Consumers can expect to pay more for Thanksgiving and Christmas turkeys.
Market fundamentals are supportive of global poultry industry margins, Rabobank says, but USDA figures tell a different story for consumers.

NEW YORK – Almost all major poultry producing regions are profitable despite outbreaks of highly pathogenic avian influenza, Rabobank said in its Poultry Quarterly Q3 report.

Rabobank said the outlook for late 2015 and 2016 is bullish due to low feed prices and tight supplies of poultry. HPAI is an ongoing concern, however the number of outbreaks has been lower in recent months which may give affected producers time to rebuild their flocks.

“The performance in most regions is currently improving, but the industry should have optimal biosecurity as its first priority, as avian influenza pressure is still significant,” said Nan-Dirk Muller, animal protein analyst at Rabobank. “Any new case can have a big impact on regional and global trade streams, as we have seen in the past months, in which Brazil and Thailand have taken further market share in global poultry trade from the US and China.”

In the United States, Rabobank forecasted strong market conditions with healthy market balance and restrictive supply growth. The last detection of HPAI was July 17. More than 48 million birds have been culled since the first detection of HPAI in December 2014. The US poultry industry has begun the process of recovering from the past outbreak while preparing for a potential round of avian flu during the fall migration of wild birds.

Market fundamentals are supportive of global poultry industry margins, but US consumers still face higher prices for poultry and eggs going forward into the Thanksgiving and Christmas holidays. The forecast for forecast for frozen whole hens for the third quarter is $1.22 to $1.26 per lb. which is an 11 percent jump compared to the comparable year-ago quarter, the Economic Research Service of the US Department of Agriculture said in its Livestock, Dairy and Poultry Outlook report in August . Prices are expected to rise higher in the fourth quarter, at $1.28 to $1.36 per lb. compared to about $1.14 a year ago.

Turkey meat production in the first six months of 2016 was 2.82 billion lbs., the Economic Research Service of the US Dept. of Agriculture said in its Livestock, Dairy and Poultry Outlook report in August. But the figure is deceptive because turkey meat production declined sharply in May and June as the HPAI outbreak impacted turkey production, especially in Minnesota.

“There were two factors impacting turkey stocks,” ERS said. “First, the number of birds slaughtered and turkey meat production were falling in May and June. Second, partially offsetting this were lower turkey exports. The net result was somewhat smaller supplies of turkey products on the domestic market.”

Around the globe

With the exception of China, Rabobank noted, the regional outlook for the poultry remains strong:

• The European Union will have strong market conditions supported by a healthy market balance and tightened supply growth.

• Meanwhile, a weak local economy in Brazil is forecast to produce a “trading-down effect” as Brazilian consumers switch to less expensive poultry meat.

• Russia will see improved performance on lower feed costs. High supplies of beef and pork will be supportive of poultry prices, according to Rabobank.

• A profitable poultry industry in China has been elusive. Rabobank noted that China will face a shortage in supplies of poultry and pork in 2016. Global breeding stock will be sharply lower in regions with AI-related import bans such as China and Southeast Asia. However the industry could see some improvement in poultry markets due to higher prices for pork in China.