UTRECHT, The Netherlands – Poultry producers should see improved returns in 2020 as Asian countries affected by African Swine Fever (ASF) become hot markets for poultry exports, Rabobank said in its Poultry Quarterly Q1 2020 report.

Rabobank expects chicken to fill the gap in local protein markets affected by the swine disease and help the industry recover from an oversupply of poultry. Also aiding in the recovery from the surplus of poultry are improved beef prices, stable average feed prices and more balanced supplies of poultry, Rabobank said.

However, prices for dark-meat chicken are forecast to stay at high-to-average levels but with more volatility, according to the report. Adding to this volatility will be rising availability of dark meat driven by Russia and Ukraine’s entry into global poultry markets and the reopening of China’s market to US chicken exports.

“The outlook for the global poultry industry will be challenging in 2020,” Rabobank explained in its report. “The ongoing impact of ASF outbreaks in Asia — and, to a lesser extent, in Europe — will remain one of the key themes for the year ahead. This will have a big impact on total protein availability in local markets, given the expected drop in pork production in China of 15 percent — after the 25 percent drop in 2019.

“Pork production in Southeast Asian countries such as Vietnam, the Philippines, Cambodia, Laos, and Myanmar is also heavily affected by ASF and faces significant drops (10 percent to 25 percent),” the report continued. “For 2020, the threat of the ongoing spread of ASF will impact production decision-making by poultry farmers.”

On a country basis, Rabobank expects US production growth of 3 percent in the first half of 2020. US producers should see improved returns with the opening of China’s market which should lift prices for leg quarters and wings. Price support from higher beef prices, which is the main substitute for poultry, also will help returns, according to the report.

Brazil will see relatively limited export growth of 1 percent this year, although Rabobank expects poultry production to expand by 2 percent in 2020.

The top performing markets in 2020 will be China — where Rabobank expects to see short supplies of poultry in the next four to five years — and Mexico where outbreaks of avian influenza stifled supplies of poultry in early 2019. Demand in China is expected push chicken production 15 percent higher, according to Rabobank, while ongoing concerns about ASF will drive volatility in markets.

Rabobank noted several “wild cards” that could impact poultry markets in 2020. Brexit concerns remain in play during 2020 along with the ongoing risk of AI outbreaks, feed price volatility and potential trade disruptions, according to the Rabobank report.

"Under any Brexit scenario, trade will surely be more difficult, and local UK production will likely increase,” Rabobank said in its report. “Exactly how much of a difficulty Brexit will pose for the EU poultry industry remains to be seen. Industry preparations to optimize production and refocus trade flows within Europe are not easy. This could affect market conditions throughout 2020.

Growth in poultry production is expected to slow in the eastern European Union, but trade restrictions are rising in Africa and the Middle East.

“The reopening of China for US poultry is equally important here,” Rabobank noted. “At the same time, we’ve seen trade between Brazil, Saudi Arabia, and the EU becoming more difficult. For 2020, there are still pending trade disputes, with US-China trade negotiations being the major one. Although chicken exports to China have already been opened, trade access could be facilitated by reducing tariffs. This could strengthen the position of US poultry and lead to changes in global trade flows, with more space likely available in traditional US export markets like Mexico, Cuba, and Angola, among others.”