The Rabobank Poultry Quarterly Q3 revealed that global market conditions for poultry had improved due to a more balanced supply and demand, “historically high” beef prices and “more abundant supply conditions” in key grain-producing regions.
The US was identified as having the best performing poultry industry, with good profitability as the result of a well-balanced market and strong demand from Mexico, which continues to suffer from avian influenza (AI) outbreaks.
South Africa and Russia were identified as the worst-performing regions due to oversupply. The report said that oversupply in South Africa was the result of a “rapid influx” of imports and poor response by local suppliers, while oversupply in Russia was due to a market slowdown and lower pork tariffs following the country’s accession to the World Trade Organisation (WTO).
“The global industry is benefiting from improved global market conditions, although significant regional differences exist,” said Rabobank analyst Nan-Dirk Mulder.
“Companies operating in markets with a well-balanced supply/demand situation, such as the US, are expected to benefit from these positive developments. However, the likes of Russia and South Africa are still suffering from oversupply, driven by structural changes in market conditions.”
Looking forward, the report predicted continuing improvement in global market conditions on the back of further reductions in grain and oilseed prices and ongoing high beef and pork prices.
It stated that conditions in the US would remain positive, but added that the recovery of Mexican production, combined with its decision to allow poultry imports from Brazil, could make Mexico a more challenging market.
It predicted that the EU would follow its current path of margin recovery, while Asian markets such as China and Thailand would also continue to recover, depending on their ability to limit further H7N9 AI outbreaks.
“In this environment, we expect industry consolidation to continue,” added Mulder.
“Many producers are currently in better shape than in recent years and further consolidation could help local industries to better balance local markets. Consolidation could take the form of regional cross-border consolidation, as has proved successful in Europe, or global consolidation, for example, between companies from low-cost grain surplus countries in the Americas and companies from grain-deficient countries, such as China.”
The report stated that global poultry trade volumes remained “negatively influenced” by continued economic slowdown in key emerging economies, as well as currency depreciation in Japan and “volatile demand” in China and Hong Kong, following the AI H7N9 outbreak.
It predicted that global trade growth would remain relatively flat for the rest of the year, with a temporary shift away from Asia towards the Middle East and Africa.