US profits, China struggles: Q1 2014 poultry outlook

Rabobank Australia
Tuesday, 08 April, 2014

Increasing grain prices, caused by political and climatic instability, are impacting the poultry market, according to Rabobank’s Poultry Quarterly Q1. Margins in Q2 are likely to be affected by avian influenza outbreaks in China, the weakening Asian economy and feed prices, which are up 10 to 15% on earlier expectations.

“The effect on companies hinges on their regional market balance and longer-term forward hedging,” said 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.”

The US can look forward to a “very profitable” year, Rabobank analysts say, while the Chinese poultry industry is suffering after a second avian influenza outbreak in less than a year has impacted demand, with consumers concerned about the safety of poultry.

India is recovering from oversupply, but Japanese market conditions are bullish. The recent opening of Japan for Thai raw chicken continues to affect trade streams, Rabobank says.

With South Africa (the EU’s biggest export market) considering anti-dumping duties and the EU considering opening its markets to Ukraine, Rabobank is predicting a further reduction in margins for the EU.

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