Rabobank Report: Global Poultry Industry Q1 2014

Apr 01, 2014

Rabobank has published a new report on the global poultry industry, forecasting a shift to bearish conditions in all markets except the U.S.

In the report, the Rabobank Food and Agribusiness Research (FAR) and Advisory group says that with the notable exception of the U.S., bullish poultry market conditions are turning bearish due to recent grain price hikes caused by turmoil in Ukraine and El Niño-related worries.  Rabobank says that abrupt increases in feed prices (up 10-15 percent vs. earlier expectations), avian influenza outbreaks in China, and a weaker Asian economy are expected to affect margins in Q2.

“The effect on companies hinges on their regional market balance and longer term forward-hedging,” explained Rabobank analyst Nan-Dirk Mulder. “A slowdown in global trade volumes and lower product prices, especially for leg quarters, will affect companies in international trade and lead to shifts in global trade streams. Brazil is likely to be affected the most, while Thailand is likely to benefit due to its recent return in the Japanese raw chicken market.”

Additional major shifts in trade streams are expected this coming quarter, including pending anti-dumping duties on European Union poultry trade in South Africa, a new temporary free trade agreement granting Ukraine access to the EU market via quotas, and the potential return of exports from the United States to Chinese markets. These developments, taking place under weak global trade conditions in a traditionally weak season for chicken meat, could all have a large impact on global poultry trade.

Regional Updates:

United States: Another very profitable year is forecast for the U.S. chicken industry as other competing animal proteins experience constrained supplies due to porcine epidemic diarrhea virus in pork, and a shrinking U.S. beef supply.
European Union: Rabobank anticipated a further reduction in margins as South Africa (the EU’s biggest export market) considers anti-dumping duties and the EU considers opening its markets to Ukraine in the short term.

China: The Chinese poultry industry suffered big losses after being hit by an outbreak of Avian Influenza for the second time in less than a year. The disease has negatively impacted demand, as consumers are concerned whether poultry is safe.
Brazil: Despite a good grain harvest outlook, and improving local demand, a challenging export market will be the key wildcard in 2014.

Russia: Russia continues to struggle with oversupply problems. Exports continued to grow but remain small. High competing protein prices and the depreciating ruble should support margins.
Rest of Asia: Indian industry performance is recovering from oversupply, but Japanese market conditions are bullish. The recent opening of Japan for Thai raw chicken continues to affect trade streams.