Low prices for feed coupled with higher prices for competing proteins such as beef and pork will provide tailwinds the global poultry trade next year. Demand for poultry usually increases under these conditions as consumers switch to lower-priced proteins.
“The extent to which the global poultry industry will benefit from these positive fundamentals very much depends on balancing supply and demand,” said Nan-Dirk Mulder, Rabobank analyst. “After a relatively long bullish market situation, many global markets have entered a period of oversupply at the end of 2015 with falling chicken prices and this needs to be solved in the next months in order to make the industry profitable again.”
Dealing with the ongoing threat of avian influenza also will be a challenge for the industry. The risk of new AI outbreaks in the Northern Hemisphere rises as winter progresses. Concerns are especially high in the southeastern United States, a key poultry production region. Additional investments will be needed in biosecurity, improved industry structures and business models, Rabobank said. “Joint approaches between industry and governments are particularly important in this regard.”
On a regional basis, the outlook for the US is uncertain given the wild-card, avian influenza. Rabobank said its forecast largely depends on who, when, where and how much US supply will be affected by AI.
“While it has been good to see most export customers taking a regional approach to banning US product, if the virus spreads to more broiler production states, the impact on exports could be significant,” Rabobank said in its report. “Under this scenario, we expect US production to increase by 3 percent in 2016, but with another year of export challenges leading to a 3.5 percent to 4 percent increase in domestic availability.”
Poultry supplies in China are forecast to tighten in the third quarter of 2016 with tight supplies to persist through 2017, Rabobank said. Poultry production in China is expected to decrease by 4 percent to 6 percent in 2016.
Meanwhile, Thailand is experiencing an oversupply of poultry. Rebalancing supply and demand for poultry will be key for Thailand for the remainder of 2015; however Rabobank expects supplies to remain high in 2016.
“Some relief will come from ongoing strong export demand and lower feed prices, although fishmeal prices are likely to go up,” Rabobank noted. A significant improvement in market conditions could occur in the second half of 2016 “when the industry will be affected by the ban on imports of grandparent stock from US chicken genetics companies.” Poultry production in Thailand could then decline 3 percent to 5 percent, which should be enough to return the country’s poultry industry to profitability.
Rebalancing in supply and strong demand for poultry have led to ongoing positive market forces in the European Union, Rabobank said. Demand for poultry in the EU is expected to grow by 1.9 percent for the whole year as it captures market share from pork and beef.
“The outlook for the EU poultry industry is still positive, backed by high beef prices, low feed prices, strong chicken demand with more differentiation in welfare concepts and recovering export volumes,” Rabobank said. “The key to maintaining this is supply discipline.”