Most challenging outlook in decades

Rabobank’s senior animal protein analyst Nan-Dirk Mulder says the “perfect storm” currently affecting the global industry is the most serious in his 20 years’ experience.


here have been crises affecting the poultry sector over the past two decades: in the early 2000s there was the avian influenza (AI) epidemic which affect- ed Asia and Europe. Then in 2008 biofuels forced

global prices up by 75% – far more than anticipated. And an- other bird flu epidemic devasted the US industry in 2014-15. But looking back over 20 years with Rabobank, Nan-Dirk Mulder says this is the most challenging outlook for the sec- tor: “This is incredible. Everything is coming together and there are big shifts in the markets that we’ve never seen before… This is the biggest change we have seen in years”.

Perfect storm Nan-Dirk spells out the “perfect storm” affecting the poultry industry in the first half of this year – Covid-19; higher and more volatile feed prices, more competitive global poultry trade markets as China and Vietnam’s recovery from African swine fever (ASF) accelerates, plus another bird flu epidemic affecting the northern hemisphere. Covid-19 will continue to disrupt the markets this year, although the roll-out of the vac- cine provides some light at the end of the tunnel for the food service market. Some regions rely on the food service sector more than others – in Europe it makes up 25% of business, in the US 45% and in China up to 60%. While the quick service restaurant sector will outperform full-service and hotels, and food retail demand will stay strong, trade volumes will still remain under pressure. This is because global traders tend to sell more to food service than food retail, which partly explains why global prices have been so low. While there is hope that governments will get to grips with the pandemic in the second half of the year, prospects for lower feed prices are less certain. Global grain and oilseed prices have rallied since August with soymeal, corn and wheat prices up 26%, 22% and 15%, respectively, in quarter four compared with the same quarter of 2019.

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Supply and demand drivers The sharp price increases have been driven by tightening supply and strong demand in China. China’s increased de- mand is partly due to the faster-than-anticipated turnaround of its pig sector and the chicken industry’s continuing expan- sion (+12%). Vietnam is also investing heavily in both its pork and poultry businesses, pushing up demand for corn and soymeal – a major driver of rising grain and oilseed prices. Weather also plays a part in the core production areas of South America and eastern Europe. Stock levels are currently dropping which is likely to mean grain and oilseed prices will remain high throughout this year. “We think prices will stay high. Corn prices could go up further, depending on the weather. But we think soybean prices have at least stabilised,” says Nan-Dirk Mulder. But apart from affecting global feed prices, China’s recovery is also having an impact on global markets. During the ASF tur- moil, global poultry exporters, such as Brazil, Russia, Thailand and the US, found China and the Philippines to be safe ha- vens for their products. With the European Union, South Afri- ca, Japan and Saudi Arabia also reducing imports. As the trend to buy local grows, the future looks bleaker for global exporters who will need to find alternative markets. “There may be markets in Africa but some African countries, such as South Africa and Nigeria, are trying to reduce im- ports. There may be markets in Ghana and Congo but they may have to accept price drops.”

Increasingly self-sufficient Exporters will look to the Middle East and some of the Gulf States, such as Qatar, Bahrain and the United Arab Emirates, but these too, are becoming increasingly self-sufficient. Rus- sia has also strengthened its position there and in Southeast Asia. If the politics can be overcome, India may be a better bet, where demand for poultry has shown continuous improvement in recent months. Global traders hope that markets could open up in the sec- ond half of the year as greater control over the spread of Covid-19 and avian influenza should lead to a gradual recov- ery of food service markets. AI has been spreading since Oc- tober from Russia and Central Asia to western and eastern Europe and to northeast Asia. Almost all key producers in eastern, northern and western Europe have been affected


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