Despite plenty of headwinds, ranging from animal disease to rising input costs and labor shortages, the forecast for poultry production and demand across the world in the new year is…mostly sunny. In December, Rabobank’s Global Animal Sector team published its first-quarter outlook report and heading into 2023 there is every reason for optimism in the poultry sector. Nan-Dirk Mulder, lead author of the report, said there are plenty of factors to monitor when considering the success of the poultry segment in the coming year, all of which are not new news to stakeholders in the industry.
One of the longer-term hurdles is the continued prevalence of the most recent spate of avian influenza (AI) infections, dating back to 2021 and before as cases in 2022 in North America reached historic highs. As cases in the United States affected more birds than the last widespread outbreak in 2015, Europe also is continuing to cope with the virus. More recently, countries in South America reported an increase in the number of AI cases among flocks in cities like Ecuador, Colombia and Venezuela. Producers in Brazil and their trading partners are bracing themselves for the potential global impact of outbreaks in one of its top poultry producing countries due to its status as the world’s top global exporter.
With feed prices still considered higher than historically reported, Rabobank’s report forecast decreasing prices, by as much as 15%. Volatility in feed costs should be expected as analysts foresee lower stock levels, political unrest, supply-chain interruptions, lagging economic growth and unknown poultry trade demand as some of the factors that could negatively affect the global poultry industry.
“Global trade should be strong in 2023, given the ongoing tight conditions in many markets,” Rabobank’s report said, “though it could be affected by AI, government efforts to restrict trade in order to curb inflation and ongoing high prices. Locally, supply discipline will be important to keep markets balanced.”
According to a recent outlook report from the US Department of Agriculture’s Economic Research Service, more poultry from the United States is expected to be exported in 2023 than in 2022, with turkey forecast to total 425 million lbs this year versus 417 million lbs in 2022, while broilers are expected to top 7.37 billion lbs in 2023 compared to 7.21 billion lbs the previous year. Meanwhile, exports of pork are forecast to decline by about 1.9 billion lbs to 6.28 billion lbs and beef expected to dip 472 million lbs to 3.07 billion lbs in 2023.
Through the third quarter of 2022, poultry trade on a global scale established new volume record highs, at 10.2 tonnes, an 8% increase over the same period in 2021. Demand across the world for breast meat, chicken feet, legs and mechanically deboned meat has kept prices for those items exceedingly high throughout 2022. Rabobank pointed out, however, that domestic oversupply of chicken legs on the market after the third quarter resulted in that cut dropping to the lowest point of the four cuts.
Focusing on operations
In November, Springdale, Ark.-based Tyson Foods Inc. attributed its 2022 fiscal fourth quarter positive results and its year-end success largely to the performance of its poultry segment and its long-term commitment to streamline and optimize that business sector. Tyson’s chicken business reported a sales volume increase of 1.1% on sales of $4.62 billion, a 19.4% increase for the quarter over the previous year’s fourth quarter and up 23.7% for the year, to $16.96 billion compared to $13.73 billion in 2021.
Like its competitors, Tyson raised its prices to offset rising costs, both in the quarter and over the course of the year. Prices increased significantly in the fourth, the company said, led by chicken at 18.2% higher and by 5% overall. Annual prices increased 12.3% overall, led by chicken at 18%.
“In chicken, our operational turnaround progressed as forecasted, and we are now increasing our focus on optimizing our mix to maximize profitability of our value-added portfolio,” said Randal Tyson, chief financial officer.
He added that in the fourth quarter the company surpassed its goal of processing 40 million birds per week by the end of the fiscal year.
If “pivoting” was the strategic theme of the meat and poultry industry during the pandemic, “trading-down” has become its 2023 equivalent, as historically high prices for food were the rule in 2022. Despite challenges in rising feed costs and labor shortages, not to mention AI, poultry was the low-cost leader, and winner, in the retail sector and on foodservice menus. Whether or not this will continue into 2023 remains to be seen as beef and pork prices have eased, however inflation is expected to remain higher than normal globally while economic growth lags behind.
“This will pressure demand as consumers become more price driven and raise the question of what price consumers are prepared to pay,” said Rabobank’s report.
In terms of US broiler prices, “Rabobank expects chicken prices to remain below 2022 levels through [the first half of] 2023 but above the five-year average,” the report stated. “As production growth slows and competing beef suppliers fall sharply, prices will trend higher in [the second half of] 2023.”
Sustained growth in global trade of poultry over the past year was the result of multiple factors, one of which was governmental intervention to offset inflation, including countries like Mexico and the Philippines opening borders to trade, while other countries, opted to restrict poultry imports. Winners in this market have included the United States, and Brazil. Prior to the third quarter of 2022, China was benefitting from Thailand’s expensive poultry supply, but that changed in the second half of the year when Thailand’s export poultry volume reached record highs. Other geopolitical factors that have come into play included the European Union’s lift of trade restrictions on shipments of chicken from the Ukraine resulting in record high volumes. Meanwhile Russia reported higher-than-normal demand for chicken exported to East, Southeast and Central Asia, Africa and the Middle East.