beverage and agribusiness industry, its Food & Agribusiness Research and Advisory team is comprised of more than 80 analysts around the world who provide expert analysis, insight and counsel clients about trends, issues and developments in all sectors of agriculture.
