February 19, 2016
Rabobank remains upbeat on poultry
Agricultural lender Rabobank continues to be upbeat on the global poultry sector as it forecasts a gradual improvement this year following challenging conditions in the fourth quarter of 2015, particularly oversupply.
Rabobank's first poultry quarterly report this year said the main factors driving recovery of the industry are increasing demand, lower supply growth in key regions including the US, China, Thailand and Europe, and price support from recovering red-meat markets.
Earlier in December, Rabobank predicted that 2016 would be a good year for the industry, saying key fundamentals were positive, such as low feed prices and relatively high competitive prices for beef and pork.
The latest Rabobank report cited Asian supply as the biggest factor to watch for in 2016. It said restrictions on breeding stock would reduce production primarily in China, as well as in Thailand and Korea during the second semester.
"This will have a strong short-term local and global market impact and will lead to local tight market conditions, increased Chinese imports and pressured Thai exports", said Nan-Dirk Mulder, Rabobank's animal protein senior analyst.
Just as it said in December, Rabobank maintained that the threat of avian-flu outbreaks in key export markets remains a wild card, potentially affecting global poultry meat trade, along with foreign-exchange volatility.
Rabobank said the freefall in prices for the main traded poultry cuts--which saw breast meat, whole birds and processed meat dropping by 20%, and leg quarters by up to 50%-- has now stabilised and would gradually recover in 2016.
Rabobank predicted that feed costs for corn and soybean would be range-bound at current levels, but that they could be affected by forex and local crop harvest conditions. "Regions like India and South Africa are hit by adverse crop conditions, while Brazil and Russia feel the impact of negative FX impacts; in Brazil, this means a more than 30 percent increase in feed costs compared to last year", Rabobank said.
Rabobank picked Brazil and Thailand as the "big winners" in trade in the short term, but said newcomers like Malaysia, Russia and Ukraine may come in as they are being approved for exports to key import markets.