A warning that a highly competitive global poultry meat market is developing, resulting in “trade battles” in certain areas, has been issued by Rabobank in its latest poultry quarterly.
“The return of the US in many global poultry markets is shaking up global trade streams, with other exporters starting to defend their market share via price concessions,” says the bank in its Q2 report.
“This is affecting margins for companies highly exposed to trade, in countries like Brazil, Argentina, Thailand and Japan,“ said Rabobank’s animal protein senior analyst Nan-Dirk Mulder (pictured above). “We believe this situation will continue, with expected supply shortages in Asia and Mexico offsetting some of the negative impacts of price concessions. Outside of these trade battles, market conditions are more favourable, with companies in balanced markets receiving good margins.”
The report states that good margins are currently being made by industries in Indonesia (after a culling programme) and India and South Africa (following a strong El Niño impact on local supplies). While also commenting that Mexico and the EU are doing well, it adds that the US poultry industry has recovered faster than expected and that the key, going forward, will to be to maintain market balance; warning that deteriorating global market conditions can rapidly impact on local market conditions.
“A highly competitive global trade is seen, due to the faster-than-expected return of the US in many international markets, after avian influenza-related trade restrictions,” it states. “This is shaking up global trade streams, with Brazil and the EU aggressively defending market share via price concessions, and prices for poultry have been reduced by up to 20%.
“Some relief will come from better seasonal demand in Q2/Q3, rising Asian and Mexican imports, and recent FX changes. In addition, Brazil’s struggle to balance markets will be a major factor for global performance in the coming months.”
The bank also comments that ongoing weak local and global market conditions, with high feed costs, will likely reduce growth from the 3.5% rate of recent months.
It does conclude, however, that the industry has, in the past, proved that it can be disciplined, a quality which Rabobank says “would support recovery”.