Keeping chicken affordable in times of major cost and supply challenges
According to the latest poultry report from Rabobank, the outlook for the global poultry industry in Q4 2022 and early 2023 remains strong, despite the challenges it faces.
The report suggests that chicken will be the best-positioned protein due to its low price position in times of pressure on consumer spending power. However, major cost price inflation, among other inputs, means that there is limited room to lower chicken prices. This is especially the case in Europe where future energy prices for winter will be reaching up to 10 times higher than average levels.
Global poultry markets are still performing well, on easing feed costs. “However, some setback in profitability has been seen in the bullish North American markets due to rising supply. European prices have stayed high due to production remaining below 2019 levels,” explained Nan-Dirk Mulder, Senior Analyst – Animal Protein at Rabobank.
Global markets: ongoing strong conditions but with some setbacks
The Chinese poultry industry had a tough 1H 2022, but is now recovering on limited meat supply and some demand recovery despite ongoing COVID-19 restrictions. The Thai industry still faces very strong local prices due to the impact of ASF on pork supply. Japan is facing challenges to keep up local production following strong domestic demand, which is leading to lower stocks and strong prices.
Several countries in Africa, the Middle East and Latin America still face tight local parent stock (PS) supply due to the ongoing effects of COVID-19 and Avian influenza (AI) restrictions on global breeding supply chains. Countries in Southeast Asia, like Vietnam, Malaysia, Bangladesh and Indonesia, face high local prices which have led to government intervention.
The main exception has been Brazil, where despite bullish exports the industry has struggled with weak local market conditions and rising supply. The situation has improved slightly, on higher prices and lower feed costs, but remains challenging.
More price-driven consumer behaviour
From a market perspective, ongoing strong demand and tight supply underpins outlook. A weaker economic climate with pressure on spending power will lead to more price-driven consumer behaviour, which supports poultry as the cheapest meat protein.
Energy costs a worry
The biggest challenge is on the operational side with higher feed, distribution and labour costs. Energy costs will also be a worry, especially in Europe, North America and northeast Asia. The report suggests that the industry should prepare for high cost-impact on production and storage, and potential disruption of availability of inputs, like packaging material and CO2 or gas stunning in case of a shut-off. Other regions, especially in the Southern Hemisphere, will be less impacted.
These rising and uncertain cost factors, ongoing AI cases and associated trade impacts, together with ongoing high construction costs, will continue to constrain supply. Most markets are therefore expected to stay above break-even, with strong conditions in the EU, Southeast Asia and Latin America. Brazil, the US and China are also expected to keep producing above break-even levels. The focus for the global poultry industry, according to the report, should be on excellence in operations.
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